The Lucio Tan tax evasion case

Lucio Tan escapes a Ps25.3 billion tax evasion case by the letter of the law. A step by step review of the case.

By merit, not on a technicality

At this juncture, one must bear in mind that the lower court dismissed the Ps25.3 billion tax evasion case against Lucio Tan and his corporations for lack of probable cause û a dismissal on the merits, or lack thereof, of the governmentÆs case.

TanÆs legal team proudly points out this was not a mere technicality.

On July 14, 1999, or on the 11th day after July 3, 1999, the DOJ panel composed of five lawyers filed a ôpetition for certiorariö with Marikina RTC questioning the decision of the Marikina MeTC.

But pursuant to Rule 65, assuming that a petition for certiorari was appropriate as a mode of appeal, the DOJ prosecutors had only until July 3, 1999 within which to file a petition for certiorari under Rule 65. The petition should have been elevated to the Marikina RTC by Friday, July 3, 1999.

Ignorantia legisá

Another questionable legal strategy of the government is its choice of the mode of appeal. From the metropolitan trial court it should have filed an ordinary appeal to challenge the courtÆs ôlack of probable causeö finding.

Instead the OSG launched a petition for certiorari under Rule 65 which can only be used to assail ôlack of jurisdiction or grave abuse of discretionö.

But that was not the only tactical problem of the solicitor-general.

The Marikina RTC found the solicitor generalÆs July 14, 1999 petition for certiorari as defective because it was filed 11 days late. The OSG filed a motion for reconsideration.

On August 25, 1999, the Marikina RTC judge denied with due course the DOJÆs motion for reconsideration. The OSG filed a second motion for reconsideration.

The government lawyers were under the impression that after their motion for reconsideration was denied, the 15-day period for an ordinary appeal or 60-day for certiorari started over gain when in fact they only had the remaining period to file an appeal. They overlooked an amendment to the Rules of Court adopted in 1998.

On October 13, 1999, Enriquez in a three-page decision for the second time denied the DOJ motion for reconsideration for lack of merit.

At the Court of Appeals

On January 25, 2000, the DOJ elevated the case to the Court of Appeals from the RTC.

The OSG launched its appeal to the CA under a different mode of appeal called ôpetition for certiorariö under Rule 65 by citing ôgrave abuse of discretionö on the part of the RTC judge for dismissing the case on a mere technicality.

Finally, on August 29, 2000 the Court of Appeals dismissed the petition for certiorari filed by the government and sustained the order of Marikina RTC in the nine counts of tax evasion against Tan and his flagship firm Fortune Tobacco.

The appellate court declared that the governmentÆs late appeal "constituted a serious procedural lapse. It failed to observe the mandatory provision of the rules on material dates."

Furthermore, the CA lectured the OSG that the mode of appeal ôshould have been an ordinary appealö not a petition for certiorari.


The opinion makers and the media had a feeding frenzy. The ômother of all tax evasion casesö has been won by a technical default, many claim.

Liwayway Chato, who started it all, told BusinessWorld that the government should elevate the case to the Supreme Court: "I ask the government and the courts involved to abide by the law and the fact, and not be swayed by the President's admitted utang na loob [debt of gratitude] to Mr. Tan and bring the accused in the tax evasion cases to justice."

Serafin Cuevas, a former Justice of the Supreme Court who was EstradaÆs justice secretary until he was ousted in February 2000, blames his pursuit of the Tan case as one of the reasons for his ouster.

Secretary of Finance Jose Pardo was quoted by reporters as saying: "We are looking at it. I talked with the BIR commissioner. They are reviewing if the case can be appealed."

Solicitor General Ricardo Galvez, still shocked from the decision plans to bring the case to the court of last resort banking. A newspaper quoted him as saying: ôIf it will be about the miscarriage of justice, the Supreme Court can set it aside on grounds that it involves the interest of justice à and that's what we raised in the Court of Appeals."

Justice Secretary Artemio Tuquero conducted a press conference saying that BIR holds the key to the case.

BIR Commissioner Dakila Fonacier has come up with a position paper on September 22, 2000 saying that the BIR ôbelieves that it would need at least 120 days to be able to evaluate existing and possible new evidence to determine the existence of a probable cause of the case".

Effectively the study requires a period that falls beyond the deadline to file a petition for review on certiorari with the Supreme Court. Having started this case in 1993, the BIR needs a little bit more time to study if they followed the correct procedure seven years ago.

Quo Vadis?

As a post mortem, then BIR commissioner Liwayway Vinzons-ChatoÆs crusade against tax evaders somehow met stiff opposition because she hurriedly filed complaints with the department of justice, despite a remedial procedure within the BIR and an appeals process to the Court of Tax Appeals then finally to the Supreme Court.

At the time, she relieved her own bureauÆs chief and assistant chief of prosecution who advised her there was no legal foundation against Tan.

By going to the DOJ directly, a legal battle ensued, primarily regarding prejudicial questions. It took four years that eventually overtook her term as commissioner. The new political administration did not have as much crusader zeal.

Her contention that Lucio Tan and Fortune Tobacco committed tax evasion (and not tax avoidance) could not be fully discussed at the trial court because by the time the DOJ filed the criminal case in 1998, the new BIR chief Beethoven Rualo insisted they had no case against Tan.

The current BIR commissioner is new to the case, and has still has to make a recommendation regarding any appeal to the Supreme Court.

Aside from failing to appreciate the appeal period, it also made a questionable judgment by launching a wrong mode of appeal û by opting for a petition for certiorari to the RTC instead of filing an ordinary appeal.

The Erap connection was not lost on the general public. A local newspaper, the Philippine Daily Inquirer, published in early September 2000, quoted an unnamed justice official that President Estrada said: ôGive this case to me as a favor.ö

Manila is rife with stories that the office of the solicitor general may have deliberately missed the appeal deadline.

The case can be elevated to the Supreme Court, though even top cabinet officials doubt if it would just be a waste of time. The defects of the appeal were fatal û lack of approval from the BIR commissioner and late of filing of the appeal.

Some legal consultants contend that the case may still be re-filed with the lower court because Tan has not been arraigned yet û therefore double jeopardy is not an issue.

Throughout this legal imbroglio, Estelito Mendoza, one of the most brilliant legal eagles in the country, represented Lucio Tan. At one time during the Marcos presidency, he was concurrently justice minister, solicitor-general, member of the parliament, and governor of a province. Using MarcosÆ presidential decree powers, Mendoza ghost-authored scores of laws some of which are still in force today, 14 years after the EDSA revolt ousted Marcos.

Where was Lucio Tan on the day the favorable Court of Appeals decision became public? He was in Central Luzon State University where he amazed the faculty with an extemporaneous lecture on bees while visiting them for a different reason.

By the way, do not forget that the BIR on its 95th anniversary in August 1999 presented a plaque of appreciation to Lucio Tan for his ôà valuable support in the agencyÆs tax collection effortsö.


Lucio Tan Tax Evasion Case
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