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.

Government loses at Court of Appeals

The office of the solicitor-general (OSG) is the agency that represents the government whenever it goes to court. On March 7, 1994, the commissioner and the OSG filed with the Supreme Court a petition for certiorari under Rule 65 of the Rules of Court to annul the abovementioned orders of the Quezon City RTC.

In another display of lack of mastery of remedial procedure on the part of the OSG, the Supreme Court denied the petition and referred it to the Court of Appeals, where it should have been lodged in the first place.

On December 19, 1994, the Court of Appeals dismissed the petition.

Automatically, the OSG filed a motion for reconsideration that the CA dismissed.

Lucio Tan scored his second major legal victory.

On March 27, 1995, the commissioner and prosecutors elevated the decision of the Court of Appeals to the Supreme Court under Rule 45 of the Rules of Court by petition for review.

The OSG has always maintained that the trial court has no authority to stop preliminary investigations.

TanÆs third victory

On June 4, 1996, the Supreme CourtÆs First Division dismissed the petition for review of the commissioner and prosecutors.

Subsequently, the BIR and the OSG filed a motion for reconsideration which was denied.

Lucio Tan scored his third legal victory.

Once a division of the Supreme Court has decided, the decision normally becomes final. Yet, the DOJ, in a last minute attempt to win this round, asked the entire composition of the Supreme Court to overrule a division ruling.

On October 15, 1996, the Supreme Court en banc decided to take over the case from the First Division.

Victory in the Supreme Court

On February 6, 1997, the Supreme Court en banc issued a resolution denying the motion for reconsideration.

The court denied the motion for reconsideration of the decision dated 4 June 1996.

It also directed the secretary of justice to designate, as early as possible, a new panel of prosecutors to investigate the complaints against Tan and his co-respondents.

The Supreme Court also ordered the BIR to provide the documentary evidence for the complaint.á

This was Lucio TanÆs biggest legal victory thus far.

At this stage, which was in early 1997, four years after the BIR initiated the tax complaint, the contending parties were not substantially better off than when they started. The Supreme Court in effect lectured the department of justice to follow remedial procedure û to resolve all those prejudicial questions first.

Still unresolved: lack of deficiency tax assessment for 1991 and 1990, whether the BIR had documentary evidence, and BIR action on FortuneÆs protest for the 1992 assessment.

Pursuant to the Supreme Court resolution, the BIR commissioner, submitted to the DOJ copies of the "Manufacturer's Sworn Statements," that Fortune had been demanding since 1993. The commissioner referred to these documents as her "truckloads of evidence."

DOJ investigation continues

At this stage, Tan expected the DOJ to lay off the case. His legal tactic consisted of one objective: Keep the investigation as a tax deficiency case argued within the BIR and not as a criminal case handled by the DOJ.

In an unexpected move, the DOJ panel issued on February 10, 1998 subpoenas to Lucio Tan and his co-respondents regarding each of the tax evasion cases û the 1992, 1991, and 1990 cases û commanding them to appear at the DOJ on February 27, 1998 to submit their counter-affidavits.

Lucio Tan cried foul. On February 16, 1998, Tan objected to the issuance of the subpoenas on the ground that the same was premature.

The defense team contends that the decision of the Supreme Court affirmed the validity of the writs of preliminary injunction issued by the QC RTC against the DOJÆs preliminary investigation.

Furthermore, the defense claims that the issuance of the subpoenas constitutes contempt of court.

Additionally, the daily manufacturer's sworn statements submitted by the other cigarette and tobacco companies mentioned in the motion have not been produced. Tan intended to use these documents to prove that his tax avoidance mechanism is similar to that of his competitors who are not similarly charged with tax fraud.

On February 23, 1998, the new DOJ panel of prosecutors denied TanÆs motion for the withdrawal of the subpoenas and cancellation of the scheduled hearing.

Carefully plotting their legal strategy around strict adherence to remedial law, on February 25, 1998, the Tan legal team filed a "motion for reconsideration and motion to comply with judgment of the Supreme Court", dated February 26, 1998.

On April 6, 1998, Lucio Tan filed a motion to furnish him copies of the "Daily Manufacturer's Sworn Statements" submitted to the BIR by La Suerte Cigar & Cigarettes, Associated American Anglo Tobacco, Sterling Tobacco, La Campana Tobacco and Mighty Tobacco and their corresponding payment of ad valorem taxes for the years 1986 to 1992.

Tan has steadfastly maintained that the BIR must show these documents as he intends to show the abovementioned companies used the same tax payment scheme as Fortune. The BIR said that they do not have to. Tan claims he has been singled out for prosecution.

Changing of the guards

When President Joseph Estrada took his oath of office in June 2000, the changing of the guards affected the governmentÆs political will to prosecute the case.

Beethoven Rualo took over Liwayway Vinzons-ChatoÆs position as BIR commissioner on July 2, 1998.

On July 28, 1998, Lucio Tan filed a supplement to his October 14, 1993 motion. He moved to resolve that the proceedings in these cases be suspended and the complaints remanded to the BIR.

After the DOJ panel received Tan and his co-respondent's supplement, the prosecutors issued an order requiring them to file their counter-affidavits.


Lucio Tan Tax Evasion Case
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