THIS IS a continuation of last Friday?s column on the criminal, civil and administrative liabilities of the boards of directors (they shouldn?t be called trustees because they cannot be trusted) of government-owned or -controlled corporations (GOCCs) who gave themselves excessive bonuses and allowances. The Metropolitan Waterworks and Sewerage System (MWSS) which President Benigno Aquino III singled out in his State of the Nation address, is used here as an example, but the same laws and liabilities apply to other GOCCs as well.

Besides being held liable for violation of the Anti-Graft and Corrupt Practices Act, the MWSS directors may also be criminally liable for violating RA 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees:

?Section 4. Norms of Conduct of Public Officials and Employees?(A) Every public official and employee shall observe the following as standards of personal conduct in the discharge and execution of official duties:

?(9) Professionalism?Public officials and employees shall perform and discharge their duties with the highest degree of excellence, professionalism, intelligence and skill. They shall enter public service with utmost devotion and dedication to duty. They shall endeavor to discourage wrong perceptions of their roles as dispensers or peddlers of undue patronage.

?(c) Justness and sincerity?Public officials and employees shall remain true to the people at all times. They must act with justness and sincerity and shall not discriminate against anyone, especially the poor and underprivileged. They shall at all times respect the rights of others, and shall refrain from doing acts contrary to law, good morals, good customs, public policy, public order, public safety and public interest. They shall not dispense or extend undue favors on account of their office to their relatives whether by consanguinity or affinity except with respect to appointments of such relatives to positions considered strictly confidential or as members of their personal staff whose terms are coterminous with theirs.

?(h) Simple living?Public officials and employees and their families shall lead modest lives appropriate to their positions and income. They shall not indulge in extravagant or ostentatious displays of wealth in any form.?

The MWSS directors are also civilly liable for damages arising from the performance of official duties where there is a showing of bad faith.

Section 103 of the Government Auditing Code of the Philippines declares expenditures which are disallowed and found to be unlawful as personal liabilities of the official or employee responsible for such expenditure:

?SECTION 103. General Liability for Unlawful Expenditures?Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor.?

As previously discussed, the authority of the MWSS directors to fix bonuses and other incentives is subject to the requirement that such amounts be ?reasonable,? failing which, such expenditures would be void. Applying these requirements, it may be argued that the act of the MWSS board of fixing extravagant bonuses renders its members personally liable for the amounts in excess of what is deemed ?reasonable? and allowable by the COA.

The COA is empowered to define what constitutes irregular, unnecessary, excessive or extravagant expenditures or use of funds or property. A COA circular defines ?extravagant? expenditures as those which appear to be imprudent and which are not responsive to the demands of government service:

?Unnecessary expenditures are those not supportive of the implementation of the objectives and mission of the agency relative to the nature of its operation. This could also include incurrence of expenditure not dictated by the demands of good government, and those the utility of which cannot be ascertained at a specific time. An expenditure that is not essential or that which can be dispensed with without loss or damage to property is considered unnecessary. The mission and thrust of the agency incurring the expenditure must be considered in determining whether or not the expenditure is necessary.?

?The term ?extravagant expenditures? signifies those incurred without restraint, judiciousness and economy. Extravagant expenditures exceed the bounds of propriety. These expenditures are immoderate, prodigal, lavish, luxurious, wasteful, grossly excessive and injudicious.?

Applying the foregoing, the exorbitant bonuses and allowances declared by the MWSS directors may be deemed as extravagant and unnecessary and disallowed by the COA. The directors may then be held personally liable for the amounts in the bonuses and incentives.

While the MWSS directors may have the authority to fix the amounts of incentives they receive, an abuse in the exercise of such authority gives rise to civil liability under the expanded provisions on human relations in our Civil Code, as the same constitutes a species of abuse of right under Article 19 of the Civil Code.

The MWSS directors may also be civilly liable under Section 31 of the Corporation Code which imposes the penalty on directors found guilty of bad faith in directing the affairs of the corporation.

While the MWSS is governed primarily by its charter, the Corporation Code nevertheless applies to GOCCs where their directors act in bad faith.

Likewise, erring directors may be liable administratively for misconduct under Section 46, Chapter 6, Subtitle A (Civil Service Commission), Title I, Book V of the Revised Administrative Code of 1987.

Don?t forget, these also apply to other GOCCs.