G.R. No. 148607 , September 5, 2012; G.R. Nos. 167202, 167223, 167271
ELSA B. REYES, ARTEMIO C. MENDOZA, and CARIDAD A. MIRANDA, Petitioners, vs. SANDIGANBAYAN (4th Division) and PEOPLE OF THE PHILIPPINES, Respondents.

FACTS

Petitioners Caridad Miranda (General Manager) and Artemio Mendoza (Finance Division Chief) of the government-owned Instructional Materials Corporation (IMC), along with private individual Elsa Reyes (President of Eurotrust Capital Corporation), were charged before the Sandiganbayan with violation of Section 3(e) of R.A. 3019 (Anti-Graft Law). The charges stemmed from the investment of IMC funds, amounting to hundreds of millions of pesos, in government securities through private broker Eurotrust and Associated Bank, instead of depositing them with an authorized government depository. A special audit revealed these investments were made without prior board approval, incurred unnecessary conduit fees, and resulted in an unaccounted balance of approximately ₱116 million. The prosecution alleged the acts were done with evident bad faith, causing undue injury to the government.
The Sandiganbayan convicted all petitioners. Miranda and Mendoza were found guilty for investing public funds without authority, while Reyes was convicted as a private individual who conspired with them. On appeal, petitioners argued the prosecution failed to prove their guilt beyond reasonable doubt, emphasizing the lack of direct evidence of conspiracy and that the investments were made in good faith to earn interest for IMC.

ISSUE

Whether the Sandiganbayan erred in convicting the petitioners of violating Section 3(e) of R.A. 3019.

RULING

The Supreme Court ACQUITTED all petitioners. The legal logic centered on the failure of the prosecution to prove the essential element of “evident bad faith” required under Section 3(e) of R.A. 3019. The Court clarified that bad faith does not simply mean bad judgment or negligence; it must be a manifest deliberate intent to do wrong or a conscious violation of the law for a dishonest purpose. The evidence showed that while the investments were irregular for lacking prior board approval, the prosecution did not establish that petitioners acted with a fraudulent or corrupt motive. The funds were invested in government securities, not misappropriated, and the intent appeared to be to generate income for IMC. The loss arose from a subsequent reinvestment in a private corporation that defaulted, an event not directly proven to be a result of the petitioners’ initial conscious design to injure the government. Without proof of corrupt intent, the element of evident bad faith was not met. The Court also found insufficient evidence of conspiracy among the petitioners. Consequently, the presumption of innocence prevailed, and the criminal liability could not be sustained.