G.R. No. 168982 ; August 5, 2009
PEOPLE OF THE PHILIPPINES, Petitioner, vs. DIR. GEN. CESAR P. NAZARENO, DIR. EVERLINO NARTATEZ, DIR. NICASIO MA. S. CUSTODIO, and THE SANDIGANBAYAN (FIFTH DIVISION), Respondents.

FACTS

The case originated from the procurement by the Philippine National Police (PNP) of 5,681 Caliber .45 Thompson pistols from Beltra Industries, Inc. through three separate purchase orders signed by respondents, then high-ranking PNP officials. The Office of the Special Prosecutor filed an information before the Sandiganbayan, alleging a violation of Section 3(g) of R.A. 3019 (Anti-Graft and Corrupt Practices Act) for entering into contracts manifestly and grossly disadvantageous to the government. The prosecution’s case hinged on a Commission on Audit special audit team’s finding of apparent overpricing, comparing the PNP’s unit cost of ₱18,550.30 with the Armed Forces of the Philippines (AFP) Logistics Command’s unit cost of ₱10,578.25, resulting in an alleged overprice of approximately ₱45 million.
In their defense, the respondents argued that a direct price comparison was invalid and misleading. They established that the AFP’s lower price was secured under the U.S. Foreign Military Sales (FMS) program, a security assistance arrangement governed by U.S. law which expressly excluded police organizations like the PNP from eligibility. Witnesses testified that procurement through local commercial sales, which was the PNP’s only available method, was inherently more expensive—often two to three times the FMS price—due to the different nature and terms of the transactions.

ISSUE

Whether the Sandiganbayan committed reversible error in acquitting the respondents of violating Section 3(g) of R.A. 3019.

RULING

The Supreme Court denied the petition and affirmed the Sandiganbayan’s acquittal. The Court upheld the trial court’s finding that the prosecution failed to prove the respondents’ guilt beyond reasonable doubt. The core of the ruling is that the mere price disparity between the PNP’s commercial purchase and the AFP’s FMS acquisition does not, by itself, establish that the contract terms were “manifestly and grossly disadvantageous to the government” as required under the law.
The Sandiganbayan correctly recognized that the two procurement modes were fundamentally different and not comparable. The FMS program involves government-to-government transactions with subsidized financing and pricing, restricted by U.S. law to eligible foreign military entities. The PNP, being ineligible, had to resort to the open commercial market where prices are necessarily higher. The prosecution provided no evidence to show that the PNP’s specific contract with Beltra Industries was grossly disadvantageous when evaluated against prevailing market prices for a comparable commercial transaction. Without such evidence, the element of the crime was not sufficiently established. The Court emphasized that in appeals from acquittals, the jurisdiction is limited to reviewing errors of law, not re-evaluating the factual findings of the trial court, which found the prosecution’s evidence inadequate to overturn the presumption of innocence.