PAGCOR licensees safe from Philippine online crackdown


philippine-online-gambling-crackdown-pagcorThe Philippines gaming regulator has clarified President Rodrigo Duterte’s comments regarding his wish to curtail online gambling activity.

Philippine Amusement and Gaming Corporation (PAGCOR) chair Andrea Domingo (pictured) has confirmed that the “closure of all online gaming” order Duterte issued on Thursday doesn’t apply to holders of the new Philippine Offshore Gaming Operator (POGO) licenses that PAGCOR began issuing earlier this month.

Domingo said the government would be issuing an executive order to provide further details on Duterte’s desire to stamp out unauthorized online gambling. But Domingo said only operators that have received PAGCOR’s blessing would be allowed to continue providing online gambling services.

Meanwhile, Duterte’s public name-and-shame of the Philippine Economic Zone Authority (PEZA) has prompted pushback from PEZA Director General Charito Plaza, who issued a statement pointing out that PEZA has never registered any online gambling sites, nor has it ever had the authority under its charter to do so.

Duterte has linked PEZA with fugitive gaming operator Jack Lam, who fled the Philippines after local authorities cracked down on the online gambling operations being run out of his Fontana Casino in the Clark Freeport.

PEZA’s Plaza reminded Duterte that the Clark Freeport was not administered by PEZA but by the Clark Development Corp, which is under the authority of the Bases Conversion and Development Authority.

Justice Secretary Vitaliano Aguirre II later clarified that Duterte had actually been referring to the Cagayan Economic Zone Authority (CEZA), under whose authority most Philippine-based Asian-facing online operators had operated prior to the new POGO regime.

On Friday, Aguirre said he’d been tasked with leading a task force that will target online gambling sites operating from economic zones in Cagayan, Aurora and Bataan provinces. The Inquirer quoted Aguirre saying these online sites had deprived the government of P1t (US $20b) in annual tax revenue, according to Duterte’s estimates.

Duterte’s estimates might be debatable, but Aguirre said the task force’s purpose was to recover the “huge amounts of money” the sites had failed to remit to the government. Aguirre said he was still waiting on an executive order spelling out “what specific powers the task force will get to go after this massive tax fraud.”

Aguirre echoed Domingo’s comments that the task force would target “online operations that violate our gambling laws, our tax laws, that do not pay the right taxes like Jack Lam.” But POGO licensees “who are complying with the limitations, of PAGCOR limitations, they have nothing to worry about.”

Lam faced new troubles on Friday after a local consumer group filed an anti-dummy complaint with the Department of Justice. Volunteers Against Crime and Corruption (VACC) accuse Lam of using shell companies and corporate layering to circumvent rules on foreign ownership of Philippine property, like Lam’s Ford Ilocandia casino in Laoag City.

The VACC complaint notes that Lam is listed as owning less than 1% of the Fort Ilocandia property, making it “seemingly compliant” with Philippine law. But the widespread knowledge of Lam’s control over the casino “warrants a deeper investigation, as to their real foreign equities and those of their subsidiaries and/or affiliates.”

Both of Lam’s Philippine casinos were closed following Duterte ordering his arrest on charges of bribery and economic sabotage. Duterte later ordered the seizure of Lam’s gaming operations to cover Lam’s unpaid tax obligations.

Duterte’s Thursday comments sparked sharp sell-offs in the stocks of PhilWeb and other companies that provide technology for the e-Games internet cafes that (unlike the CEZA-based Asian-facing sites) are accessible by local residents.

On Friday, PhilWeb issued a statement saying it was “a software provider to PAGCOR for its network of e-Games outlets. PhilWeb does not engage in online gaming … PhilWeb’s software cannot be played from homes or offices. Each e-Games outlet is owned by an individual entrepreneur whose gaming license is issued by PAGCOR directly to them.”

Similarly, DFNN Inc issued its own statement saying Duterte’s remarks “pertain to online gaming that is not under the supervision of PAGCOR.” DFNN said that its investee subsidiaries have “multiple existing valid licenses under the State Gaming Regulator.”

Leisure and Resorts World Corp (LWRC) issued a statement saying it “has no other information” regarding Duterte’s pronouncement save for what it has gleaned from media reports.

Shares in PhilWeb and DFNN rebounded on Friday, suggesting investors have gotten over their panic or are at least willing to bottom-feed in the hopes of enjoying a big bounce.
PhilWeb, whose local operations were essentially destroyed by Duterte’s original anti-online comments this summer, is awaiting word on whether PAGCOR will approve its new license application.