But de la Cruz took three years before activating CKL Enterprises in both Davao City and Quezon City. Registered as a wholesaler, her Quezon City office lists monobloc plastic chairs as its principal product.

In 1995, CKL, representing itself as the exclusive distributor of LKD World of Chairs, a marketing arm of a plastic furniture maker, got accredited in the all-plastic category by the Pre/Postqualification Bids and Awards Committee (PBAC) of the Department of Education, Culture and Sports (DECS).

The following year, CKL was accredited anew in the same category by PBAC, which by then was headed by undersecretary for legal affairs and legislative liaison Antonio Nachura, now a congressman representing Western Samar.

That was also the year CKL clinched the controversial P81.7-million contract to supply 185,086 all-plastic armchairs to public high schools.

CKL has since been paid in full for the armchairs. But education officials say the company managed to deliver only 40 percent of the armchairs as of the April 24, 1997 deadline stipulated in its contract with DECS. (CKL says it has delivered 63 percent of the chairs.)

The DECS has called in some P98 million in performance and surety bonds posted by CKL. It has yet to get the money, though, and its lawyers are not too optimistic.

But DECS Secretary Andrew Gonzales is unrelenting, and has asked de la Cruz to return P49.4 million representing the undelivered desks, and pay damages equivalent to P46.4 million or a total of P95.8 million. Gonzales also confirms: "We're definitely pressing criminal charges."

De la Cruz declined to be interviewed for this story. As it is, the DECS chief has prohibited all DECS offices nationwide from doing business with her firms—CKL Enterprises, Business International Wood Products, Giomiche Inc. and Tashi Garment—on pain of disciplinary action.

But the damage has already been done, as hundreds of thousands of public school students make do without chairs during classes. DECS veterans are also unsure that lessons will be learned from the CKL fiasco so long as politics and the padrino mentality pollute the system.

They note that CKL's formation came at a time that Education Secretary Ricardo Gloria was recentralizing procurement of school desks and armchairs.

Gloria had cited the need to standardize the design, quality and price of school desks and armchairs nationwide as chief reasons for letting the DECS central office regain its active role in procurement. But his decision took many education and audit officials by surprise.

Centralized procurement had been abandoned since 1986, when DECS allowed regional directors and division superintendents to buy desks. The central office limited itself to issuing guidelines, including price estimates, and scrutinizing and approving big contracts exceeding field officials' signing limits.

"The concept today is regionalization," says Eufracio Rara, DECS auditor from 1994 to 1998."The region is a mini-central office and regional directors are like combat officers, You just need to give them guidelines. When you centralize, you reverse the process of development."

But as a result of the Gloria directive, the central office for two years joined its regional offices in buying the desks and armchairs that public schools needed nationwide. Purchases done at the central office consumed 50 percent of what had become half-a-billion-peso pie in 1995, rising to 80 percent in 1996.

CKL was among the first few suppliers that qualified under Gloria's procurement guidelines. It joined the 1996 bidding for 298,126 all-plastic armchairs for public elementary and high schools nationwide. Had CKL won the contract to supply all these at the initial price it submitted, the transaction could have run into P241.78 million. But Allied Moulding Corp., a large plastic furniture manufacturer accredited by DECS for the first time, kept beating CKL in pricing.

In the end, PBAC split the contract between CKL and Allied Moulding: CKL got 62 percent while Allied Moulding got the rest.

Then PBAC chair Nachura admits he and other education officials had heard about the criminal cases against de la Cruz and her firms. But he says accreditation of de la Cruz's CKL was a collective decision. "This was not," he says, "an individual decision." Yet an order issued by Gloria shows that the job of PBAC's accreditation group was largely recommendatory, with the chair making the final approval.

Accreditation allowed CKL to bid for contracts of all-plastics chairs. In 1995, the firm would also benefit from two of Gloria's several directives on procurement.

In a Sept. 11, 1995 memo, Gloria set the prices for seven categories of chairs and desks that DECS was buying. Two months later, he amended the memo to allow price increases in four of seven categories citing "representations of the different manufacturers."

The increases ranged from P35 to P65, except for monobloc plastic chairs, of which CKL was an accredited supplier. For those, DECS raised the price from P450 to P650 for plastic armchairs and from P895 to P1,105 for plastic graders' desks.

Gloria now says PBAC then headed by undersecretary Alejandro Clemente had recommended the adjustments. Later, on Nachura's recommendation, Gloria also approved negotiated purchases as the mode of procurement for school desks and armchairs in lieu of public biddings.

Nachura and other education officials had gotten COA Chairman Celso Gangan and Rara to agree to negotiated purchases by citing, among other reasons, the danger of the procurement money reverting to the national treasury at the end of the year and the urgency of bidding out the contracts.

The impact of the memo was felt nationwide. One after another, DECS regional offices canceled or indefinitely postponed public biddings that were already scheduled for desks and armchairs. When 1995 drew to a close, de la Cruz had picked up, through negotiated procurement, P109 million in contracts to supply desks and armchairs at the higher prices approved by Gloria. A review of a contract entered into the same month by DECS with another supplier shows that the armchairs at the time could be had for P450 apiece.

Then came the 1996 bidding for the all-plastic student armchairs.

A public bidding requires at least three qualified suppliers or it would be declared a failure. In the 1996 bidding for schoolchairs, DECS had accredited only two, CKL and Allied Moulding, but pushed on with the public bidding anyway. When a failed bidding was declared, PBAC negotiated with the two companies.

At the time, Allied Moulding had thought it would easily win the contract to supply all the needed armchairs. When the initial bids were opened, it had priced the chairs at P669 each or P142 lower than CKL's P811. It also expected PBAC to disqualify CKL, whose armchairs came with book tray and footrest, two features that were not in the original specifications.

But in what Allied Moulding charged as an "unexplained display of compassion" to de la Cruz, PBAC met with CKL's proprietor on Aug. 20, 1996 and allowed her firm to resubmit on Aug. 22 at 10 a.m. a proposal for armchairs without book tray and footrest. Allied Moulding, which was excluded from the meeting, was also told to submit a new proposal.

Although CKL submitted its proposal at 4:05 p.m., or way past the deadline, PBAC failed to disqualify it, prompting Allied Moulding to file three letters of protest. Despite the pending protests, Nachura sent the companies a notice for the final submission of proposal on Aug. 30.

Allied Moulding says it joined the final round "for fear of technical disqualification." CKL also submitted a proposal and, this time, several samples of chairs. Allied Moulding, which was not invited to attend the durability tests run on the chairs, learned later that CKL's samples broke when tested. It also learned that CKL's final proposal quoted prices that exactly matched its own.

Documents show that Allied Moulding protested the conduct of the biddings from beginning to end. But according to Nachura, Allied Moulding "is stopped from making any complaints anymore" when it accepted the arrangement that gave CKL the P81.7-million contract to supply 185,086 secondary armchairs and Allied Moulding a P49.8-million deal covering 113,040 elementary armchairs.

Nachura insists, though, that awarding the contract to CKL "was not completely my responsibility. I was merely chair of PBAC, and PBAC consisted of a number of members."

Gloria, however, says Nachura, as chairman of PBAC, was empowered to suspend proceedings and recommend a rebidding if he disagreed with the committee for valid reasons. "That is expected of him. It is his responsibility as chairman of the committee," he says.

Nachura says he and Gloria would have been the last persons to favor de la Cruz since the businesswoman had filed a graft case against them before the Ombudsman in Mindanao earlier that year. Gloria and Nachura have since been cleared of those charges.

Still, Nachura admits that continuous representations by de la Cruz convinced him to give in to her odd request that entailed an abrupt departure from normal government practice: payment by letter of credit (LC).

In lobbying for an LC, de la Cruz had complained about frequent delays in the release of payment by the DECS accounting division, as well as cited the large amount covered by the contract, Nachura recalls.

Nachura, by his own admission, is vaguely familiar with LC transactions. He also concedes that opening an LC for local purchases by the state "is not an ordinary course taken… (it is) not the normal procedure." Indeed, it was the first time in the education department's 100-year history that it would be paying a local supplier by LC.

A former budget official says: "Letters of credit don't make sense in government purchases. Funds are supposed to have been earmarked so there's no reason to resort to an LC. Cash releases are made to pay suppliers during the anticipated delivery time."

While government agencies sometimes run out of cash to pay suppliers, says the official, delays in payments have also been due to the failure of suppliers to present to government accountants all the proofs of delivery and acceptance.

Strangely, the DECS accounting division was excluded from the preparation of the LC for CKL. Chief accountant Blanquita Bautista, who certified the availability of funds, says DECS legal officers instead took charge.

On Dec. 23, 1996, through a disbursement voucher, DECS transferred to Land Bank of the Philippines P81.7 million to cover the transaction.

Auditor Rara learned about the transaction only in April 1997, during a post-audit of DECS, when he came across the disbursement voucher without documentary support. He wrote Nachura for a copy the contract, a distribution list of armchairs, delivery receipts and acceptance reports, and the performance and surety bonds. He also questioned why a domestic LC was needed.

Seven months later, Rara's findings formed the basis of graft charges filed against Gloria, Nachura, Bautista and de la Cruz before the Ombudsman. The three DECS officials were charged with paying de la Cruz in full on Dec. 24, 1996 for a non-existing contract and in the absence of proof of deliveries.

The date on the contract was Dec. 31, 1996. But Ombudsman Aniano Desierto junked the charge that a contract was non-existent when CKL got paid on Dec. 24. Nachura and Bautista were cleared after telling investigators they had signed the contract on Dec. 19 and had even written that date beside their signatures. Gloria was also cleared after he produced two witnesses, including a legal consultant he had hired, to testify that he, too, signed the contract on Dec. 19.

Desierto also cleared the DECS officials of any liability for allowing de la Cruz to get paid in full before making any deliveries. Instead, he ordered an inquiry into possible lapses by Land Bank where the LC was opened and negotiated.

But Gonzales says,"The bank is not at fault." That view is shared by people well versed in LC transactions. Under such arrangements, the supplier gets paid by a bank to which the buyer has transferred the money, provided that he submits all the documents set down by the buyer in the letter of credit. If the documents are in order, the bank automatically releases the payment.

A safeguard, therefore, is for the buyer to put down in the LC as many documents as he deems necessary to prevent fraud. In the case of CKL, Gloria and Nachura issued a clean LC, listing only the minimum requirements: a sales invoice and a duly accepted draft.

Land Bank international trade department head Zenaida Dayao says de la Cruz presented the two documents in requesting payment on Dec. 24, 1996. Dayao recalls Gloria had already signed acceptance of the draft, which she says is tantamount to "an approval for payment of the negotiation." At that time, though, CKL had not made any deliveries because DECS had just issued the notice to proceed with its contract on Dec. 23.

Nachura never gave Rara an explanation as to why Gloria signed the draft before deliveries of the desks. "Perhaps," Nachura says now, "it may have been because Secretary Gloria did not know so much about letters of credit."

But Gloria says he depended on the recommendations of Nachura, PBAC and DECS lawyers for a transaction he knew little about. He says he signed the draft after this cleared with Nachura. Says the ex-DECS head: "I thought deliveries were made because that's what they told me."

Nachura, meanwhile, insists that "a draft per se is not payment." Yet in commerce, a draft is a bill of exchange or a bank check that can be drawn at sight or demand. In effect, Gloria had issued CKL a draft that became payable the moment he signed its acceptance.

Nachura also shifts the responsibility to the Land Bank, which he says should have demanded proof of delivery, including the sales invoice, delivery receipts, inspection report and acceptance report which were written into the contract.

Dayao, however, invokes international rules on LCs set by the International Chamber of Commerce (ICC). These rules say that letters of credit are transactions separate from contracts. Banks, therefore, are not required to examine contracts even if these are mentioned in LCs.

Besides, the Land Bank says, DECS never furnished it a copy of the contract. But then DECS could not have done so at the time, as the contract was notarized on Dec. 31, 1996-at least on paper. A check showed that CKL actually notarized the contract on Jan. 2, 1997 but had asked the notary public to antedate the notarization date to Dec. 31. No copy of the contract, however, can be found at the notary public and the Quezon City regional trial court.

Land Bank officials say they saw no need to check with DECS before releasing payment because two DECS representatives had accompanied de la Cruz on Dec. 24 to file the application for the LC at its Pasig Capitol branch.

De la Cruz, for her part, wrote then Education Secretary Erlinda Pefianco in April to explain that the delay was caused by the overheating of her manufacturer's machines because of El Niño and its difficulty to buy the spare parts due to the currency crisis.

But El Niño and the financial crisis had not set in at the time of the contract's April 1997 deadline, both having begun only during the second half of that year. An executive of CMC, a plastic furniture maker from which CKL sources the armchairs, also says he has no recollection of a massive breakdown of his machines last year.

The CMC executive adds that he did not know about the contract to supply 185,086 armchairs. He stresses that his company is capable of producing and delivering what DECS had needed within 120 days. But, he says, de la Cruz did not place orders totaling that many armchairs and has been inactive since late last year.

And while de la Cruz in her letter complained that the 120-day delivery period was too short, the other supplier, Allied Moulding, managed to deliver all the 113,040 chairs under its P49.8-million contract in 51 days.

DECS turned down de la Cruz's request for an extension. Last Oct. 21, in another attempt to convince DECS to overlook her shortcomings, de la Cruz wrote Gonzales offering to deliver the remaining chairs within 180 days. Gonzales's reply reads in part: "For us to agree to an extension under the circumstances will be contrary to law and will make us criminally liable under the Graft and Corrupt Practices Act for granting you undue benefit and advantage to the detriment and damage."