What Went Before: Awarding of SMC shares to government

In May 2004, the Sandiganbayan awarded the 27-percent block of San Miguel Corp. (SMC) shares to the government, which holds it in trust for the country’s coconut farmers.

The shares were among the assets sequestered in 1986 by the Presidential Commission on Good Government (PCGG), the agency tasked to recover the ill-gotten wealth of President Ferdinand Marcos and his cronies.

Marcos imposed a levy on coconut farmers between 1972 and 1982 supposedly to develop the coconut industry.

In 1975, Marcos authorized the Philippine Coconut Authority (PCA), the agency tasked with developing the coconut industry and whose board included businessman Eduardo Cojuangco, to use the funds to buy a bank “for the benefit of the farmers.”

The bank was First United Bank, later renamed United Coconut Planters Bank (UCPB). Cojuangco became its president and chief executive officer.

With the PCA and UCPB in their control, Cojuangco and his associates were able to buy firms and mills placed under the Coconut Industry Investment Fund (CIIF), a group of 14 holding companies whose assets included 47 percent of SMC. These assets were held by UCPB, the CIIF administrator.

The PCGG filed cases in the Sandiganbayan against Cojuangco, claiming the CIIF and other assets were acquired using the coco levy funds.

During the Estrada administration, Cojuangco won provisional control of the 20 percent block of shares in SMC, allowing him to return as chair and chief executive officer.

In December 2001, the Supreme Court declared the coco levy funds as “prima facie (apparently) public funds,” but left the Sandiganbayan to determine the owner of the assets acquired with the funds.

The 27-percent stake was reduced to about 24 percent after it was diluted with the investment of Japanese brewer Kirin in SMC.

In November 2007, the Sandiganbayan junked a civil case seeking to recover the 20 percent block of shares under the names of 44 Cojuangco-owned companies.

The antigraft court said the PCGG had failed to prove that coco levy funds were used to purchase the block of shares.

Various farmers’ groups asked the Supreme Court to reverse the decision. Cojuangco sought to stop the intervention of the groups, but the Supreme Court denied his petition and ruled in April 2008 that they had the right to take part in the case as taxpayers.

In June 2009, the Office of the Solicitor General asked the Supreme Court to allow the government to sell its 24-percent stake in SMC to avoid losses as a result of the depreciation of the shares of stocks.

In October 2009, the PCGG approved the conversion of the government’s 24-percent stake in SMC, amounting to 750 million shares, into nonvoting preferred shares.

The PCGG said the decision was a result of a careful study and was approved by the Supreme Court and the stakeholders of the coco levy fund.

It added that with the conversion, the shares would not fall prey to “speculation” and its price would be pegged at P75 each.

Former PCGG chairman Jovito Salonga and several others filed a motion for reconsideration in the Supreme Court, questioning the conversion, which they claimed was “disadvantageous” to the government.

In February 2010, the Supreme Court upheld its ruling, which allowed the conversion.

In April, the high court ruled that Cojuangco was the legitimate owner of a fifth of shares in San Miguel Corp.

In May, Salonga and another former senator, Wigberto Tañada, and the coconut farmers, urged the high tribunal to set aside its ruling.  Inquirer Research