‘UCPB doesn’t give loans to those in slippers’
(Last of three parts)
UCPB
For three decades, Oscar F. Santos waited, and waited, and waited for the return of billions in coconut levy funds to millions of farmers on whose backs a few have amassed great wealth in the biggest scam to ever confront the nation.
No deal.
The farmers do not even have access to state-owned United Coconut Planters Bank (UCPB) created as a result of the tax collected during Ferdinand Marcos’ martial law regime, principally to address their perennial credit problems.
“The bank does not entertain a person wearing slippers seeking a loan,” said Santos, 83, a free legal aid lawyer and former Quezon representative cited during the Republic’s centennial in 1998 as one of its true heroes of the century.
“Justice has been so elusive for the farmers,” Santos said. “It is the obligation of the leadership to speak out now.”
Santos has been at the forefront of the campaign to recover private assets acquired with the use of the tax—principally shares of stocks in San Miguel Corp. (SMC) whose ownership is being litigated in the Supreme Court. He calls the levy an outright “racket.”
The assets were sequestered after Marcos was ousted in 1986 in the Edsa People Power Revolution that installed Corazon Aquino in Malacañang.
Bishop Broderick S. Pabillo, the head of the Catholic Church’s National Secretariat for Social Action, also has urged President Benigno Aquino III to “break his silence and for once come to the aid of the farmers.”
Pabillo, in a recent statement, called on Mr. Aquino to “stay faithful to the promise made by his mother, the late President Cory, to render justice to the coconut farmers, whose suffering was first and foremost perpetuated by their relative,” referring to Eduardo “Danding” Cojuangco, the politically influential SMC chairman.
Omi Royandoyan, executive director of the policy advocacy group Centro Saka, said that with his high popularity ratings, President Aquino could simply issue an executive order and unfreeze coconut levy funds deposited in UCPB as the ownership of the SMC shares awaits final court resolution.
“Why isn’t Malacañang moving? What’s the problem?” asked Royandoyan, whose agency has outlined proposals to make use of the funds to modernize the industry and ease the lives of the farmers.
Reform advocates fear that as the Supreme Court continues to sit on the SMC cases, barbarians waiting at the gates would again raid the coconut funds deposited in UCPB for the farmers.
Historical precedents
The apprehension is not without basis.
In 1983, cronies of Marcos, behind the glare of the controlled media under martial law, dipped into the levy funds deposited in UCPB that they were managing. They then secretly acquired the majority of SMC shares, the food and beverage giant that is now a highly diversified conglomerate.
The levy, which averaged P60 per 100 kilos of copra, was originally meant to subsidize consumers of coconut products after the price of copra hit record highs on the world market and set back operations of local oil millers and manufacturers of soap, filled milk and cooking oil.
Part of the levy was supposed to be invested in coconut-related enterprises meant to modernize the industry. This led to the creation of UCPB, the Coconut Industry Investment Fund (CIIF) and 14 holding companies, the acquisition of six oil mills and the setting up of a trading monopoly, among many other schemes.
Benefit after death
Joey Faustino, executive director of the Coconut Industry Reform Movement, said token amounts were given out for education, but most beneficiaries were sons and daughters of influential members of the Coconut Planters Federation (Cocofed).
“Farmers got the levy benefit after they died,” Faustino said. That’s the P10,000 death insurance that is not even enough to buy a coffin, said Faustino, whose brother, an anti-Marcos activist, was tortured and killed.
Under the martial law regime, the levy fund became an instrument of plunder and deception, according to an audit conducted after the Marcos dictatorship crumbled.
Among others, the P9.6-billion levy collected between 1973 and 1982 financed the hosting in Manila of the Miss Universe contest, the World Chess Championship between Anatoly Karpov and Victor Korchnoi, and the construction at the edge of Manila Bay of the P40-million Coconut Palace for the visit of Pope John Paul II, who refused to stay in such opulence amid pervasive poverty in the country.
The levy also funded—to the tune of P900 million—a disastrous coconut replanting scheme using seedlings of a Malaysian-West African (Mawa) variety propagated on Bugsuk, an island in the Sulu Sea at the southern tip of Palawan, owned by Danding Cojuangco.
Bugsuk was also the site of Cojuangco’s pearl farm, developed at about the same time as the Mawa seedlings. His gems were said to be as fabulous as the world-renowned Mikimoto pearls.
Clandestine acquisition
The largest investment from the levy was the clandestine purchase—behind the glare of the controlled press under martial law—of the SMC shares in elaborate schemes involving holding companies and individuals arranged by Cojuangco’s law firm, Accra.
Duly endorsed negotiable instruments found in Marcos’ vault the night he, his families and cronies were airlifted away to an exile’s life by US helicopters as howling mobs stormed the Palace gates in 1986 suggested the dictator owned or shared with Cojuangco ownership of SMC shares of stocks according to lawyers.
There were stock certificates in blank, among many others, in Primavera Farms Inc., Meadow Lark Plantation Inc. and Silver Leaf Plantation, which owned 8,138,440 SMC shares.
The discovery of the instruments led to the creation of the Presidential Commission on Good Government (PCGG)—the very first official act of the newly installed president, Corazon Aquino.
The PCGG was tasked to recover the ill-gotten wealth of Marcos and his associates and use it to fund an ambitious agrarian reform program, the centerpiece of Mrs. Aquino’s social justice promise to ease poverty and eliminate a major source of a pestering communist insurgency.
So far, P93.421 billion has been recovered by the PCGG—roughly about half of the estimated value of the SMC shares under court litigation. Not one of those behind the illegal wealth acquisitions has been clapped in jail.
‘Joke of the century’
Worth around P2 billion then, the entire SMC portfolio comprising 51 percent of the company’s total shares of stock has ballooned over the years to over 1.1 billion shares with an estimated value of upwards of P200 billion, depending on the day’s performance on the stock market of SMC. At one point it reached P180 per share.
A 20-percent block, comprising 400,000 shares, is under the name of Cojuangco, who headed UCPB when the shares were bought. He had negotiated the acquisition of UCPB, which used to be called the First United Bank, from the family of first cousin Corazon Aquino.
Cojuangco had bought out the shares of the late Enrique Zobel, a swashbuckling polo player who later assembled an army of Filipino workers and built for the Sultan of Brunei a palace that rivals Buckingham and Versailles.
Another 24-percent block, made up of 700 million shares, was designated the SMC-CIIF shares—farmed out among the 14 holding companies conjured by the Accra law firm for Cocofed, then headed by the late Clara Lobregat, which, along with UCPB and the Philippine Coconut Authority, then under Defense Minister Juan Ponce Enrile, was authorized to use the levy funds.
(Of the 51 percent SMC shares, 3 percent was diluted after the government failed to respond to SMC’s increased equity following the entry of the Japanese brewer Kirin; another 4 percent was converted into treasury warrants.)
In April 2011, the Supreme Court gave Cojuangco the 20-percent bundle, averring that the businessman was not a Marcos crony and that he did not violate a fiduciary trust, did not help himself to the fund meant for the farmers. A dissenting justice described the ruling as the “the joke of the century.”
In January, the court decided that because funds used to acquire the SMC-CIIF shares came from the levy, the portfolio belonged to the government and should now be used for the benefit of the farmers and the modernization of the industry.
Cocofed claims stocks
Cocofed has filed a motion for reconsideration, claiming the stocks on behalf of 1 million farmers.
In fact, the Sandiganbayan had nullified the tons of shares of stocks, each worth P1, in UCPB and the CIIF oil mills distributed to these unshod and nameless stockholders, saying there could be no private ownership of state assets.
Still, some of these farmers are holding on to their termite-bitten stock certificates kept under lock and key in wooden trunks in the boondocks.
As reform activists await the denouement of the interminable court battles, concern is raised that the billions deposited in trust in UCPB could again be raided.
During the short-lived Joseph Estrada administration (1998-2001) the bank granted P4 billion in behest loans to Cojuangco’s companies.
One of the country’s top banks before sequestration, UCPB had unraveled and in 2008 received a P30 billion cash infusion from the state Philippine Deposit Insurance Corp. under a 10-year rehabilitation plan.
Substantial dividends from the sequestered SMC-CIIF shares have begun to flow to the bank after the PCGG under the Arroyo administration in a deal in 2009 approved by the Supreme Court converted the portfolio from common to preferred shares pegged at P75 each.
The court, then headed by Chief Justice Reynato Puno, said the conversion would protect the shares from market vagaries. Critics said the deal meant a great loss to farmers, pointing out that San Miguel shares had fetched as high as P180 at one point.
Puno used to be a deputy of Estelito Mendoza, who as solicitor general argued for the legality of Marcos’ martial law declaration in 1972. Mendoza is now a San Miguel counsel. Puno has joined SMC as director.
The preferred shares have so far yielded P9 billion in dividends. San Miguel has the option to buy back this package this year. That could mean that at the current quotation of P120 per share of the SMC-CIIF portfolio estimated at P89 billion, Cojuangco’s SMC stood to gain 36 percent from the redemption, or P33 billion, no sweat, says one analyst.
Renewed concerns
President Aquino’s recent appointment as solicitor general of Francis Jardeleza, a counsel for San Miguel with a long association with Cojuangco, has sparked concern among farmers.
Jardeleza, deputy Ombudsman for Northern Luzon the past year, replaced Jose Anselmo Cadiz, who resigned on February 3.
A joint statement issued by two advocacy groups, Centro Saka and Alyansa Maglulubi, said farmers were “extremely saddened and disappointed” with the appointment of Jardeleza.
The groups said that Jardeleza’s past activities as a lawyer for Cojuangco, uncle of President Aquino and major contributor to his presidential election campaign in 2010, could “even boost” the businessman’s hold on the contested coco levy funds.”
Jardeleza served as litigation lawyer for the Accra law firm from 1975 until 1986 during the period Cojuangco transferred ownership of coco levy money to shares held by private individuals and firms, they said.
“Under the term of the new SolGen, coconut farmers ask: Who will defend our interests and that of the Philippine government if the new SolGen has represented and will likely continue to represent the interests of the country’s number one Pacman: Danding Conjuango?”
Pacman is a computer game in which the player gobbles up everything in its path.
The groups said that Mr. Aquino should recall the appointment of Jardeleza “for the greater interest of the small farmers, social justice, and the “matuwid na daan”—the Presidents reform program.
Same fears emerging
Last November, Malacañang announced without fanfare the reappointment of Jeronimo Kilayko as president and chief executive officer of UCPB.
As head of the bank during the Estrada years, Kilayko facilitated billions of pesos in loans to companies linked to Cojuangco and SMC, according to an in-house audit ordered in 2003 by the late Haydee Yorac, the highly respected PCGG chairperson.
The audit showed that UCPB lent P1.4 billion to Lucky Star Holdings Inc., P2 billion to Asturias Holdings and P700 million to Skyssets Inc.—companies linked to Cojuangco and Ramon Ang, chair and president of San Miguel, respectively.
The three companies were said to have no track record of profitability, insufficient collateral, and doubtful prospects for repayment.
No diligence audit was conducted on the transactions, according to the audit. But Ang then said that the loans were all legitimate and were fully secured.
82 times
The loans to the three firms were part of the P10 billion in loans granted to Cojuangco-linked companies that had weakened UCPB since 1999 and required the infusion of fresh funding by the government.
“It is this penchant for fraudulent schemes, shown by Cojuangco’s pre-Edsa I history and confirmed to the present by this CIIF transaction, that more than ever puts public assets in danger of dissipation,” the PCGG then said. “One can only imagine what private respondents can do if they already have full control of UCPB.”
Former congressman Santos said that one night, he pored over the Marcos decrees and executive orders concerning the levy issued during the martial law years.
Santos counted the words “for the benefit of the farmers” in the edicts 82 times until, exhausted, he fell asleep.
