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WHAT WENT BEFORE

/ 03:53 AM June 22, 2011

Former Senators Jovito Salonga and Wigberto Tañada and the coconut farmers asked the Supreme Court in May to set aside its April 12 ruling awarding 20 percent of San Miguel Corp. (SMC) to Eduardo “Danding” Cojuangco Jr., an uncle of President Aquino and crony of the late dictator Ferdinand Marcos.

The high court ruled in April that Cojuangco was the legitimate owner of a fifth of shares in San Miguel Corp., which the government claims he acquired using the controversial coconut levy funds.

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Sitting en banc, the tribunal affirmed a 2007 decision issued by the Sandiganbayan and declared “that the block of shares in SMC in the names of respondents Cojuangco et al. … is the exclusive property of Cojuangco et al. as registered owners.”

In their ruling, the justices observed that the government had failed to offer clear evidence to prove that Cojuangco used levy money to acquire the shares from SMC, a food and beverage conglomerate which has diversified into power generation, telecommunications and other businesses.

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Coco levy

The government had been contesting 20 percent of SMC’s capital stock or 16,276,879 shares that Cojuangco allegedly acquired through the coco levy when he headed the United Coconut Planters Bank (UCPB).

The government maintains that the coco levy is public, which means that the state owns 20 percent of the SMC stocks in the name of Cojuangco et al.

The coconut levy was a tax exacted from coconut farmers from 1973 to 1982, during Marcos’ martial law rule 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 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. 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.

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Sequestered

In 1986, the Presidential Commission on Good Government (PCGG) sequestered a 47-percent block of San Miguel shares, claiming they were illegally acquired by Cojuangco using the coco levy funds. The PCGG, an agency formed by President Corazon Aquino immediately after Edsa I, is tasked to recover the ill-gotten wealth of Marcos and his cronies.

The PCGG filed cases in the Sandiganbayan against Cojuangco, claiming the SMC assets and other assets of the CIIF 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.

Sandiganbayan

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

Petition

The Salonga et al. petition asking the high court to reverse its April ruling pointed out that Cojuangco violated his “fiduciary obligations and duties” when he took the loans from UCPB and CIIF companies to buy SMC shares while he was an officer of these firms.

The petition said government lawyers were able to show that Cojuangco used public funds to buy SMC shares. “The subject SMC shares, having been purchased from funds sourced from UCPB and the CIIF companies … are deemed to have been purchased with public funds,” it said.

The petition noted that Cojuangco had admitted that the borrowings were funded by the CIIF companies.

In the April decision that was appealed, the high court declared Cojuangco as the legitimate owner of the 20-percent block of SMC shares as the government failed to establish any breach of Cojuangco’s “fiduciary duties” as a bank official.

Cojuangco’s only liability, it said, was to pay the loan and its interest as stipulated by law. Inquirer Research
Sources: Inquirer Archives

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TAGS: coco levy funds, Eduardo Danding Cojuangco, Graft and Corruption, Jovito Salonga, Marco crony, San Miguel Corp., Wigberto Tañada
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