How ‘coconut levy funds bought SMC shares’

06:23 AM May 14, 2011

(The author was solicitor general during the Cory Aquino administration)

(Last of two parts)


GOING BY the record of the Philippine Coconut Authority (PCA) alone, out of the P9.6 billion coconut levy funds collected from 1973 to 1982, PCA funneled more than 50 percent to the United Coconut Planters Bank (UCPB) for the latter’s establishment and disposition.

A breakdown of how this was done (see Table 1 on Page A8) does not, however, reveal the juggling of the various coconut levy funds.


Ten million pesos apiece was invested in 10 Coconut Industry Investment Fund (CIIF) copra trading companies (CTCs). These “traders” were “incorporated” later over a period spanning from Jan. 29 to Feb. 5, 1985.

Almost P1 billion pesos was poured into CIIF oil mills (the “Mills”). Their incorporation papers or amendments were filed in the Securities and Exchange Commission (SEC) when President Ferdinand Marcos’ coco-levy decrees started to come out in a series.

The Legaspi Oil Mill articles were amended, for example, on July 3, 1973, three days after the issuance of the first of a series (Presidential Decree 232 re PCA).

Moreover, UCPB “invested” CIIF funds in the setting up of 14 holding companies (HCs) for the sole purpose of availing of a “private event” that occurred in 1983 which will be discussed later. These 14 HCs reportedly were formed to gobble up “business enterprise[s]…”

Common stockholders

Presidential Commission on Good Government (PCGG) records from the SEC also show that the stockholders, directors and officers of all the above consist of common set of stockholders, plus or minus a few names, whether the holders be entities such as CIIF, UCPB, the Mills, the coconut investment companies (CICs), or individuals such as Eduardo Cojuangco Jr., Juan Ponce Enrile, Maria Clara Lobregat, Jose C. Concepcion, Danilo S. Ursua, Amando C. Mamuric, Alfredo C. Tumacder Jr. Teodoro D. Regala, Raul S. Roco, Eduardo Soriano, Antonio J. Roxas, Jose Antonio Garcia, to tick off a few names from a common pool.

PCGG records likewise indicate beyond denial that the 14 HCs are owned by the 10 CTCs, which are “owned” by the Mills, which are “owned” by UCPB. This is another way of saying that the 14 HCs are owned by UCPB. That UCPB is owned by Cojuangco goes without saying, just as it cannot be gainsaid that UCPB is FUB (First United Bank) which is PCA.


The incorporation papers of the 14 HCs are perfect clones of each other save for the merry-go-round of common names, and made out obviously on two typewriters, bearing the same incorporation date: Aug. 9, 1983.

They have no specific addresses save “c/o UCPB” and have one common treasurer, Jose Antonio Garcia, in whose account at UCPB, mainly at the Salcedo Branch, the 25 percent paid-in capital for each of the 14 HCs was allegedly deposited on the same date—Aug. 12, 1983—to meet the SEC “certificate of deposit” requirement and to meet a “private event” that occurred in 1983.

ACCRA lawyers

The corporate names of some were beautifully “encoded” unto particular names of particular stockholders, e.g. “Te Deum Resources” (TDR) for Teodoro D. Regala, “Anglo Ventures Corp” (AVC) for Avelino V. Cruz, “Rock Steel Resources” for Raul S. Roco, “First Meridian Development” (FMD) for Franklin M. Drilon, etc., all ACCRA lawyers.

Corporate records of the CTCs, the Mills and the 14 HCs do not indicate whether the individual stockholders, like Regala, Cruz, Roco, Drilon, etc. are coconut farmers, considering that on said records appear one other group of common stockholders, namely, “1,003,008 coconut farmers.”

At any rate, despite PCGG’s repeated requests for the identification of the “more than one million coconut farmers” allegedly benefiting from the coco levy funds, neither the PCA nor CIC nor Cocofed nor UCPB could furnish their names, notwithstanding Section 8, Republic Act No. 6260: “The receipts and/or certificates shall be non-transferable except to coconut farmers.”

That provision had not been swept away by the deluge of PDs on the levy.

Unnamed farmers

As of Sept. 15, 1987, only 9 percent of shares in UCPB and 6 percent in the mills have been identified or validated through a process instigated by the PCGG.

These miniscule percentages, however, do not even mean anything in terms of individual coconut-farmer-stockholder identification, whether in personal or corporate form, considering that shares in UCPB, the mills, 14 HCs, etc. are in names that gravitate toward a common pond of select members.

The flesh-and-blood coconut farmers, unaccounted for as they are by the still undetermined big percentages, are witnesses unto themselves as to how they have been reduced to “jackasses” in a “lion-and-jackass” arrangement.

‘Private event’

Sometime in mid-1983, a private event occurred: Andres Soriano (ASIII), Francisco Eizmendi Jr., Benigno Toda Jr., Eduardo Soriano, Antonio Roxas and Antonio Prieto (Soriano Group) decided to sell their 33,133,266 shares (the “shares”) in San Miguel Corp. (SMC) for P1.656 billion (P50/share) to Cojuangco, who consequently had to scout for funds.

The funds are in UCPB, but UCPB, under the banking laws, is a universal bank, and as such cannot be a brewery much less an ice cream parlor. More importantly, the funds are government levies. Hence, something had to be done.

Up sprouted the 14 HCs to do the “job.” The five CIIF “mills” companies, namely: Iligan Coconut Industries Inc., Southern Luzon Coconut Mill Inc., Cagayan de Oro Oil Co. Inc., Gran Export Manufacturing Corp. and Legaspi Oil Co. obtained P976 million in loan from UCPB.

Out of that resource, P247 million was funneled to the 14 HCs by the mills as investment in the equity stock of the 14 HCs. The balance of P729 million was farmed out to the 14 HCs by the mills as loans.

Loan from UCPB

With the resulting HC capital structure, the 14 HCs then obtained as loan P680 million directly from UCPB, thus availing themselves of a grand total of P1.656 billion, exactly the purchase price of the SMC shares, thus:

1. Indirect UCPB “loan” via the Mills to 14 HCs—P .976 B

As equity in 14 HCs stocks—P247 M
As loan to 14 HCs—P729 M

2. Direct UCPB “loan” to 14 HCs—P .680 B

With the above total, pooled as if by a magic wand, the 14 HCs acquired on Dec. 15, 1983, the “shares” from the aforementioned Soriano Group, thus (see Table 2).

Picture complete

This is not the end of the swirl of coco levy funds.

Subsequently, the P680 million obtained as direct loan by the 14 HCs from UCPB was paid and erased clean by the five mills with fund advances provided by the 10 CTCs. This is not the end either.

The 10 CTCs had obtained the funds by way of loans from UCPB in order to erase and cleanse the P680 million direct loan. And this is not the end, as all the while PCA had been funneling CIDF and CIIF levy collections to UCPB, as shown earlier.

Clearly, the coconut farmers own the CIIF companies, which own the oil mills, which own the holding companies which own the disputed stock of SMC shares.

That should complete the picture of how coconut levy funds were used to acquire UCPB and SMC shares.

Table 1: Where half of coco levy funds went

1. Transfer cost of UCPB
of the controlling FUB equity interest P28,880,000.00 .30%
additional equity in UCPB 80,864,000.00 .83%
Subscription Deposit P5,776,000.00 .06%
2. Coconut Industry Development Fund
(CIDF) (Replanting Program) 1,147,176,054.00 11.83%
3. Coconut Industry Investment Fund 2,572,143,884.69 26.53%
4. Debt Service Fund 38,970,509.40 .10%
5. Insurance Fund 994,941,396.29 10.26%
P4,839,771,844.38 50.61%

Table 2: No. of shares acquired from Soriano Group
Soriano Shares Inc. 1,249,163
ASC Investors Inc. 7,562,449
ARC Investors Inc. 4,431,798
Roxas Shares Inc. 2,190,860
AP Holdings Inc. 1,580,997
Fernandez Holdings Inc. 838,837
SMC Officers Corps. Inc. 2,385,987
Toda Holdings Inc. 3,424,618
Te Deum Resources Inc. (TDR) 2,674,899
Anglo Ventures Corp. (AVC) 1,000,000
Randy Allied Ventures Inc. (RAV) 1,000,000
Rock Steel Resources Inc. (RSR) 2,432,625
Valhalla Properties Ltd. Inc. (VPL) 1,361,033
First Meridian Dev. Inc. (FMD) 1,000,000
The “Shares” 33,133,266

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