The Multi-Billion Peso President

Joseph Estrada amassed a fortune by abusing the powers of the presidency.
by Sheila S. Coronel

EDGARDO Espiritu recalls the time, early on in Joseph Estrada's term, when a beaming president told him what it was he enjoyed most about being in Malacañang. "Napakasarap palang maging presidente (It's great to be president)," Espiritu, who was then finance secretary, remembers Estrada saying, "even without asking for funds, dumarating na lang (they just come)."

Espiritu is probably as hard-boiled as they come. In 1992, he was a key figure in the presidential campaign of Ramon Mitra, together with the likes of the brothers Ronaldo and Manuel Zamora, who are among the country's shrewdest businessmen and politicians. A veteran banker and campaign insider, Espiritu was one of Joseph Estrada's election fundraisers in 1998, collecting money from businessmen to bankroll the popular former action star's campaign.

Having moved in and out of the corridors of power, Espiritu is not new to the profits that can be made from the presidency. Others who had occupied that post made their own deals as well, he says. But Espiritu, like other businessmen and politicians who have dealt with Estrada before he became president, now says there was no indication that the man who liked to be called 'Erap' would become a major-league grafter whose acquisitiveness would ultimately be his downfall.

Espiritu has known Estrada since the 1970s. "He was something of a bully, that was all," he recalls, "he was really just after the small gain." Says a businessman who has been friendly with Estrada from his days in the Senate: "As long as he could maintain his wives and his lifestyle, it was okay. It was just the usual corruption."

What struck this businessman as well as others who have seen Estrada at his political prime was the evident delight this president took in the perks that came with highest office of the land. They say that Estrada's sense that there was nothing wrong with accepting money from his cronies was so absolute, his belief that a popular president could get away with anything so unshakeable, that he became reckless.

The picture that Estrada's former associates paint of him is that of a man who was so dazzled by the money-making opportunities made possible by the powers of his position that he became insatiable. "This guy likes to get involved in the retail side of deals," says a businessman who used to visit Malacañang regularly. "He enjoyed the fact that as president, you need money and it just comes."

It is true that every time a new administration comes into power, businessmen make a beeline to Malacañang, offering their support to the new president. Sometimes, these offers of support come with bags of cash, often with no favors asked in return, at least initially. "That's how powerful the position of the president is and the kind of influence he has over the country," says Espiritu. "In the beginning, (Estrada's) Chinese friends without asking any favors yet would bring him all sorts of things."

For all his supposed lack of intellectual credentials, Estrada apparently soon became wise to the lucrative possibilities of the presidency. Instead of just waiting for the money to come, he proceeded to actively pursue the unlimited opportunities for deal making that the presidency provides. "The guy is simply amoral," says Espiritu, who as Estrada's finance secretary saw the then president dirty his hands in transactions that brought him billions of pesos within his first year in office. "He does not have a sense of right or wrong."

In his pursuit of his billions, Estrada benefited from the counsel of wily friends like Mark Jimenez, the shadowy businessman who is wanted in the United States for mail fraud and illegal campaign contributions, and Charlie 'Atong' Ang, a one-time masiao (like jueteng, another illegal numbers game) operator with the mind and connections of an underworld thug. With their help, and the cooperation and complicity of many others, including some of the country's top banks and biggest corporations, Estrada systematically looted the country.

The remarkable thing about his thievery is that it involved the most advanced and licit sectors of the economy—the stock market and the formal banking system—as well as the primitive and illicit worlds of gambling and smuggling. Although Estrada, in public, said he hated the rich, he actually got the tacit cooperation of some of the country's wealthiest clans, who did not balk at his deal-making.

What is now apparent is that he combined the vintage methods of presidential plunder that had been perfected by former strongman Ferdinand Marcos—behest loans, commissions from contracts, and the ownership of companies through nominees—with newer types of machinations, such as stock speculation and corporate mergers and takeovers using state pension funds. By the time he was ousted two and a half years after his election to the presidency, Estrada had accumulated, according to a plunder charge that has been filed against him in the Ombudsman's office, up to P20 billion in cash and real estate.

BY VARIOUS accounts, it was Jimenez who first introduced Estrada to the big time. Facing legal charges in the United States, where he had put up a lucrative computer business, Jimenez returned to the Philippines in the first half of 1998, initially supporting the candidacy of former defense secretary Renato de Villa. But when de Villa's chances at the polls didn't look too bright, especially after then President Fidel V. Ramos threw his weight behind the presidential bid of then House Speaker Jose de Venecia, Jimenez shifted to the Erap camp.

By the time Estrada moved into Malacañang, Jimenez had managed to insinuate himself into the Palace inner circle, largely by pandering to the President's ego and impressing him with his business savvy. In November 1998, barely five months into Estrada's term, Jimenez brokered the sale, for close to P30 billion, of over 17 percent of the shares of Philippine Long Distance Telephone Co. (PLDT). The shares were acquired mainly from the family and partners of then PLDT chief Antonio Cojuangco and sold to First Pacific, a Hong Kong-based conglomerate owned by the Salim group of Indonesia.

"Mark Jimenez was the broker for both the buyer and the seller," says Espiritu. The sale, according to various other sources, generated a P3-billion commission—about 10 percent—from both sides of the transaction. Jimenez supposedly split this amount with Estrada.

In what would become the classic Jimenez maneuver, the deal involved the purchase of PLDT shares in the open market months before the transaction was consummated. The buyers of the shares were the two state pension funds, the Social Security System (SSS) and Government Service Insurance System (GSIS). Their buying spree was monitored by brokerage houses and generated speculative interest in PLDT stock, causing a rise in share prices. Having acquired a substantial portion of PLDT, the pension funds also got substantial voting rights in the contested company that government nominees could then vote in favor of whichever group had the blessings of the President.

It was the kind of "win-win" transaction that Jimenez convinced the President was perfectly legitimate. After all, the Cojuangcos, who were forced to give up a corporate jewel that had been with the family for over 30 years, earned princely profits from the deal: First Pacific bought PLDT shares at a premium - P1,300 per share at a time when the stock was being traded in the previous weeks at anywhere from P860 to just a little over P1,000. At the same time, First Pacific bested other contenders to take over a corporate cash cow, after it failed in a bid just a few months earlier to wrest control of San Miguel Corporation.

So successful in fact was the transaction that it became the patented Jimenez strategy. Six months later, in May 1999, Jimenez would broker for both sides again, this time for the sale of the controlling stake in PCI Bank from the Lopez and Gokongwei families to Equitable Banking Corp. owned by the Go family. Equitable president George Go was a long-time Estrada friend. This time, SSS and GSIS played an even bigger role by purchasing 35 percent of the bank's shares worth P15 billion. This chunk, which was paid for from the social security contributions of millions of employees, combined with the 38 percent that Equitable had bought, was more than sufficient to take control of PCI Bank.

Again, the stock was sold at a premium: P290 per share, compared to a peak of P109 at which it was then being traded in the open market. Again, Jimenez was believed to have brokered for and taken commissions from both sides. According to Espiritu and other sources, P3 billion in commissions was paid through Jimenez, roughly 10 percent of the P31.8 billion for which the shares were bought from their original owners.

FOR ALL HIS audacity, Jimenez—an upstart with a sleazy past—could not have transacted with some of the country's biggest and proudest business families if he did not have the President's backing. The various Jimenez-brokered transactions show how the foremost Filipino business clans were willing to accommodate the less-than-legitimate demands of a greedy president.

Businessmen are always careful to curry favor with Malacañang. After all, the president as the ultimate executor of government policy can make or unmake businesses, providing openings and relaxing the rules for his friends, while putting the squeeze on their rivals. Says Enrique Razon, whose International Container Terminal Services, Inc. runs several of the country's ports: "If you have an adversarial relationship with the president, it's very easy to get squeezed. We have to be friendly with Malacañang to protect ourselves."

Moreover, the president has discretionary power over government or quasi-government funds. He can, for example, speed up or delay the release of allocations from the national budget. He also has the power to approve government contracts above P50 million. Although strictly speaking, state corporations and financial institutions are independent, the president can influence their decisions through the men and women he appoints to their boards. A phone call from the president can mean the approval of a hefty loan from a government bank or the restructuring of an overdue debt. It can mean a state firm, whose board is likewise appointed by the president, goes this way instead of that way.

Other presidents had allowed government financial institutions to favor the businesses of their kin and cronies. But Estrada went farther than his predecessors in the deployment of state pension funds for the purchase of shares in firms ripe for a takeover. He did this by getting the complicity of the heads of SSS and GSIS whom he himself had appointed. GSIS chief Carlos Arellano was one of his boyhood friends while SSS chief Federico Pascual once headed Allied Bank, owned by Estrada crony Lucio Tan.

Arellano and Pascual "were asked to see Mark Jimenez and deal with him with regard to the Equitable transaction," says Espiritu, whose official post gave him supervisory authority over all government financial institutions. "Inutusan sila (They were ordered). They knew about the deal." Espiritu says he himself had resisted the involvement of the two institutions. But the President, he says, merely set aside his objections, saying "Ed, hindi naman sa 'yo ang GSIS at SSS, 'wag mo na kong pakialaman rito (Ed, GSIS and SSS aren't yours, so don't meddle with what I'm doing.)"

"I was vehemently against the deal," says Espiritu. "Had GSIS and SSS done due diligence, they would have not lost so much money. After PCI merged with Equitable, the share price went down to an average of P98, and the present value is at P52 to P53. How would you justify that to the members? They lost a lot in the transaction. There was no excuse for that decision."

The biggest winner, of course, was Estrada. Within his first year in office, Jimenez's wheeling-dealing in just two transactions had netted some P6 billion in commissions. In addition, Estrada found in the merged Equitable-PCI Bank a willing laundromat for his ill-gotten wealth. As documents subpoenaed during Estrada's impeachment trial show, the bank became the repository of the fictitious Jose Velarde account, where P2.2 billion in apparent payoffs to the President were deposited. The bank also became the conduit for the jueteng money that was coursed through the Erap Muslim Youth Foundation.

The PLDT and Equitable deals also whetted the former president's appetite. Jimenez tried to broker more deals, such as the sale of government shares in Manila Electric Co. (Meralco), which is run by the Lopezes. Jimenez had already spoken to representatives of the family about negotiating a sale to a company that would be friendly to them, says Espiritu, who put his foot down on the transaction. The finance secretary argued that it wasn't wise to dispose of government shares until the Omnibus Power Bill had been passed. Nonetheless, several government financial institutions were instructed to buy Meralco shares in the market, but the transaction never pushed through.

At the very least, Jimenez should be credited for opening for Estrada new vistas of the presidency. "It was Mark who put it into Erap's head that he could make billions," says a businessman who was in Malacañang often enough to observe the goings on at the Presidential Residence. "It was Mark who convinced him that he could get away with anything as long as he is popular."

In the end, it was also Jimenez who would turn against Estrada, by offering in February to testify against the former president so that the fugitive businessman could have a stay on his extradition to the United States.

BUT JIMENEZ, had a point. In truth, Estrada's popularity during his first two years in office intimidated his critics. During that period, the institutions designed to check on presidential excesses were for the most part either bullied or bribed into submission: Congress, opposition political parties, even the press. Erap may have even gotten away with plunder if he had been less reckless in the way he made - and spent - his money.

The machinations surrounding the operation of the BW Resources Corp. and its affiliated BW Gaming and Entertainment Co. were probably the height of presidential recklessness. To begin with, Estrada was Dante Tan's secret partner in BW, confirms Espiritu. That was why BW became the recipient of so many government favors: an online bingo license given in record time by the Philippine Amusement and Gaming Corporation (Pagcor), the state-owned gaming company; a P600-million loan from the Philippine National Bank that was approved even if the collateral was worthless land; and a contract from Pagcor that ensured the transfer of Pagcor operations to a building that BW was constructing in downtown Manila.

Moreover, as various officials attested during the impeachment hearing, Estrada intervened on behalf of Tan when he was being investigated by the Securities and Exchange Commission (SEC) for insider trading and stock price manipulation. The President also ordered Jimenez and ethnic Chinese businessmen Wilson Sy and Willy Ocier, whose speculative play in the market was believed to have caused BW prices to fall precipitously in late 1999, to return the money Tan had lost to shore up BW prices.

"That was the version of Dante Tan when I confronted him about it," says Espiritu. "That version was also confirmed by the brokers at the Philippine Stock Exchange." Face to face with an angry president, Sy and Ocier agreed to reimburse Tan's losses, according to prosecution lawyers in the Estrada impeachment trial. The payoff was supposedly made not in cash but in 650 million shares of Belle Corp. worth P1.5 billion. The shares were turned over not to Tan but to Estrada, who then supposedly sold them to SSS and GSIS at a profit of P800 million.

Little wonder then that Estrada was splurging on luxury real estate. The billions were fattening up his bank accounts and he refused to take a loss on his investments in companies like BW. In fact, it can be said that as far as BW was concerned, he even made a profit on his loss.

But that wasn't all. On top of all these, Estrada was getting regular payoffs from businessmen. The Jose Velarde account gives some clues of just how much the ex-chief executive was raking in. It also gives some indication of the kinds of deals Estrada cut with his cronies. The account had deposits of P170 million in cash and nearly P2 billion in checks, all made in just a five-month period, from August 1999 when the account was opened to January 2000.

The biggest deposits, according to investigations made by prosecution lawyers with the help of sources in various banks, were from the accounts of Dante Tan, Estrada's partner in BW; Lucio Co, a suspected smuggler and owner of Duty-Free shops, who is also believed to be Estrada's partner in a Clark Air Base casino; Ramon Lee, a member of the board of BW; Jaime Dichaves, a long-time presidential friend who is believed to have made deals with telecommunications companies on Estrada's behalf; and a certain Kelvin Garcia, whom prosecutors believe is really tobacco magnate Lucio Tan.

In addition, a P40 million-deposit was made by Antonio S. Evangelista, Estrada's Ateneo high school classmate who has been reported as a shareholder of New San Jose Builders Inc., a company that has bagged multibillion pesos worth of government housing contracts. Evangelista, who owns Kanlaon Construction, also built the former president's "Boracay" house in New Manila, Quezon City and is constructing a Forbes Park mansion for Guia Gomez, one of Estrada's mistresses.

The mansions being built for presidential mistresses appear to be part of the accommodations from businessmen. These allegedly include the constructions done by Centech International, a firm run by Ramon Ang, vice-chairman of San Miguel Corporation (SMC). San Miguel chief Eduardo 'Danding' Cojuangco Jr., who became SMC chairman with the backing of government nominees to the company's board, was an Estrada supporter to the end. Centech built the P200-million house on Harvard Street in Wack Wack, Mandaluyong, supposedly as a gift for presidential paramour Laarni Enriquez, and was also the project manager for Gomez's Forbes Park mansion.

IT IS DIFFICULT at this stage to have a full picture of exactly how much Estrada made and to list down all the deals that he went into. Even the figure of P20 billion accumulated in two-and-a-half years is at best a rough estimate. But certainly, judging from the Velarde account, the former president took a share of the profits made by his various friends in enterprises that ran the gamut of all lucrative businesses, from smuggling to housing, telecommunications and gambling.

If investigated, other accounts in other banks could yield more clues. Prosecutors say that Estrada, using fictitious names, had accounts in Metrobank (believed to be close to P1 billion); RCBC, where another P600 million is reportedly kept; Asia United Bank, Bank of Commerce, and Allied Bank. In addition, he kept under his own name, $3 million in Citibank. He also had P143 million in a numbered account in Urban Bank, which he withdrew just before it closed in April 2000. Plus, there was the money that found its way to presidential mistresses, including Enriquez, whose account in PS Bank had deposits of P650 million, many of them from the same bank branches that were transferring money to the Velarde account.

The illegal profits from jueteng are well documented because of Ilocos Sur Governor Luis 'Chavit' Singson's exposé. We now know that jueteng collections, which totaled P500 million, were paltry in comparison to what Estrada made from other deals. We also know that most of the jueteng money ended up in Equitable-PCI. But the illicit gain from smuggling remains unknown terrain. There are indications that they were quite substantial. Espiritu, who was once the major shareholder of the now defunct Westmont Bank, says that a P58-million cashier's check deposited in the Jose Velarde account was transacted at Westmont and was traced to Manny Tan Kian Sy, a fertilizer dealer.

Kian Sy is believed to be involved in the smuggling of rice and sugar, and was among those that Espiritu declined to mention in his Senate testimony last January. Other suspected smugglers who were close to the Estrada were Co, Dichaves and a certain Johnny Sy.

Much more needs to be investigated if there is to be a full appreciation of the Estrada presidency and the flaws in the system that it made evident. Apart from a liberalization of banking secrecy and tighter regulation of banks, among the reforms that have to be considered are those providing checks on presidential powers and presidential appointees.

There should, for example, be more transparency in the operations of government financial institutions and other state entities. For one thing, the practice of investing state pension funds in private enterprises should be reconsidered. So should the involvement of government in commercial banking. There is really no reason why state banks should be financing enterprises which, if they were truly viable, could get money from private banks. The Estrada era has shown the urgency of professionalizing the leadership of government financial institutions to make them less susceptible to presidential influence.

In addition, there should also be mechanisms to allow for a closer scrutiny of the assets and business involvements of people in high office. Certainly, putting Estrada and his accomplices on trial and ensuring that justice is done would be a big step forward and would serve as a lesson to others.

Ultimately, however, the biggest challenge is how to make the conduct of business more open and accountable and less dependent on political connections and the blessings of the presidential palace. To do this, government entities must be allowed to evolve into autonomous regulators of business and impartial enforcers of policy. This in turn is possible only if the business culture is overhauled and a tradition of patronage and spoils is overcome.

Estrada plundered the country right under the noses of the courts, the Cabinet and Congress. He was the logical product of a system that provided a president such wide discretion that allowed him, in the words of sociologist Walden Bello, to "centralize crime under the presidency."

What people power achieved was to oust the Godfather. It was no mean feat, but the rest of the Mafia remains very much in place.



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