First of Two Parts
What a pathetic country we’ve become.
Foreign companies have been able to dominate our strategic telecom industry despite the clear Constitutional restrictions against such control, only because of two Philippine presidents’ illegal interventions.
Such is our national shame, for two presidents of the Republic to violate our Constitution and help foreigners capture a strategic sector based on national and natural resources.
How can we ever strengthen our rule of law when we choose to forget or ignore such treasonous crimes committed by our leaders? No wonder that in sharp contrast to our situation, all our Asian neighbors with stronger states and more nationalist citizens have their telecom sectors dominated by their nationals, private or public.
First, Joseph Estrada in 1998 used – illegally – his powers as President to remove blocks to the acquisition by the dominantly Indonesian-owned First Pacific Co., Ltd. of the 17 percent controlling bloc shares of Philippine Long Distance Telephone Co. That was the beachhead for First Pacific’s expansion of its ownership of PLDT to the present 26 percent, making it the telcos’ undisputed controlling stockholder.
According to several accounts at that time, especially that of the Securities and Exchange Commission (SEC) chairman Perfecto Yasay, Jr., whom President-elect Duterte has appointed as his foreign affairs secretary, Estrada got a huge “commission” of P3 billion for his intervention.
Second, outgoing President Benigno Aquino 3rd in 2012 – believe it or not – in effect reversed, through a mere memorandum issued by the SEC which is under his office, a Supreme Court decision in 2011 which ruled that PLDT violated the 40 percent limit on foreign ownership of public utilities. The same ruling would have applied to Globe, if not for the SEC’s memorandum. That certainly would explain the all-out support for Aquino by big businesses, especially the elite Ayala clan.
In the case of Estrada, his intervention was done through, first, ordering the Social Security System to buy on the stock market about 6 percent PLDT shares, and then sell that stake to First Pacific’s Larouge BV to assist in the Indonesian-owned company’s accumulation of the telco’s shares for its takeover bid.
Second, Estrada’s operators removed Yasay as SEC chairman, a post that by law had a seven-year term of office and his appointment to this post was made by President Ramos in 1995. Yasay had questioned First Pacific’s takeover of PLDT on grounds that such major change of ownership of a listed firm required the clearance by the SEC, as well as the public tender offers to existing shareholders, and their waiving of rights of first refusal.
When Yasay got the Supreme Court to reinstate him, Estrada ordered the transfer of the SEC’s supervision from the Department of Finance to the Office of the President. Estrada also issued an order giving the Office of the President the oversight over SEC “matters not expressly appealable to the Court of Appeals.” That meant that any investigation for violations of securities laws – which the PLDT sale could have committed – had to be cleared with Estrada. Yasay didn’t bother to get such clearance.
Estrada coerced Yuchengco
Third, Estrada coerced PLDT stockholder and banking taipan Alfonso Yuchengco to sell his shares and waive his right of first refusal, or right to counter First Pacific’s bid.
“My PLDT common shares were taken from me in 1998 through sheer intimidation and serious threat to my business, myself and my family,” Yuchengco said in a 2009 statement through his lawyers. “Ten people came to my office with 10 rifles and Albert del Rosario (former Ambassador to the US and now former foreign affairs secretary) and another fellow forced me to sell my stake. So I had no choice,” Yuchengco was quoted in his biography To Leave a Good Name: the Legacy of Alfonso T. Yuchengco written by the late Nick Joaquin and Krip Yuson.
Estrada sued Yuchengco for libel in 2009 for his accusations, filed in the former President’s hometown San Juan, where he had been mayor for 17 years. The court, however, dismissed the case in 2010.
Yuchengco and his associates’ affidavits to the court disclosed details on how the coercion was made. PLDT Chairman Manuel Pangilinan and del Rosario themselves made the offer to buy his shares in PLDT when they were at the residence of his daughter, the Filipino-Chinese tycoon said. When he refused the offer, a police captain detailed at President Estrada’s office threatened the next day to arrest and jail his son Alfonso, Jr. on trumped-up charges of illegal drug possession.
Pangilinan, through PLDT chief counsel Ray Espinosa, denied Yuchengco’s allegations when it became news in 2012, and claimed that the taipan was generously compensated for the sale of his shares. Del Rosario, however, was ruthless in his reaction to Yuchengco’s claims, alluding that these were due to his “seniority and reported illness.” Yuchengco had been reported at that time to be suffering form the onset of Alzheimer’s disease.
Yasay alleged in November 2000 that Estrada received US$20 million (P1 billion) to help First Pacific’s buyout of PLDT. First Pacific at that time denied Yasay’s claim and categorically stated that neither the company nor Metro Pacific, its subsidiary, made payments to Estrada.
Yasay repeated his allegations under oath during Estrada’s impeachment trial that started November 2001. In his testimony, Yasay said that Estrada personally called him several times to give him instructions regarding the First Pacific’s capture of PLDT, one of which was to deny the application for a temporary restraining order filed by PLDT’s minority stockholders. Yasay told him that he already had a “commitment to foreign investors.”
The Senate was set to summon PLDT Chairman Pangilinan to respond to the allegations during Estrada’s impeachment trial that started November 2000. However, on Jan. 16, 2001 the trial was disrupted because the majority of the Senators refused to open a certain envelope that was supposed to prove Estrada’s corruption, and the prosecutors walked out. After four days of huge demonstrations called EDSA II, Estrada was forced out of office. Pangilinan avoided having to explain to the Senators under oath if Estrada did or did not help First Pacific take over PLDT.
In his 2005 book “Out of the Lion’s Den,” Yasay claimed that Estrada got not just P1 billion but P3 billion for his help in First Pacific’s acquisition of PLDT. Yasay wrote that Estrada, indeed, received P1 billion, initially. However, Yasay wrote, when Estrada learned that two of his associates who helped him in his project also got P1 billion each, he demanded they give him the P2 billion, scolding them: “Magpresidente muna kayo bago kayo makihati sa akin ng ganyan.” (“Get yourselves elected as President first, then you can split commissions with me that way.”).
One balikbayan businessman, Mario Crespo, who assumed the name Mark Jimenez, was Estrada’s negotiator in the PLDT takeover, helping in the packaging of the deal. A 1999 article written by Antonio Lopez for the regional magazine Asiaweek reported, “for his role in brokering the deal, Jimenez pocketed $50 million.” This amount, equivalent to P2 billion at the exchange rate that time, could be the P2 billion in “commissions,” which Yasay alleged in his book, Estrada wanted to be turned over to him by his associates.
Yasay affirmed these allegations when I interviewed him in December 2014. Estrada, however, in an interview last year denied getting anything from the PLDT deal, saying he merely helped Tonyboy (Cojuangco), in selling the clan’s controlling shares to First Pacific.
An article in the magazine of the prestigious Philippine Center for Investigative Journalism also claimed, citing different sources: “The sale, according to various other sources, generated a P3 billion in commissions—about 10 percent—from both sides of the transaction.”
If true, that would make it the country’s biggest bribe money ever paid to an official using government levers to facilitate a corporate takeover. It would also be the biggest case of state coercion in order for a private entity – worse, a foreign one – to acquire a private firm.
But how could First Pacific, which now owns 26 percent of PLDT, keep hold of the telco since 1998, and how could other foreign investors now own a separate 50 percent stake in the firm, when our Constitution categorically limits foreign ownership of a public utility to just 40 percent?
That has become possible because of President Aquino’s intervention, through his SEC, which defied the Supreme Court’s ruling on the issue. That on Wednesday.
Second part here.