Is corruption bringing Gokongwei group down?

Frankly Speaking
By Frank Wenceslao

John L. Gokongwei Jr.

After an 8-year research and study to fight corruption Pamusa announced last month we’re starting to expose the corrupt practices and shenanigans of Filipino big businessmen like their American counterparts responsible for the collapse of the U.S. corporate giants such as the late ENRON’s CEO Ken Lay whose corrupt practices are allegedly equaled by John L. Gokongwei, Jr., Chairman Emeritus of the JG Summit Holdings, Inc.

For the sake of fair play and clarity, I’ve offered Gokongwei a deal and others like him in view of their vital role in the Philippine economy to allow them wait for opportunity to negotiate out-of-court settlement of their wrongdoings that have incredibly grown their corporate assets and net worth from the proceeds of corruption. By donating funds to Pamusa, a California nonprofit anticorruption corporation authorized by the U.S. Department of Justice to fight corruption in the Philippines, we’ll prioritize running after thousands of small-time perpetrators of corruption which are most debilitating to the economy and the biggest cause of poverty, while waiting for government measures to enable the business community’s “big fishes” to negotiate settlement of past wrongdoings.

For fellow Filipinos with crab mentality, donations to Pamusa in cash and in kind are reported to and registered by the California Attorney General’s Registry of Charitable Trusts that monitors our sources and application of funds such that if our expenditures exceed a reasonable limit for Pamusa’s operation, we’re subjected to audit and disciplinary action. Pamusa can’t pay employees’ bonuses and expenses for office parties or other celebrations.

We will use the donations to improve investigation, prosecution and bringing to court if needed the thousands of “dealmakers” or fixers responsible for the graft and corruption pervading the government that, in fact, have made earnings from the scourge a vital part of their way of life. Without addressing these dealmakers and their debilitating effects, graft and corruption cannot be minimized let alone be stopped by Philippine government efforts alone.

Increase of population and growth of poverty would be racing like Olympian athletes until the rich become the scapegoats and, God forbid the time to come when racial riots happened like in Indonesia and Malaysia in mid-1960s. In Jakarta, for instance, a Philippine Embassy staffer showed me a river like Pasig which became red with blood when native Indonesians roaming the streets cut to pieces everyone they met who looked like Chinese to whom they attributed to be causing their economic miseries.

As quid pro quo for donations to Pamusa which we have the option to accept or not, we’ll use our prosecutorial discretion whether to immediately file or defer law suits against “big fishes” like Gokongwei suspected of corruption, fraud, and bribery of government officials to have undue competitive advantage and exploit small and medium Filipinos delivering the goods and services the big businessmen sell in their department stores and malls at exorbitant profits.

Pamusa will continue to explore and wait as long as it takes for big businessmen to negotiate settlement with our proposed Office of Recovery and Settlement (ORAS) to enable the people and corporations who have inexplicably amassed illicit assets from exorbitant profits over the rock-bottom prices forced on SMEs and inexplicable sources since the Marcos time.

Deferring Pamusa’s legal actions will give big businessmen time to consider returning the bulk of their ill-gotten assets to the Philippine Treasury and be allowed to keep a reasonable part thereof, for instance, the reasonable ROIs and other accruals proportionately with their capital investment and risks based, of course, on mutually accepted accounting.

The settlement negotiation will be strictly confidential and in secret between the “owner” of ill-gotten assets wanting to return them and the ORAS official assigned to the negotiation, which unlike the unlamented PCGG “fix-cal agents” won’t be allowed to be involved in the actual negotiation to ask for their “cut.”

The President will be the only one to know every negotiation going on and has the sole option to assign who will mediate between the “owner” and ORAS official assigned to the case, perhaps a respected private lawyer or CPA, who will submit to the President for approval the agreement when settlement is reached.

Negotiation can also be started in the U.S. under the USDOJ’s auspices even before ORAS is created. Thus, a settlement may already be in place when ORAS takes effect and implementation of the agreement can begin under stricter U.S. laws. The settlement will remain confidential even after it’s approved by the President including the amount of assets to be turned over to the Philippine Treasury.

In any event with the donations Pamusa will receive the help of Philippine business community and the media will be mobilized to lobby for government reforms including the ORAS creation. Pamusa will also coordinate with the USDOJ the actions against corruption by other NGOs in the Philippines conformably with the Kleptocracy Asset Recovery Initiative.

Pamusa warrants to wait as long as it takes until the donors have the opportunity to negotiate the settlement of their ill-gotten assets with ORAS or a similar agency. Nothing herein should be deemed to mean though that Pamusa will set aside its authority granted by the USDOJ to stop submitting evidence to the FBI for consideration if and when its legal action is warranted except when there’s prior agreement to defer it pursuant to these particular UNCAC provisions, to wit:

“Countries agreed to cooperate with one another in every aspect of the fight against corruption, including prevention, investigation, and the prosecution of offenders. Countries are bound by the Convention to render specific forms of mutual legal assistance in gathering and transferring evidence for use in court, to extradite offenders. Countries are also required to undertake measures which will support the tracing, freezing, seizure and confiscation of the proceeds of corruption.”

As though God’s will, which I believe it is to stop or at least minimize graft and corruption hurting poor Filipinos and driving them deeper into poverty, the ratification of the UNCAC by the Philippine Senate fell on the shoulders of then foreign relations committee chair Sen. Miriam Defensor Santiago to sponsor who proudly announced that the UNCAC has a force of law as though passed by Congress and approved by the President; hence, it is now part of the law of the land.

Worse, the UNCAC has been reinforced by other international cooperation agreements against corruption (ICAACs) such as the OECD, G8 and G20 mandates; PHL-USA Mutual Legal Assistance Treaty (MLAT); and anticorruption policies and programs of individual UNCAC signatories like the U.S. National Strategy to Internationalize Efforts Against Kleptocracy allowing U.S. cross-border investigation, extradition and prosecution of foreigners for corruption with Pres. George W. Bush’s Presidential Proclamation No. 7750.

PP7750 is implemented by the U.S. Department of State to bar entry into the U.S. and its territories of nonimmigrant and immigrant aliens who have been involved in and benefited from corruption. In the context of U.S. law nonpayment of Philippine taxes on foreign bank deposits; ownership of palatial homes and other properties; and such luxuries as several latest models of cars from unexplained income are sufficient evidence for the USDS to bar entry of a Filipino to the U.S. as happened to Jocjoc Bolante whose U.S. multiple-entry visa was cancelled after defying the Senate’s subpoena to appear in the hearing in 2006 on the loss of the P728-million

Going back to Gokongwei’s corrupting, defrauding, and bribery of DBP’s and other concerned government officials to obtain Development Bank of the Philippines’ financing and foreign exchange allocation to import the machinery and equipment as in fact they were imported by falsely representing they were for a corn (maize) grits mill with clear and undeniable intent to circumvent an existing government ban against the importation and use of scarce foreign exchange for complete flour milling plant.

The corruption, fraud and likely bribery of DBP and other concerned government officials are glaringly evident from the facts and circumstances surrounding this case, to wit: (1) the machinery and equipment for corn grits are not imported and allocated foreign exchange so that they made locally by rice mill makers at a fraction of the price Gokongwei paid by asking for bids of the world’s two leading complete flour mill suppliers, Buehler of Switzerland and MIAG of Germany; (2) The price each supplier offered for the machinery and equipment plus the cost of the building and other facilities for the project to be cost-effective and thus compete with the older and existing flour milling companies could have bought thousands of locally-made corn grits mills; (3) If the corn grits mill were indeed intended for Cebuanos and other Visayan consumers, why was the plant located at the old UCP’s site in Pasig and most all its sales invoices and financial records seldom mention flour as its product; and (4) URC’s accounting and financial reports have most likely been cooked to suit the terminologies and identification of corn grits mill parts and accessories at the same time falsifying in official documents the tariff categories and rates and the Import Entry not for flour milling machinery and equipment but for corn grits mill whose customs duties are much lower.

In fact, in the delivery of the machinery and equipment by Buehler (the winning bidder) from the factory, loading on shipping vessels, and to the Port of Manila must have involved a series of falsifying such official documents as the Commercial Invoice on which tariff rates are based, Bill of Lading, Bureau of Customs Import Entry, Insurance Policy, etc.

If this were so, the Bill of Lading law was violated which is punishable with imprisonment under international law. Hence, Universal Robina’s entire flour milling machinery and equipment were effectively smuggled and therefore a CONTRABAND subject to seizure by the Bureau of Customs and the collective complaint of is being detrimental to Philippines’ efforts to attract foreign investment by the five (5) existing flour mills before URC’s mill was built, namely: Republic, now RFM Corporation; Liberty Flour Mills; Wellington Flour Mills; Philippine Flour Mills (Gonzalo Puyat & Sons Group); General Milling Corporation in Mactan; and Pillsbury Mindanao Flour Milling Co. in Iligan City that illegally lost portions of their market to URC and got in return the competitive advantage of mounting flour inventory the market could not take.

On top of it all, URC’s flour milling has strengthened the JG Summit group. According to preliminary analysis of Pamusa’s forensic accounting consultants, Gokongwei’s corruption, fraud and certain bribery of concerned government officials that enabled the smuggling of URC’s flour milling assets, that allegedly extended to the judiciary, without being exposed till now led to the incredible growth of Gokongwei’s investment capability to undertake expansion of existing companies and venturing into non-allied businesses such as banking, namely: Far East Bank, PCI Bank, Equitable Bank, Robinson Bank Corp; Cebu Pacific Air; Robinson Land and Property Development, merchandising; petrochemical; San Miguel Corporation; PLDT; and Meralco. All of this stemmed from corruption, fraud, bribery of concerned government officials, and related crimes that had they been committed in the U.S. or any developing country could end up to years of jail sentences.

Gokongwei must be stopped and the nefarious practice of growing corporate assets and the CEOs’ net worth beyond the realm of statistical probability with the government virtually complicit even when it has become clear the growth may have come from “a process or series of actions through which income of illegal origin is concealed, disguised, or made to appear legitimate (main objective); and to evade detection, seizure and taxation.”

Gokongwei’s lawyers who advise him that JG Summit is defensible in the U.S. have another think coming. Don’t HSBC, Siemens, Alstom, Marubeni, etc. have their own legal departments, yet when push becomes a shove of defending them against the USDOJ, these companies decided it was better to negotiate settlement and pay the fines rather than fight in court and risk their top officers going to jail and spend more in legal cost more plus the fines.

Like a boxer used to fight with government regulators behind him, JG Summit may not survive the “new kids in the block” confronting him whose T-shirts are painted with UNCAC, Kleptocracy Fighter, and ICAACs.