Last of Three Parts

THE LAWYERS and spokesperson of President Gloria Macapagal Arroyo have spoken, in many words saying that the 114-percent surge in her declared net worth from 2000 to 2008 could be explained.

In this series:

Part 2: Gov’t spends P45M on road to lot Arroyo sold for P42M

Related PCIJ stories:

Shame and scandal in the Family

The unmaking of a President

Portrait of a president

SALNs:

Gloria Macapagal-Arroyo Statements of Assets, Liabilities, and Net Worth (2008)

Gloria Macapagal-Arroyo Statements of Assets, Liabilities, and Net Worth (2007)

Gloria Macapagal-Arroyo Statements of Assets, Liabilities, and Net Worth (2001)

Gloria Macapagal-Arroyo Statements of Assets, Liabilities, and Net Worth (1998)

Gloria Macapagal-Arroyo Statements of Assets, Liabilities, and Net Worth (1991)

Joseph Estrada Statements of Assets, Liabilities, and Net Worth (1991)

Fidel Ramos Statements of Assets, Liabilities, and Net Worth (1991)

Corazon Aquino Statements of Assets, Liabilities, and Net Worth (1991)

SEC document/s:

Gloria Macapagal-Arroyo SEC i-Report

Jose Miguel Arroyo SEC i-Report

Relevant document/s:

Summary: Assets (Real Properties) 1991-2008

Summary: Assets (Real Properties) 1991-2008

Summary: Assets (Personal Properties) 1991-2008

Summary: Liabilities 1991-2008

Summary: Net Worth 1991-2008

Business, Financial Interests 1991-2008

Declared Assets: Real Properties 1991-2008

Declared Assets: Personal and Other Properties 1991-2008

Declared Liabilities (Loans, Mortgages, etc) 1991-2008

Relatives in Government Office 1991-2008

Sworn statement of Udong Mahusay in 2003

In a press conference Monday, her lawyer Romulo Macalintal said the ongoing PCIJ report – whose part 1 was released earlier that day — was “speculative and judgmental.” He added that PCIJ must come up with proof to support its “most unfair and uncalled for” findings on Arroyo’s wealth.

Lawyer Ruy Rondain, who also serves as counsel to First Gentleman Jose Miguel Arroyo, seconded: “My feeling is that if the PCIJ has any evidence, it would be better if they bring it out because the report is just full of insinuations.”

Indeed, there are more details that the PCIJ has uncovered, and which Arroyo’s lawyers themselves may well want to look at. Contained in various documents obtained from the Office of the Ombudsman, Securities and Exchange Commission (SEC), Register of Deeds of local government units, and other relevant public agencies, these details raise more questions that even Macalintal and Rondain may not be able to answer.

For instance, in the Statement of Assets and Liabilities and Net Worth (SALNs) she filed in 2008, President Arroyo had declared ownership of only six real estate properties, with total book or acquisition value of a measly P5.7 million.

These include a “gift purchased” residential lot in Antipolo, Rizal; a house and lot in Baguio City; a raw land in Coron, Palawan; a fishpond in Malolos, Bulacan; an agricultural lot in Nasugbu, Batangas; and a commercial lot in Tayabas, Quezon.

Until recently, the First Couple had owned a three-hectare agricultural lot in San Rafael, Bulacan that, according to then Senator Arroyo’s 1995 SALN, they acquired for P1.2 million. They sold it for P42 million on Dec. 23, 2008.

It was to be the only real estate property that the Arroyos liquidated to account for a significant cash inflow. Cash might have come in from the sale of three other real properties they owned — a residential lot in Las Pinas, an island in Cagayan, and a condominium in Makati City – but these were sold in 1994 and 1999, or before Arroyo became president.

No La Vista, no Forbes

Curiously, over the last 17 years or from 1992 when she first served as senator, Arroyo had not once declared two prime real estate properties that her own Cabinet officials believe she owns or has interests in: her house on No. 14 Badjao Street in posh La Vista Subdivision in Quezon City, and her parents’ house on No. 92 Cambridge Circle, North Forbes Park in Makati City.

By August 8, 2008, official records show that ownership of 10 house-and-lot properties of the Arroyo clan in La Vista had been transferred in the name of La Vista Holdings and Investments, Inc., from another company whose registration the SEC had revoked in August 2003.

La Vista Investments and Holdings is the only company that Arroyo listed in her 2008 SALN in which she and her husband have “business interest and/or financial connections.” The First Gentleman, President Arroyo said, is a shareholder of La Vista Investments.

Raul Gonzalez, chief legal counsel today and for five years justice secretary of Arroyo, recalls attending meetings at the North Forbes house until two years ago.

Karina Constantino David, Civil Service Commission chairperson until 2007, says she knows that the house on Badjao Street is clustered among several houses that all belong to the Arroyos and their children and immediate relatives.

In their separate SALNs, Arroyo’s sons Juan Miguel and Diosdado, both members of the House of Representatives, as well as the First Gentleman’s brother, Ignacio Jr., and sister, Maria Lourdes, now a party-list representative, have all declared owning houses worth multimillions of pesos in the Arroyo enclave on Badjao and Kalinga streets in La Vista.

An elephant’s mind

That Arroyo seems to have forgotten about these houses and other assets surprises Gonzalez, who swears that the Philippines’ 14^th president has the memory of an elephant.

Arroyo, he says, remembers the minutest details, facts, figures, faces, numbers, and names from even years back. He says it is unthinkable for Arroyo to forget what she and her husband own.

“What is obvious, how can you forget what is obvious? How can I forget my wife has a chicken farm? How can I forget my wife is engaged in looking for properties which are foreclosed and sold in public auction and she tries to buy them those things she can afford,” Gonzalez says.

“She is very meticulous, she is very retentive,” he says of the president. “My God, she has the memory of an elephant, and things you discussed six months ago she can tell you.”

Macalintal and Rondain meanwhile say that Arroyo’s wealth could be explained not just by her real estate properties, but also by her shareholdings in companies that she and her husband own.

In truth, in her 2008 SALN, Arroyo had declared that stocks already made up 70 percent, or P110 million, of her declared net worth of P144.5 million. Her SALNs, however, do not say in which companies she has acquired capital shares, and whether these are listed in the stock market.

The PCIJ obtained all documents available at the SEC on the business entities in which the president and the First Gentleman, their sons, and other relatives in public office have interest in a diligent effort to find out whether these could account for the surge in Arroyo’s stocks portfolio.

Stocks, also called capital shares or equity, represent claims of ownership in a corporation – whether or not publicly listed in the stock market.

Few profitable firms

The president, according to SEC records updated as of October 2008, still has business and financial connections in at least five entities: Optima Research & Consultancy Agency, Inc., incorporator as of Sept 15, 1980; L.T.A. Realty Corp., incorporator, as of Sept. 28, 1992; EVA Development Corp., incorporator/board member, as of May 18, 1993; Circulo Pampangueno of Guam, Inc., board member, as of Sept. 29, 1997; and Centrist Democrat International Asia-Pacific, Inc., stockholder, incorporator, board member, as of July 24, 2005.

The First Gentleman, by the SEC’s records, still has business interests and financial connections in at least nine entities: Trans Realty Co., Inc., incorporator, as of Oct. 8, 1980; Raco-Trading Philippines, Inc., incorporator, as of Oct. 9, 1980; L.T.A. Realty Corp., incorporator, as of June 28, 1982; Aviatica Travel & Management Corp., incorporator, as of July 22, 1987; Eva Development Corp., incorporator, board member, as of May 18, 1993; Philippine Blooming Trade and Development Corp., incorporator, as of Sept. 5, 1995; and Pacific Mint International Corp., incorporator, board member, as of May 15, 1997.

The First Gentleman is also connected with three foundations: Ateneo Law Class ’72 Foundation, Inc., board member, as of March 14, 1996; Kaibigan ni Gloria Macapagal Arroyo Foundation, board member, as of May 17, 1999; and First Gentleman Foundation, Inc., incorporator, as of May 28, 2002.

All these firms are not listed in the SALNs that Arroyo filed from 2001 to 2008. But since most are not particularly big or profitable, they could not have served as sources of the First Couple’s additional cash or equity shares.

No deeds of assignment

SEC records further show that except in the case of one firm (Philippine Blooming Trade and Development Corp.), no “deed of assignment” or certificates of divestment have been filed by the Arroyos from any of these companies as of August 9, 2009.

The Code of Conduct and Ethical Standards for Public Officials says that “a public official or employee shall avoid conflicts of interest at all times,” and that when such situations arise, the official should “resign from his position in any private business enterprise within thirty (30) days from his assumption of office and/or divest himself of his shareholdings or interest within sixty (60) days from such assumption.”

The Code defines “divestment” as “the transfer of title or disposal of interest in property by voluntarily, completely and actually depriving or dispossessing oneself of his right or title to it in favor of a person or persons other than his spouse and relatives.”

The voluminous records that the PCIJ secured from the SEC on the corporate assets of the First Couple yield interesting details:

• EVA Development Corporation: The primary purpose declared, in an amended articles of incorporation filed on Jan. 6, 1997 and signed by Jose Miguel Arroyo as corporate secretary, was “to invest in, purchase, or otherwise acquire and own, hold, use, assign, transfer, mortgage, pledge, exchange or otherwise dispose of real and personal property of every kind and description including shares of stocks, bonds, debentures, notes, evidence of indebtedness, and other securities or obligations, of any corporation or corporations, domestic or foreign, for whatever lawful purpose or purposes, the same may have been organized and to pay therefore in money or by exchanging therefore stocks, bonds or evidences of other indebtedness or securities of this or any other corporation, and while the owner or holder of any such real or personal property, stocks, bonds, debentures, contracts, or obligations, to receive, collect and dispose of the interest, dividends, and income arising from such property and to possess and exercise in respect thereof all the rights, powers, and privileges of ownership including all voting powers of any stock so owned.”
  
  Eva Development’s incorporators were the late parents of President Arroyo, former president Diosdado Macapagal and former first lady Evangelina M. Macapagal; Gloria M. Arroyo, her brother Diosdado M. Macapagal Jr., and Jose Miguel T. Arroyo.

The authorized capital stock, at date of incorporation, was P50 million, and subscribed, P250,000 evenly split among the five incorporators.

The firm listed its principal office address at the Macapagals’ family home on No. 92 Cambridge Circle, North Forbes Park, Makati City. The office address was later changed to 2005 Alpha Salcedo Condominium in Makati City. In its latest financial statements filed with the SEC and signed by independent auditors C.B. Dimar and Associates, the firm reported retained earnings of P24 million, total assets of P65.5 million in 2007, accrued expenses and advances from stockholders of P788,849. Among its current assets, the firm listed P17.64 million in “loans and accounts receivable,” which the notes to the financial statements explained “represents advances made to certain parties” that as of Dec. 31, 2007 “amount to P17,639,146.39.”


• Aviatica Travel & Management Corp. A new five-person board of directors now represents the firm with Ma. Dolores Fortun signing as president and Victoria Seno as treasurer. The other directors as of July 25, 2006 were Philip Sigfrid A. Fortun, Mylene T. Marcia-Creencia, Dickson Berberabe, and Charisse C. Corales. By this time, Aviatica also increased its capital stock from P2 million to P5 million. Dolores Fortun acquired P2.6 million worth of stocks equivalent to cash advances she made to the firm. She issued five checks worth from P200,000 to P500,000 from July 31, 2004 to July 14, 2006, in favor of Aviatica.
  
  On Sept. 11, 2006, Aviatica submitted amended articles of incorporation and declared its primary purpose to be “in general, to conduct the business of a travel and tour agency and allied services, and accordingly, to invest, operate and/or maintain tourist facilities, including transportation, vehicles, ships, planes, helicopters, resorts, conference facilities both here and abroad for the exclusive use of the corporation.” In this document, Aviatica said its P600,000 subscribed capital stock includes shares – at the firm’s inception on July 1, 1987 – of Jose Miguel T. Arroyo (1,000 stocks worth P100,000), as well as Victoria R. Gonzales, Honorario Poblador III, Jose P. Dans, Mercedes D. De Jesus and Francisco Dinglasan.


• Philippine Blooming Trade and Development Corp. The firm’s declared primary purpose: “to engage in conduct, and carry on the business of buying, selling, distributing, marketing, at wholesale….in so far as may be permitted by law, all kinds of goods, commodities, wares, and merchandise of every kind and description, to enter into all kinds of contracts for the export, import, purchase, acquisition, sale, at wholesale, and other disposition for its own account as principal, or in representative capacity as manufacturer’s representative, representative broker, indenter, commission merchant factors or agents, upon consignment, all kinds of goods, wares, merchandise, of products whether artificial or natural.” The co-incoporators of Jose Miguel Arroyo were Mary San Juan, Pio M. Kingsu, Gao Zhide, and Wang Zong King. The firm declared authorized capital stock, P4 million; subscribed, P1 million. Its last filing with the SEC dated Jan. 2, 2007 reported a transfer of business address signed by company president Jacqueline T. San Juan.


• Pacific Mint International Corp. Jose Miguel Arroyo was incorporator together with Victoria Toh, Salvador Guevara, Kelvin Tan, and Thomas Toh Jr. The firm said its primary purpose was “to engage in the business of trading of goods such as food, pharmaceuticals and others on wholesale/retail basis.” Its authorized capital stock was P1 million, and paid-up capital, P62,500 in 1997, and increased to P250,000 in 1999, evenly split among the five incorporators. The firm named Victoria Toh as treasurer but as of its filing with the SEC said its retained earnings by 1998 was a deficit of P244,959.73.


• Kaibigan ni Gloria Macapagal Arroyo Foundation. Three Arroyo scions are listed as incorporators: the First Gentleman, his brother, Negros Occidental Rep. Ignacio T. Arroyo Jr., and the President’s son and Pampanga Rep. Juan Miguel M. Arroyo. In addition, Mike Arroyo’s known close associates Edgardo C. Manda, Alfredo M. Guico, and Efraim Genuino are also incorporators. Apart from the incorporators, at least 16 other persons were listed as “trustees” of the foundation, including other relatives of the First Couple. Manda was elected as treasurer. Its latest SEC filing showed that as of 2008, the foundation had total fund balance of P4.75 million, slightly less than the P5.05 million it reported in 2007 and 2006.
  
  The foundation cited among its purposes for existence the following: “To determine the factors that would contribute to the social and economic upliftment of certain communities in the Philippines, and to identify and make available the appropriate technology, technical expertise, and resources necessary and advisable to address the desired development.” Also, the firm said it wanted to “identify regional, provincial, municipal and barangay socio-economic development particularly in the province of Pampanga through the full mobilization and development of available resources that it may tap or generate.”


• First Gentleman Foundation, Inc. This latest venture of Mike Arroyo has four close friends of his serving as its other incorporators: Edgardo C. Manda, businessman Antonio Cabangon-Chua, Feorelio M. Bote, and Manuel C. Roxas. Its audited financial statements showed that the foundation had cash ending balance of P6.01 million in 2006, slightly up from P5.8 million in 2005.

Listed stocks?

Only these Arroyo companies are the most liquid among the undeclared business interests of the First Couple but altogether, their retained earnings would still not account for the surge in the president’s P110-million stocks portfolio.

As per the SALN law, the president was required only to declare the acquisition value of stocks she buys, which means that the increasing value of her stocks represents incremental volumes and not price earnings, if she had invested in publicly listed companies.

Queried at the Monday press conference about details regarding the Arroyos’ stock investments, lawyer Rondain replied that these are available “at the Philippine Stock Exchange.” But stock brokers approached by the PCIJ say it would be hard to discern these data because such placements may have been made blind, or in the name of the brokerage houses and not the actual purchaser of the stocks.

Stockbrokers say two other brokerage houses are known to be trading for the Arroyos. The PCIJ decided not to name them at this time.

Coincidentally, the president’s own brother, Diosdado Macapagal Jr., is senior managing director of A.T.R. KimEng Capital Partners, Inc., which calls itself “the largest independent investment house in the Philippines.” By many accounts, he is well-liked in the industry.

Yet even if the president had invested in publicly listed companies, the increase in her stock interests seems incredulous, given the global financial crisis that sent markets tumbling in 2007 and 2008.

‘It’s a miracle!’

To Karina David, who led the crafting of the new SALN form designed to capture baseline data on the assets of public officials, the rise in Arroyo’s stocks cache in a down market defies logic.

“It’s a miracle!” she says. “My friends who invested in stocks in 2007 were all crying… even the IPOs (initial public offering) that supposedly would fly did not, and they had to sell at a loss.”

Data on the performance of stocks in the Philippine Stock Exchange from 2007 to 2008 bear this out: returns on blue-chip peso stock funds yielded big losses, or returns of between negative 14.28 percent to negative 48.28 percent in 2008; peso balanced funds, returns of negative 6.27 percent to negative 32.52 percent; dollar balanced funds, negative 8.68 percent.

Peso bonds generally did better, but also recorded small returns of 0.57 percent to 5.26 percent. Foreign currency bond funds showed mixed performance results – only three delivered small returns of at most 2.37 percent, while seven others slid in value with returns of negative 0.71 percent to negative 13.87 percent.

One respected economist says that Arroyo’s soaring stock portfolio beats even the record of Warren Buffett, CEO and largest shareholder of Berkshire Hathaway and, according to Forbes magazine, the world’s second richest man in 2008.

Buffett used to have a net worth of $37 billion. When the global financial crisis struck, Berkshire reported a 62-percent decline in profits. Buffet’s loss: three billion pounds, or about $4.9 billion.

Nothing to hide

Only four months on the job as Arroyo’s legal counsel, Gonzalez says he has not been involved in preparing the president’s SALNs. Yet he asserts that he knows Arroyo to be “very meticulous with everybody” and “very strict on matters of compliance.”

When told that Arroyo has stacked up on her stocks portfolio in companies that she did not disclose, Gonzalez is evidently surprised.

“Well, probably these people are more speculative than others,” he says. “They say when the economy is down, it’s a buyer’s market… ’di ilagay mo d’yan baka ‘yan tumaas uli yumaman ka bigla (why not invest, who knows the market may improve, and you’ll suddenly be rich).”

Holding back data on companies an official has equity shares in is a matter Gonzalez finds puzzling. ”If there’s nothing to hide, why not?”

The intent of the law is quite clear, he says, but others “are just lazy, they are thinking as long as they can file, it’s enough, just like people who file income tax returns… Kung matiklo nila, magbabayad ako (If I get found out, then I’ll pay).”

Still, Gonzalez maintains that he believes the president had complied well with the SALN law. “I would think she has complied… I am sure she is compliant,” he says.

Besides, he says, “if the president expects everyone to be accountable because of their oath,” Arroyo surely realizes that “the Constitution gives her a different oath as president, a bigger accountability.”

Part of that bigger responsibility is to assume command responsibility not just over her subordinates but also, under the Anti-Graft Law or Republic Act 3019, “up to the fourth degree of consanguinity” or her third-degree relatives, Gonzalez adds.

To be sure, according to Gonzalez, the law does not prohibit officials from trading in stocks, even though it is assumed they have access to important and secret market-moving information. Gonzalez even remarks, “(To) say that because I’m a member of the Cabinet and I play with stocks, I have information about this, I think that’s unfair.”

But he says he has no appetite for such trade, noting, “You are gambling. It can make you a millionaire today, (you) lose it tomorrow.” – With additional research by Karol Ilagan. Aura Marie Dagcutan and Ed Lingao, PCIJ, August 2009