CLARK SPECIAL ECONOMIC ZONE—Since 1999, President Joseph Estrada and his associates had their eye on a mini-Las Vegas that is rising up here, a strip of hotels and casinos that would attract high-roller gamblers who would be flown in direct to this former U.S. air base from neighboring Asian countries.

At first, presidential cronies tried to take over Clark's Mimosa Regency Casino, various sources interviewed for this report said. When that failed, the President ordered his associates to build the Fontainbleau Casino in Clark, said Ilocos Sur Governor Luis 'Chavit' Singson, a charge corroborated by testimonies in the impeachment trial that show the funneling of jueteng funds into Fontainbleau.

But when Fontainbleau shut down because of the rivalry among the President's cronies, preparations were made for the takeover of the Fontana resort complex from Chinese-Filipino businessman Robin Tan and the establishment of a casino there with Estrada's blessings.

The same pattern of corporate layering and formation of shell companies that Estrada's friends used to purchase real estate was evident in the attempts to acquire a casino in Clark for the President.

In fact, the same law firm—the De Borja Medialdea Bello Guevarra & Gerodias law partnership—and the same lawyer, presidential adviser on political affairs Edward Serapio, a former partner of the firm, that formed the shell corporations for President Estrada's mansions were also those that set up the companies that would take over the Fontana Casino.

Indeed, the same crony, businessman Lucio Co, whose company owns the house in which presidential mistress Laarni Enriquez currently resides, appears on paper as the main owner of Fontana.

The rise and fall of Fontainbleau, said to be owned by Estrada, and the emergence of Fontana Casino, in which the President reportedly also has a stake, shows how business deals are brokered on Estrada's behalf and how rivalries among cronies determine the final configuration of these deals.

Shell Companies
In October 1999, Serapio, then presidential assistant for political affairs, asked senior and junior associates in his former law firm to incorporate Alexie Holdings and Pio Holdings, admitted Pablo de Borja, a founding partner of the firm.

Earlier, in July and August 1999, the law firm had formed six other shelf companies on Serapio's request. Two of these companies would later be used to purchase real estate for the President. One of them, St. Peter Holdings, was the corporate vehicle used for the acquisition of the now-famous "Boracay" mansion in New Manila, QuezonCity. After all, Singson said in his testimony at the impeachment trial last week, Serapio was "in charge of Estrada's properties."

Like the other companies formed by the firm on Serapio's request, Alexie and Pio Holdings had identical incorporators, all members of the de Borja law office; the same paid up capital of P62,500; and had accounts in the same bank, AsiaTrust.

Alexie and Pio are the names of children of the law office's employees. "It was easy to register names," Dawn Flores-Castro, one of the firm's partners, said.

After the companies were formed, the incorporators, who were all members of the firm, signed blank deeds of assignment. De Borja and Flores-Castro said they do not know to whom the shares were assigned. "We knew nothing of these companies after they were incorporated," de Borja said.

"The papers just landed on their (associates) desks, given by Michael (Leslie de los Reyes)," Flores-Castro added. By then, Serapio, who was appointed to Malacañang in April 1999, had taken a leave from the firm although he continued to hold office there. He hired a junior associate, Michael Leslie de los Reyes, as assistant. De los Reyes, who quit the firm in March 2000, handled the paperwork for Serapio, the firm's partners say.

At about the same time that Alexie and Pio were formed, another company, Bellagio Holdings, was set up by Lucio Co, a presidential friend who runs the duty-free shops and who has been investigated for smuggling. Four of Bellagio's incorporators are the same individuals who are listed as incorporators of Co's Puregold Duty Free (Subic), Inc. All four listed the same address: 900 D. Romualdez St., Paco, Manila.

In addition, the corporate registration records of Bellagio show five other incorporators with one share each: Lucio Co, his wife Susan, his lawyer Jose Santos, a certain Luis Co Chia Kiat, and Leonardo Dayao, executive vice president of Fontana Resort.

All these companies are listed in a fact sheet from the Philippine Amusement and Gaming Corp. (Pagcor) as the owners of RN Development Corporation, the company that owns the Fontana resort and casino. According to the fact sheet, Bellagio Holdings owns 55 percent of RN Development; Alexie Holdings, 10 percent; and Pio Holdings, five percent.

The remaining 30 percent is owned by Marlon Holdings Limited, an offshore company registered in Western Samoa in 1996. Western Samoa is classified as a "low tax financial shelter."

In a memorandum signed by Nathan Inc., the sole director of the company, in June 1999, Marlon Holdings placed its correspondence address as Suite 602, 76 Kennedy Road, Hong Kong. The area is an exclusive apartment complex along a tree-lined residential street. It is not a place of business.

"Whoever is operating out of suite 602 is a private resident. It is the best apartment house on Kennedy Road. It is an expensive place to live, with excellent security," said a Hong Kong resident contacted for this article. Offshore companies usually maintain addresses in Hong Kong, where an accountant or lawyer operates.

These complex layers of companies indicate a serious attempt to hide the real ownership of Fontana. In fact, Singson recalls a conversation with Lucio Co wherein the latter told him: "Kay Boss din 'yan (That also belongs to the boss), " referring to the Clark casino.

Fontana Casino reported gross revenues of P146 million from April to October 2000, a far cry from Mimosa Regency Casino's earnings of P640 million in 1997 and P930 million in 1998.

Jueteng for Casino
The chase for a casino began when Estrada cast his eye on Clark in early 1999. Singson says that Estrada instructed him to set up a casino here, using funds obtained from jueteng collections. "Kung hindi natin makuha ang Mimosa, magtayo ng sarili (If we can't get Mimosa, let's build our own)," Estrada reportedly told his friend, the governor. "Masyadong magulo ang Mimosa (Mimosa is too messy)."

The Mimosa Regency Casino was then the sole casino in this sprawling economic and leisure zone. A state-of-the-art gambling operation, it was the crown jewel of the Mimosa Leisure and Resort Corporation (MLRC), raking in hefty monthly gross revenues of more than P100 million. But it was closed down in December 1998 after its owner, former Tourism Secretary Jose Antonio U. Gonzales, couldn't pay rentals due to the Clark Development Corporation (CDC).

Rufo Colayco, former CDC head, corroborates Singson's story. "Estrada summoned me to the Palace February or March 1999 and introduced me to Chavit. He said that he wished to let the governor have a casino to be operated in the Fontana Resort. He wanted me to help the project along. I took the instruction to mean that the project is important and that it should not be hindered by the bureaucracy," Colayco said in an interview.

Singson said that the President instructed him to "use" his Ateneo classmate, businessman Jesus Pineda, and friend Jaime Dichaves, known supplier of telecommunications equipment, as fronts. Thus, when Fontainbleau Holdings was formed in February 1999, Pineda and Dichaves—representing Estrada—were listed in its corporate records as owning 70 percent of the company.

Singson, on the other hand, represented by his daughter Regina S. Lim and friend Romeo Reyes, owned 25 percent. Edmundo Silverio, who had the remaining five percent, was a nominee of Pagcor president and CEO Reynaldo Tenorio, Singson told the Senate blue ribbon committee.

Fontainbleau kept an account at Metrobank, Ayala branch. Its signatories were Yolanda Ricaforte, who Singson said was the President's auditor, and the governor's daughter, Regina S. Lim. Deposits to the account came from jueteng collections, according to both Singson and his accountant, Carmencita Itchon.

Fontainbleau entered into a lease agreement with RN Development Corporation, then controlled by Robin Tan - which owns the 300-hectare Fontana Resort that has 300 two-bedroom villas, a convention center, clubhouse, and ballrooms - to lease the convention center and convert it into a casino.

Under the lease agreement, Singson paid Tan P30 million down payment for the lease. Renovation of the convention center began in February 1999. Singson spent another P34 million for refurbishing the place and acquiring gambling paraphernalia.

Manuel Singson, a lawyer and the governor's relative who formed Fontainbleau Holdings, explained the advantage of putting up a separate company to run a casino. "Fontainbleau would get a bigger share for Estrada rather than if the casino would be operated by Fontana," he said. "Under Fontana, Estrada would only get a percentage (of revenues)." Manuel Singson was Fontainbleau's corporate secretary.

Enter Atong Ang
Although he had already leased part of his resort to Fontainbleau, Tan did not give up his plan to operate his own casino. He and Singson also began to have disagreements. To establish a casino, however, Tan needed connections that would enable him to secure a license from Pagcor, Colayco and Manuel Singson said in separate interviews.

Tan found that connection in another presidential friend, Charlie 'Atong' Ang, who, at that time, already had a falling out with Chavit Singson. With Ang's help, RN Development Corporation applied for a casino license.

The rivalry between Ang and Singson was intense. Colayco recalled that Ang even made him listen to a telephone conversation the latter had with the Ilocos Sur governor "Chavit told Ang that he couldn't have another casino in Clark. Chavit was adamant. He said only Fontainbleau was going to operate. The boss, Singson said, will decide if we'll be together in Fontainbleau."

Because of this rivalry, two applications for a casino license landed in Pagcor: one from Fontainbleau and another from RN Development. Pagcor called both parties to a meeting. Manuel Singson represented Fontainbleau. To qualify for a casino license, the applicant should have more than 100 hotel rooms. Fontainbleau had none and was hoping to get access to Tan's Fontana villas. RN Development Corp., which Tan owned, therefore had the upper hand.

"Estrada instructed the two parties to settle," Manuel Singson said. "It was justifiable for Fontana to get the license. Chavit told the President about this."

Between Tan and Ang, things started to fall apart, too. "Atong became too ambitious. He wanted Robin (Tan) out," Colayco said. "He (Atong) told me that he wanted to own 70 percent of Fontana for himself and Erap. He wanted me to kick out Robin Tan."

Eventually, because of disagreements, Fontainbleau folded up in July 1999. RN Development Corporation reimbursed P64 million that Fontainbleau had advanced: P30 million for advance rental and P34 million for expenses incurred in the purchase of gambling paraphernalia and renovation of the convention center.

But Fontainbleau still entered into an agreement with RN Development that it would get 10 percent of net earnings of the Fontana casino once it started operations. However, in February 2000, when Lucio Co and the shelf companies bought RN Development, Estrada asked his classmate Pineda, the former Fontainbleau president, to sign a "deed of mutual waiver and quit claim" giving up the 10-percent share in earnings, said a Fontainbleau official.

Pineda had already resigned from Fontainbleau at the time so he asked the board to authorize him to sign the quit claim. "The President wanted all the earnings to go to the new owners. He decided to take over through Lucio Co," Manuel Singson said.

Pattern of Acquisition
Fontainbleau was not the first attempt by Estrada and his friends to take over a casino in Clark. Soon after he became President, Estrada's friends tried to enter into a deal with Gonzales on Mimosa. In 1998, the Mimosa Regency casino reported gross revenues of almost P1 billion, up from P640 million in 1997.

Negotiations for Mimosa continued in 1999 and early this year. In an affidavit, Gonzalez named the presidential cronies who approached him with various offers: fugitive Mark Jimenez, Ang, CDC board member Sunday Pineda, owner of Best World Gaming and Entertainment Corp. Dante Tan, Jaime Dichaves, Bank of Commerce president Raul de Mesa, and presidential adviser Robert Aventajado.

Two common strands in most of these offers were: the desire for majority ownership of the company; and the mention of President Estrada as co-owner and beneficiary.

• Jimenez wanted 40 percent of MLRC "for free, asked for voting rights, and wanted to install his own nominee as chairman of the board."
  
• Ang proposed getting 80-percent share of casino revenues to be "divided among special interest groups, including the President."
  
• Tan wanted 40-percent equity for his company and 40 percent for a foreign investor which he would choose. "Tan made clear that whatever percentage will go to his group, half of it will go to President Estrada," Gonzales states in his affidavit.

This same pattern is evident in the case of Robin Tan's Fontana, with a slightly different set of presidential friends. The most brazen was Ang's proposal that Tan give up 70 percent of his company to him and the President.

RN Development Corp., under Tan, eventually got its license to operate a casino in December 1999. At about that time, Colayco recalled that negotiations between Lucio Co and Tan for the sale of RN Development were going on. "Tan, by himself, couldn't have gotten that license from Pagcor," Colayco said.

In February 2000, Co and the holding companies bought RN Development. Colayco said Bank of Commerce president Raul de Mesa brokered the sale of RN to Co, but De Mesa denies this. A former Fontana executive remembers De Mesa as "always visible" in Clark during the negotiations to purchase the company, starting with Chavit Singson and Ang. "He appeared to be negotiating for whoever was the interested party," the source said.

Singson said he used to see de Mesa with the President in Malacañang. Asked if he is Estrada's financial adviser, De Mesa replied: "Isn't it quite presumptuous for anyone to say this about me?"

In a written interview, De Mesa said he was introduced to (Robin) Tan by former Congressman Rene Diaz in the middle of 1999 to assist RN complete their project in Clark. "Due to the complex nature of the financial requirements of RN, a letter of engagement was signed between Bancommerce Investment Corp (BIC) and RN Development Corp (Robin Tan). The engagement appointed BIC as financial advisor and investment bankers of RN. This included raising of new equity and debt to fund the capital expenditures, working capital and other financial needs. Part of the engagement also included financial and legal due diligence and an appraisal of the assets of Fontana resort."

"The investment house arranged for a credit line to RN, secured by a pledge over Club shares with a fair market value of P200 million and assignment of leasehold rights over 50 villas. The Bank's exposure has been fully paid and settled," De Mesa wrote.—with additional research by Vinia M. Datinguinoo and Robert Panganiban



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