MARCOS-ERA GOLD REPORTED MISSING, SOURCE LA TIMES MARCH 16, 1986

Marcos-Era Gold Reported Missing : Philippines Tracing Flow of Millions in Bullion, Cash and Illegal Profits BY MARK FINEMAN MARCH 16, 1986 12 AM PT TIMES STAFF WRITER MANILA —  At least seven tons of gold worth more than $75 million reportedly disappeared from the inventories of the Philippine national treasury in the seven years after President Ferdinand E. Marcos took direct control of the processing and distribution of gold mined in the Philippines. During those same years, Marcos’ family and friends are believed to have amassed tens of millions of dollars in illegal profits from unauthorized logging operations that have left much of the country’s jungle and forest a barren wasteland. Also, Marcos and his friends are believed to have siphoned off hundreds of millions of dollars in cash from the treasury, either through the creation of private corporations and quasi-governmental institutions that never repaid government loans or by simply removing money at will from discretionary funds Marcos created in several of his ministries. Poring Over Records All this has been disclosed by ministers and auditors of the new government of President Corazon Aquino in interviews with The Times. In the 2 1/2 weeks since the Aquino government came to power, these people have been poring over the books and records Marcos and his family left behind when they fled to the United States on Feb. 25. The ministry audits, which are being carried out in addition to inventories the new government is preparing on the Marcos family holdings here and abroad, are nowhere near complete. But a pattern is emerging that shows not only what Marcos owns but how he came to own it--how one man and his family amassed fortunes that total between $5 billion and $10 billion, according to officials in the new government. Mansions, Office Towers Every day since Marcos surrendered a job that officially paid him about $5,000 a year, the Philippine people have been hit with new reports of the deposed president’s wealth--mansions and office towers in New York, California, New Jersey and Texas; scores of crates containing gold and cash on board the plane that carried the Marcos party to Hawaii; dozens of boxes filled with gold coins, priceless jewelry and art objects removed from the presidential palace since Marcos’ flight; wardrobes so extensive that, in just one closet of Imelda Marcos’ bedroom, government auditors found 500 identical, imported black brassieres. ‘Raped, Robbed’ Nation The Aquino government’s investigation into how the Marcoses acquired so much wealth has been much quieter. But, according to many analysts here, it says a great deal about the way Marcos led a country of 54 million people whose per capita income is $625 a year. Ernesto Maceda, who served in the Cabinet under Marcos and is minister of natural resources in the Aquino government, said the other day of the Marcos era: “This was a government that raped its own country of its rich resources and directly robbed the nation’s treasury to enrich just one man and his family and friends. “From gold and timber to coconuts and sugar, they kept creating new ways and new conduits to take things out of the country for themselves, and they very nearly mortgaged the future of the country in the process.” According to independent Filipino and Western analysts in Manila, at the outset of his two decades in power, Marcos set up structures of administration and operation that made possible the accumulation of vast private wealth. System ‘Well Oiled’ “The entire economic structure here was set up not to stimulate overall growth for the nation, but to produce rents that people could scrape off the top,” said a senior Western diplomat who had intimate knowledge of Marcos and his government. “It was a system that was very much in place on every level, and it was a system that was very well oiled.” It is alleged, and widely believed, that the system involved routine official bribery. Filipino and foreign businessmen have said publicly that corporations had to pay huge cash commissions to Marcos and his ministers in order to do business in the Philippines. But the corruption went far beyond that, and it was all grounded in Marcos’ virtually unbridled political power. He personally appointed every minister and judge; he wrote and rewrote the constitution; and, until his last few days here, he controlled the armed forces. Even Marcos’ harshest critics concede that in his first eight years as president, he was honest. It was not until he declared martial law in 1972 that he consolidated his power, dissolving Parliament, setting up military courts and assuming the power to rule by decree, without checks or balances. Although Marcos lifted martial law in 1981, he retained most of the authoritarian powers he had held under it. And by then he had filled every position of power outside the presidency with a close ally. Rich in Gold According to Maceda and other members of the new Cabinet, the gold industry typifies the way Marcos and his associates enriched themselves. The Philippines has long been considered a potentially major gold producer, with proven reserves of 80 million tons of gold ore and an estimated 120 million more tons in probable and exploratory reserves. For many years, private mining companies and individual operators sold their gold ore to private export firms or to the government. The ore was sent to England and the United States, where it was refined and converted into bullion that helped support the Philippine currency. Initially, “the whole system was in private hands,” Maceda said. “There was no easy way Marcos could get at it.” But in 1978, under martial law, Marcos ordered the entire system placed in the hands of the government. By decree, Marcos ruled that all gold mined in the Philippines had to be sold to the Central Bank, which built a refinery to process it. Marcos said the change was meant to bolster the Philippine economy by preventing the transfer of gold to foreign firms and by building up the Philippines’ foreign exchange. Also, he said, it saved the treasury the expense of refining abroad. “In reality,” Maceda said, “what Marcos did was position himself to steal as much as he wanted without anyone knowing.” Gold Unaccounted For According to hundreds of pages of reports submitted to the Bureau of Mines by private mining firms and the Central Bank, the government refined a total of 124,234 pounds of gold mined between April 17, 1978, when the new system took effect, and the end of 1984, the last year for which statistics are available. But the Central Bank, in annual reports covering the same period, has accounted for only 110,319 pounds of the gold--13,915 pounds less than it bought. “Those two figures should be the same,” Juanito Fernandez, director of the Bureau of Mines, said. “That big a difference can only mean one thing--the gold has somehow been diverted from the treasury.” And according to Maceda, who last week started an investigation to find the missing gold, “only Marcos and his cronies could have had access to it. I suppose the bulk of it is already . . . in Switzerland.” The charge is supported by some indications that Marcos may have taken large quantities of gold out of the country. There have been reports from Hawaii that gold bars were among the personal goods the U.S. Air Force moved out of Manila for the Marcoses two weeks ago, although U.S. Customs officials have declined to comment. Auditors who inventoried every item the Marcoses left behind in the palace filled 51 large boxes with Philippine commemorative gold coins, which are minted for the Central Bank from gold mined in the country under a contract with British and American government mints. Can’t Explain Discrepancy Officials at the Central Bank’s gold refinery could not explain the discrepancy between the two figures last week. Supt. Cesar Lomotan said there has never been a theft from the refinery or from the armored trucks and commercial airliners that transport the gold to official buyers and banks. Lomotan, who has supervised the refinery since 1981, said he is certain that he can account for all the gold that has been bought and refined. When he was asked how Marcos could have acquired the gold found in his possession, Lomotan suggested that he may have bought it illegally outside the Central Bank system. In a separate report last week, the Philippine Chamber of Mines, a private association that includes gold mining corporations, said an additional $220 million in gold bullion had been sold on the black market outside the Central Bank system since 1978, and Maceda said he was investigating whether Marcos obtained any of that gold as well. Maceda said the gold discrepancy is just one of several indications that Marcos and those close to him exploited the country’s natural resources for personal gain. Auditors have documented at least $50 million in profits made by Marcos’ friends and relatives in illegal logging operations, Maceda said. He said this has reduced the virgin forest area to 2 million hectares, about 5 million acres, down from more than 30 million acres 20 years ago. In a single raid last week at a logging firm owned by Marcos’ brother-in-law, Marcelino Barba, authorities found more than $100,000 worth of illegally cut timber that had been felled in the previous few weeks. Favoritism to Cronies According to Maceda, Marcos also showed favoritism in awarding the 170 highly coveted legal timber concessions in the country. He said auditors have traced the great majority of them to the families of Marcos and his senior Cabinet ministers. Other ministers in the new government said the large-scale diversion of government assets under Marcos went far beyond physical resources. Some of it, Budget Minister Alberto Romulo said in an interview, was simply “the blatant theft of cold, hard cash.” Romulo said last week at Aquino’s first Cabinet meeting that Marcos, in his last two months in power, “raided” the government treasury of hundreds of millions of dollars to pay off local officials and voters for their part in the Feb. 7 presidential election campaign. He said this left the new government with a budget deficit of $250 million for the first quarter of 1986. “But the main way they got the money,” Romulo said, “was through various financial institutions and corporations they created. They siphoned the money off from the budget--first into these corporations, and then into their own pockets.” Assets Were Transferred After receiving large quantities of government equity contributions, advances and subsidies, Romulo said, the corporations they created would gradually transfer the assets to personal accounts and ultimately declare the corporations bankrupt, leaving the government holding a corporate shell and hundreds of millions of dollars in bad loans. Romulo said it will be several weeks before his and other ministries complete their audits and publish the names of the corporations and principals involved. Several reports have been published in the last several years on large banks, transportation companies and deluxe hotels owned and managed by Marcos’ family and friends that were given millions of dollars in government subsidies before they gradually were drained of their assets, forced into bankruptcy and turned back to the government. Raul Daza, a member of a government commission investigating the extent and origins of Marcos’ wealth, described the general scheme to reporters last week. But he said, “We don’t have anything specific (to make public) right now.” Delegation in U.S. The commission, which sent a delegation to the United States last week to lay the groundwork for recovering some of Marcos’ assets, has amassed thousands of pages of documents that the commission’s chairman, Jovito R. Salonga, says will detail many specific examples of the schemes. But despite this drain on the country’s resources, which economists blame in large part for the Philippines’ $25-billion national debt, most of Aquino’s ministers are optimistic about the future. “I don’t think Marcos and his cronies mortgaged it entirely,” Budget Minister Romulo said. “We are still very rich in resources, especially in human resources, and this new government is in a good position to progress right now. “We might have to tighten our belts for the next few months, but the trust and the confidence of the people is there. That alone is a great reservoir of hope.”