SC: Disputed shares belong to Aquino uncle
BAGUIO CITY—Businessman Eduardo “Danding” Cojuangco Jr., an uncle of President Benigno Aquino III and crony of the late dictator Ferdinand Marcos, is the legitimate owner of a fifth of shares in San Miguel Corp., which government claims he acquired using the controversial coconut levy funds.
SMC is the country’s biggest food and beverage conglomerate, which has diversified into power generation, telecommunications and other businesses.
The Supreme Court, sitting en banc, affirmed a 2007 decision issued by the Sandiganbayan and declared “that the block of shares in SMC in the names of respondents Cojuangco et al. ... is the exclusive property of Cojuangco et al. as registered owners.”
The government had been contesting 20 percent of SMC’s capital stock or 16,276,879 shares that Cojuangco allegedly acquired through the coco levy when he headed the United Coconut Planters Bank (UCPB). [SMC closed Tuesday at P153 a share in the Philippine Stock Exchange and San Miguel Brewery Inc. at P30.6.]
The government maintains that the coco levy is public in nature, which means that the state owns 20 percent of the SMC stocks in the name of Cojuangco et al.
Cojuangco already has control of a block of 33 million shares through holding firms owned by the oil mills of the Coconut Industry Investment Fund, according to the government complaint.
7 for Cojuangco, 4 against
Seven justices voted in favor of Cojuangco—Chief Justice Renato Corona, and Associate Justices Lucas Bersamin, Presbitero Velasco Jr., Mariano del Castillo, Roberto Abad, Jose Portugal Perez and Martin Villarama Jr.
Four dissented: Associate Justices Arturo Brion and Conchita Carpio-Morales, who wrote dissenting opinions; and Jose Catral Mendoza and Maria Lourdes Sereno.
The other four justices took no part in the deliberations: Associate Justice Antonio Carpio identified himself as one of the petitioners who sought to declare the coco levy funds as public funds; Antonio Eduardo Nachura, who noted that he signed the government pleadings as solicitor general; Teresita Leonardo-de Castro and Diosdado Peralta.
The decision begins with the following context: “For over two decades, the issue of whether the sequestered sizable blocks of shares representing 20 percent of the outstanding capital stock of SMC at the time of acquisition belonged to their registered owners or to the coconut farmers has remained unresolved.
“Through this decision, the court aims to finally resolve the issue and terminate the uncertainty that has plagued [these shares].”
The high court also declared as lawful previous decisions that lifted eight writs of sequestration imposed by the Presidential Commission on Good Government (PCGG) against Cojuangco’s assets.
In their ruling, the justices observed that the government failed to offer clear evidence to prove that Cojuangco amassed his wealth illegally.
For example, the court said the nullification of the writs of sequestration against Cojuangco was valid because in some instances, the PCGG had failed to determine prima facie basis for sequestration.
The decision dwelt on “the concept and genesis of ill-gotten wealth in the Philippine setting” in addressing Cojuangco’s situation.
Then President Corazon Aquino’s first official act on Feb. 28, 1986, was to recover all ill-gotten wealth amassed by Marcos, his immediate family, relatives and close associates both here and abroad through the creation of the PCGG.
The court said that by definition, “ill-gotten wealth would not include all properties of President Marcos... but only part that originated from the ‘vast resources of government.’”
The court also ruled that to be “ill-gotten, the assets must have originated from government itself... [or] taken by [Marcos and his associates] by illegal means.”
The tribunal said “identifying other persons who might be the close associates of President Marcos presented an inherent difficulty, because it was not fair and just to include within the term ‘close associates’ everyone who had had any association with President Marcos, his immediate family and relatives.”
In any case, the court said “the Republic did not discharge its burden as the plaintiff to establish by preponderance of evidence that the respondents’ SMC shares were illegally acquired with coconut levy funds.”
The government tried to argue that Cojuangco obtained loans from UCPB to buy the SMC shares through a letter of instruction issued by Marcos. It said this violated rules restricting bank officials from taking advantage of their own deposits and assets.
But the court said government failed to establish any breach of Cojuangco’s “fiduciary duties” as a bank official.
“The thrust of the Republic that the funds were borrowed or lent might even preclude any consequent trust implications,” the court said, because the debtor acquires proprietary control over the loan once it is transferred.
“A debtor can appropriate the thing loaned without any responsibility or duty to his creditor to return the very thing that was loaned or to report how the proceeds were used,” it said.
Cojuangco’s only liability, it said, was to pay the loan and its interest as stipulated by law.
What went before: The disputed shares of SMC
The Supreme Court, sitting en banc, affirmed a 2007 decision issued by the Sandiganbayan and declared “that the block of shares in SMC in the names of respondents Cojuangco et al. ... is the exclusive property of Cojuangco et al. as registered owners.”
The government had been contesting 20 percent of SMC’s capital stock or 16,276,879 shares that Cojuangco allegedly acquired through the coco levy when he headed the United Coconut Planters Bank (UCPB). [SMC closed Tuesday at P153 a share in the Philippine Stock Exchange and San Miguel Brewery Inc. at P30.6.]
The government maintains that the coco levy is public in nature, which means that the state owns 20 percent of the SMC stocks in the name of Cojuangco et al.
Cojuangco already has control of a block of 33 million shares through holding firms owned by the oil mills of the Coconut Industry Investment Fund, according to the government complaint.
7 for Cojuangco, 4 against
Seven justices voted in favor of Cojuangco—Chief Justice Renato Corona, and Associate Justices Lucas Bersamin, Presbitero Velasco Jr., Mariano del Castillo, Roberto Abad, Jose Portugal Perez and Martin Villarama Jr.
Four dissented: Associate Justices Arturo Brion and Conchita Carpio-Morales, who wrote dissenting opinions; and Jose Catral Mendoza and Maria Lourdes Sereno.
The other four justices took no part in the deliberations: Associate Justice Antonio Carpio identified himself as one of the petitioners who sought to declare the coco levy funds as public funds; Antonio Eduardo Nachura, who noted that he signed the government pleadings as solicitor general; Teresita Leonardo-de Castro and Diosdado Peralta.
The decision begins with the following context: “For over two decades, the issue of whether the sequestered sizable blocks of shares representing 20 percent of the outstanding capital stock of SMC at the time of acquisition belonged to their registered owners or to the coconut farmers has remained unresolved.
“Through this decision, the court aims to finally resolve the issue and terminate the uncertainty that has plagued [these shares].”
The high court also declared as lawful previous decisions that lifted eight writs of sequestration imposed by the Presidential Commission on Good Government (PCGG) against Cojuangco’s assets.
In their ruling, the justices observed that the government failed to offer clear evidence to prove that Cojuangco amassed his wealth illegally.
For example, the court said the nullification of the writs of sequestration against Cojuangco was valid because in some instances, the PCGG had failed to determine prima facie basis for sequestration.
The decision dwelt on “the concept and genesis of ill-gotten wealth in the Philippine setting” in addressing Cojuangco’s situation.
Then President Corazon Aquino’s first official act on Feb. 28, 1986, was to recover all ill-gotten wealth amassed by Marcos, his immediate family, relatives and close associates both here and abroad through the creation of the PCGG.
The court said that by definition, “ill-gotten wealth would not include all properties of President Marcos... but only part that originated from the ‘vast resources of government.’”
The court also ruled that to be “ill-gotten, the assets must have originated from government itself... [or] taken by [Marcos and his associates] by illegal means.”
The tribunal said “identifying other persons who might be the close associates of President Marcos presented an inherent difficulty, because it was not fair and just to include within the term ‘close associates’ everyone who had had any association with President Marcos, his immediate family and relatives.”
In any case, the court said “the Republic did not discharge its burden as the plaintiff to establish by preponderance of evidence that the respondents’ SMC shares were illegally acquired with coconut levy funds.”
The government tried to argue that Cojuangco obtained loans from UCPB to buy the SMC shares through a letter of instruction issued by Marcos. It said this violated rules restricting bank officials from taking advantage of their own deposits and assets.
But the court said government failed to establish any breach of Cojuangco’s “fiduciary duties” as a bank official.
“The thrust of the Republic that the funds were borrowed or lent might even preclude any consequent trust implications,” the court said, because the debtor acquires proprietary control over the loan once it is transferred.
“A debtor can appropriate the thing loaned without any responsibility or duty to his creditor to return the very thing that was loaned or to report how the proceeds were used,” it said.
Cojuangco’s only liability, it said, was to pay the loan and its interest as stipulated by law.
What went before: The disputed shares of SMC
MANILA, Philippines—President Ferdinand Marcos imposed a levy on coconut farmers between 1972 and 1982 supposedly to develop the coconut industry.
In 1975, Marcos authorized the Philippine Coconut Authority, the agency tasked with developing the coconut industry and whose board included businessman Eduardo Cojuangco, to use the funds to buy a bank “for the benefit of the farmers.”
The bank was First United Bank, later renamed United Coconut Planters Bank (UCPB). Cojuangco became its president and chief executive officer.
With the PCA and UCPB in their control, Cojuangco and his associates were able to buy firms and mills placed under the Coconut Industry Investment Fund (CIIF), a group of 14 holding companies whose assets included 47 percent of San Miguel Corp. (SMC). These assets were held by UCPB, the CIIF administrator.
In 1986, the assets were sequestered by the Presidential Commission on Good Government (PCGG), the agency tasked to recover the ill-gotten wealth of Marcos and his cronies.
The PCGG filed cases in the Sandiganbayan anti-graft court against Cojuangco, claiming the CIIF and other assets were acquired using the coco levy funds.
During the Joseph Estrada administration, Cojuangco won provisional control of the 20 percent block of shares in SMC, allowing him to return as chair and chief executive officer.
Public funds
In December 2001, the Supreme Court declared the coco levy funds as “prima facie (apparently) public funds,” but left the Sandiganbayan to determine the owner of the assets acquired with the funds.
In May 2004, the Sandiganbayan awarded the 27-percent block of SMC shares to the government, which holds it in trust for the country’s coconut farmers.
Government share diluted
The 27-percent stake was reduced to about 24 percent after it was diluted with the investment of Japanese brewer Kirin in SMC.
In November 2007, the Sandiganbayan junked a civil case seeking to recover the 20 percent block of shares under the names of 44 Cojuangco-owned companies.
The anti-graft court said the PCGG had failed to prove that coco levy funds were used to purchase the block of shares.
Various farmers’ groups asked the Supreme Court to reverse the decision. Cojuangco sought to stop the intervention of the groups, but the Supreme Court denied his petition and ruled in April 2008 that they have the right to take part in the case as taxpayers.
SC lets gov’t sell SMC stake
In June 2009, the Office of the Solicitor General asked the Supreme Court to allow the government to sell its 24-percent stake in SMC to avoid losses as a result of the depreciation of the shares of stocks.
In October 2009, the PCGG approved the conversion of the government’s 24-percent stake in SMC, amounting to 750 million shares, into non-voting preferred shares.
The PCGG said the decision was a result of a careful study and was approved by the Supreme Court and the stakeholders of the coco levy fund.
It added that with the conversion, the shares would not fall prey to “speculation” and its price would be pegged at P75 each.
Former PCGG chair Jovito Salonga and several others filed a motion for reconsideration in the Supreme Court, questioning the conversion which they claimed was “disadvantageous” to the government.
In February 2010, the Supreme Court upheld its ruling, which allowed the conversion. Inquirer Research
In 1975, Marcos authorized the Philippine Coconut Authority, the agency tasked with developing the coconut industry and whose board included businessman Eduardo Cojuangco, to use the funds to buy a bank “for the benefit of the farmers.”
The bank was First United Bank, later renamed United Coconut Planters Bank (UCPB). Cojuangco became its president and chief executive officer.
With the PCA and UCPB in their control, Cojuangco and his associates were able to buy firms and mills placed under the Coconut Industry Investment Fund (CIIF), a group of 14 holding companies whose assets included 47 percent of San Miguel Corp. (SMC). These assets were held by UCPB, the CIIF administrator.
In 1986, the assets were sequestered by the Presidential Commission on Good Government (PCGG), the agency tasked to recover the ill-gotten wealth of Marcos and his cronies.
The PCGG filed cases in the Sandiganbayan anti-graft court against Cojuangco, claiming the CIIF and other assets were acquired using the coco levy funds.
During the Joseph Estrada administration, Cojuangco won provisional control of the 20 percent block of shares in SMC, allowing him to return as chair and chief executive officer.
Public funds
In December 2001, the Supreme Court declared the coco levy funds as “prima facie (apparently) public funds,” but left the Sandiganbayan to determine the owner of the assets acquired with the funds.
In May 2004, the Sandiganbayan awarded the 27-percent block of SMC shares to the government, which holds it in trust for the country’s coconut farmers.
Government share diluted
The 27-percent stake was reduced to about 24 percent after it was diluted with the investment of Japanese brewer Kirin in SMC.
In November 2007, the Sandiganbayan junked a civil case seeking to recover the 20 percent block of shares under the names of 44 Cojuangco-owned companies.
The anti-graft court said the PCGG had failed to prove that coco levy funds were used to purchase the block of shares.
Various farmers’ groups asked the Supreme Court to reverse the decision. Cojuangco sought to stop the intervention of the groups, but the Supreme Court denied his petition and ruled in April 2008 that they have the right to take part in the case as taxpayers.
SC lets gov’t sell SMC stake
In June 2009, the Office of the Solicitor General asked the Supreme Court to allow the government to sell its 24-percent stake in SMC to avoid losses as a result of the depreciation of the shares of stocks.
In October 2009, the PCGG approved the conversion of the government’s 24-percent stake in SMC, amounting to 750 million shares, into non-voting preferred shares.
The PCGG said the decision was a result of a careful study and was approved by the Supreme Court and the stakeholders of the coco levy fund.
It added that with the conversion, the shares would not fall prey to “speculation” and its price would be pegged at P75 each.
Former PCGG chair Jovito Salonga and several others filed a motion for reconsideration in the Supreme Court, questioning the conversion which they claimed was “disadvantageous” to the government.
In February 2010, the Supreme Court upheld its ruling, which allowed the conversion. Inquirer Research
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