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The $10bn question: what happened to the Marcos millions?

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islander:


Ferdinand Marcos with Richard Nixon after a meeting at the White House in 1969. Photograph: Getty Images

In the early years, the PCGG documents suggest, Marcos was naive in his crime. With sacks of cash from rich backers and help from the CIA, the bright young lawyer won elections to congress, then the senate, but he was nothing special, just another “Mr Ten Per Cent” selling his political influence. After he became President Ten Per Cent in 1965, his income from kickbacks for government contracts increased, but his guile went no further than stashing $215,000 in a New York bank in his own name. As far as the records show, he and Imelda took their first steps to real secrecy on 20 March 1968, when they used false names to deposit $950,000 in four accounts with Credit Suisse, he as William Saunders (he practised his new signature on the headed paper), she as Jane Ryan. By February 1970, the Swiss accounts were so loaded, the couple added an extra layer of concealment, transferring their ownership to foundations registered in Liechtenstein. Then Marcos started to get really clever.

On 21 September 1972, he declared martial law. As his diary records, the Nixon administration consented as he shut down congress, arrested his political opponents, took control of the media and courts, and suspended all civil rights. On the same day – as a PCGG worker pointed out to me with some passion – he took time off to open another Swiss bank account. In his diary a week later, reflecting on his “reforms”, Marcos wrote: “The legitimate use of force on chosen targets is the incontestable secret of the reform movement.”

Over the following nine years, an estimated 34,000 trade unionists, student leaders, writers and politicians were tortured with electric shocks, heated irons and rape; 3,240 men and women were dumped dead in public places; 398 others simply disappeared. With total power over politics, the president closed in on the country’s wealth.

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islander:

This was no longer just about kickbacks. Marcos started to steal whole companies, using the crude tactics of a gangster. He wanted the nation’s electricity company, Meralco, owned by Eugenio Lopez, patriarch of one of the families who had run the country for centuries. He had Lopez’s son charged with plotting to assassinate him, which carried the death penalty. The old oligarch handed over his company for $220 (it was worth $400m). To have gunmen is a gangster’s requirement; to have gunmen in uniforms, with all the power of the state behind them, is a gangster’s dream.

Yet most of Marcos’s takeovers involved no violence. Martial law allowed him, literally, to write his own law: his decrees passed straight on to the statute book. When he wanted to take over the sugar industry, he set up companies and then issued decrees that allowed them to dominate the planting, milling and international marketing of Philippine sugar, which accounted for 27% of export earnings. He then created a Philippine Exchange Company, decreed it should handle all foreign sugar sales and used its monopoly position to buy from farmers at rock-bottom prices and sell at vast profit. This allowed him to buy Northern Lines, which had the contract to ship the sugar overseas. Finally, he decreed that the sugar industry be exempt from minimum-wage law, with the result that 500,000 labourers saw their income fall to less than $1 a day, making even more profit.


Marcos’s scribbled sums counting his stolen millions. Photograph: Nick Davies

The PCGG archive shows how, in the same way, Marcos used his own companies to take over the three other key areas of agriculture: coconuts, tobacco and bananas. Granting himself government contracts, monopoly deals and tax exemptions, he levered his way into dominating industries across the whole economy – logging and paper, meat, oil, insurance, shipping and airlines, beer and cigarettes, textiles, hotels and casinos, newspapers, radio and TV. His was an early and particularly rapacious version of privatisation.

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islander:

Crucially, he saw his crime through a lawyer’s eyes. Of course people would observe that the Marcoses were suddenly very wealthy – they could live with that. What mattered was to ensure that there was no evidence. Repeatedly, he set up his companies so that outwardly they belonged to other people. Marcos deployed dozens of cronies: relatives, golf partners, political allies, anybody who shared his greed. The crony would sign a deed transferring ownership of most of the business – usually 60% – but would leave a blank space for the name. Marcos would hold the deed and leave the space blank. There was no “evidence” that he owned the 60%.

Marcos stole, then stole more. The Japanese paid reparations for the second world war; he skimmed it and put the profit into his Swiss accounts. He stole international aid money, gold from the Central Bank, loans from international banks and military aid from the US. He decreed that more than a million impoverished coconut farmers must pay a levy, supposedly to improve the industry, amounting to $216m. He had already issued decrees to gift most of the coconut trade to one of his own companies; now he stole great chunks of the levy fund, all the while taking kickbacks on government contracts.

"All the Marcoses had to do was turn on the taps anywhere in the world and cash would come pouring out."

All this theft created a logistical problem: how to handle the tidal flow of money. The PCGG archive shows how Marcos set up his own banking system, using cronies to buy private banks and others to control the state banks. These were useful for stealing more money, in loans that would never be repaid, and for accessing foreign currency – although eventually he set up his own specialist bank to trade currency on the black market.

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islander:

Above all, the banks acted like a network of dykes receiving his ocean of income. Bank staff would make regular – sometimes weekly – trips to the palace, to pick up cheques and bundles of cash, which were then deposited in dozens of accounts. The millions were then channelled into Marcos’s expanding reservoir of offshore accounts (he had 69 in Switzerland alone). Then all he and Imelda had to do was turn on the taps anywhere in the world and cash would come pouring out; cash that had been washed clean of its connection to crime.

For all its craziness, the gorging on consumer goods that followed now seems a natural progression. There were multiple houses for the extended family, a $5.5m yacht, private planes, helicopters and dozens of Mercedes-Benzes. When their youngest daughter was married in June 1983, they built a new runway and hotel, renovated a 200-year-old church, demolished nearby houses and rebuilt them in traditional style, imported carriages from Austria and horses from Morocco.

The men and women who work at the PCGG are driven by an anger. Each day they discover more detail of this crime, while its victims sleep on the pavements and in the slums around them. They are well aware of what the money could do for the impoverished people of the Philippines: if Marcos stole $10bn, this would have paid for the entire government budget for his last year in power three times over. And so they want not only to retrieve the stolen money, but to restore it. It is not easy. The Marcoses, with their money and their connections, have always been in the lead.

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islander:

Consider the saga of the missing paintings. When the PCGG searched the president’s palace after he fled, they found that the walls of the ballroom displayed 23 pale patches where once there had been masterpieces. The Marcoses had a town house on East 66th Street in New York, where Imelda held many parties. Neighbours told investigators that they had seen two 18-wheel trailers pull up a few days after the couple went into exile: they had been loaded up with antiques and paintings, and driven away. By the time the house was searched a few weeks later, there were only brass plaques boasting of treasures that had once occupied its walls: the Madonna And Child by Michelangelo, the Marquesa de Santa Cruz by Goya, a couple of Monets, two Braques, a Pissarro, a Manet.


The vast PCGG archive of documents in Manila. Photograph: Rolex Dela Pena/EPA/Corbis

Paperwork retrieved from their various homes revealed that the Marcoses had bought at least 304 valuable paintings. Almost all were now missing. The Philippine investigators were left with a few dozen inferior works abandoned in some of the Philippine homes, and one Henri Fantin-Latour found wrapped in a blanket under a maid’s bed in one of their New York apartments, apparently an attempt to thieve from the thief. They got a judge to order galleries and auction houses not to sell anything that might have come from the Marcoses. There was not much else they could do.

During their first year, the PCGG received a little help from several former Marcos staff and allies. A financial aide, Rolando Gapud, gave them details of five Swiss bank accounts. By Marcos standards, they did not contain very much (only $356m) and the banks refused to hand it over. All the PCGG could do was persuade a Swiss court to freeze the accounts. Gapud and others began to disclose the scale of Marcos’s ownership of the Philippine economy. In Manila, the government set up an “anti-graft” court; by the end of 1986, the PCGG was opening cases against Marcos and his network.

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