“Ferdinand Marcos…probably surpassed all other politicians at fiscal manipulation, economic favoritism and ‘cooking the books’ to enable themselves, their friends and their relatives to steal from the Filipino people,” said Patricia Adams.
“Ferdinand Marcos and his wife, Imelda, probably surpassed all other politicians at fiscal manipulation, economic favoritism and ‘cooking the books’ to enable themselves, their friends and their relatives to steal from the Filipino people,” Patricia Adams, executive director of Toronto-based think tank Probe International, said in a paper, “Odious Debts: Loose Lending, Corruption and the Third World’s Environmental Legacy.”
When Marcos became president in 1966, the Philippines’ debts stood at just under one billion dollars. When he fled the country in 1986, that figure had soared to over 28 billion dollars.
The Marcos story would have had a happy ending had all the debts his government incurred went to spurring growth and lifting the population out of poverty. Had that happened, the Philippines would probably be now rivaling Singapore as Southeast Asia’s most advanced and most prosperous country.
As things turned out, however, most of the money, according to investigations undertaken by the Aquino administration and studies by independent think tanks abroad, lined the pockets of the Marcoses and their cronies. The result has been a republic where 75 percent of the population live below poverty line, 30 percent do not have access to health services and sanitation, 30 percent of the children under age 5 are malnourished, and 30 percent of the children are deprived of elementary education.
It is difficult to ascertain how much the Marcoses stole because most of the money were deposited in countries with strong secrecy laws, but few dispute the 10-billion-dollar estimate of the Presidential Commission on Good Government.
One of the biggest of the Marcos administration’s “odious” debts was the 2.3 billion dollars (119 billion pesos) worth of loans it got to build the Bataan nuclear power plant.
Since construction began in 1977, the government has spent more than 1.2 billion pesos paying for the power plant. Each Filipino taxpayer is now paying over 170,000 dollars a day in interest to an obligation that now accounts for 10 percent of the country’s total debts. The national treasurer estimates that taxpayers will have to shoulder another 282 million dollars until the loans are settled in 2018.
Despite this expenditure, the plant has never produced a single watt of electricity. It was declared unsafe and inoperable by a team of international inspectors after Marcos’ downfall in 1986. The ill-conceived plant stands just 100 kilometers from Metro Manila, near several earthquake fault lines and at the foot of a dormant volcano.
From the start, the project, which cost three times the price of a comparable plant in South Korea, was plagued by allegations of corruption. Originally estimated at 500 million dollars for two reactors, the entire project ended up costing 2.8 billion dollars for a single reactor, the cost largely padded by commissions that Marcos and his cronies allegedly received.
According to a 1986 New York Times investigation, Marcos allegedly received around 80 million dollars in commissions, through a crony, from Westinghouse Corp., whose winning bid was much more expensive than a proposal from General Electric Corp., which the head of the National Power Corp. recommended.
Marcos was told by one of his ministers that his government, at the price Westinghouse quoted, bought “one reactor for the price of two,” yet the transaction pushed through. Marcos overruled his own panel’s choice in favor of the much more expensive reactor before Westinghouse had even submitted a detailed bid.
The Marcos crony who arranged the deal, Herminio Disini, was awarded several lucrative contracts associated with the power plant, went on to live in a castle near Vienna.
Westinghouse acknowledged paying a commission to a Marcos associate but said “allegations of illicitly inflated costs at its nuclear power plant in the Philippines are completely without merit.”
According to the lawyer and a banker who negotiated the deal, Disini received payments through a variety of channels.
The best contracts went to Disini’s companies, many of them new and inexperienced in the nuclear reactor business. According to documents left behind in the presidential Palace, Marcos also had an interest in Disini’s companies.
In one case, Westinghouse helped Disini acquire Asian Industries, its distributorship in the Philippines, with commissions paid to the company for Disini’s benefit. In another contract, Disini set up a construction company that was soon named chief contractor for building the reactor. In a third instance, a small insurance company owned by Disini was awarded a 688-million-dollar policy on the nuclear plant, the largest ever written in the Philippines.
And finally, Disini received most of his money through a Swiss subsidiary of Westinghouse, which had set up another entity–Westinghouse International Projects Co.–solely to handle the Philippine reactor.
According to a New York Times investigation: “The reason for the complex arrangement with the Swiss concern was that Westinghouse couldn’t pay fees directly to Disini without risking charges of bribery under various United States fraud laws or laws requiring corporate disclosure. But there were no similar restrictions in Switzerland.”
The banker who represented Disini in the transaction explained that a special Swiss fund dispensed the money to Disini, Marcos and one or two of Disini’s employees, and that Marcos was to receive 95 percent of the fee. “After all, it was Marcos’ deal; Disini was just a conduit.”
To see the project through, Westinghouse and Marcos had to deflect growing concerns about the safety of the plant, which was sited at the foot of a volcano, in the middle of the Pacific “fire rim” earthquake zone of high seismic activity.
The International Atomic Energy Agency, the international promoter for the nuclear power industry, termed the site “unique to the nuclear industry” and considered the risk of a future volcanic eruption “credible.”
The Philippine Atomic Energy Commission, who refused to give the plant–already under construction–a construction permit, was also nervous. Finally, after much wining and dining by Westinghouse and pressure plied by the energy minister, and just one week after the Three Mile Island nuclear accident in Harrisburg, Pennsylvania, Librado Ibe, the head of the commission, issued the permit and then moved to the United States.
As he explained to Fortune magazine, it was unsafe to resist Marcos’ lieutenants for too long.
Marcos could not have accumulated his offshore estate had he restricted his means.
Hardly any government institutions were beyond his power: where none existed to serve his interest, he created them.
“Corruption was centralized as never before and was, thus, carried on more efficiently,” an independent Filipino research team learned. “Vast legislative powers Marcos accorded himself through Proclamation No. 1081 placed him in a vantage position to spot lucrative deals, then wheel and deal through his cronies who also held important government posts.”
The government-owned Philippine National Oil Co. was also placed at the service of Marcos and of his energy minister, Geronimo Velasco, who is believed to have siphoned off millions of dollars in illegal kickbacks and rebates from the company.
Velasco, according to the head of the Commission on Audit set up by the Aquino administration, “took a staggering amount. We really don’t know how much it was, or how much went to Marcos, because for all these years, PNOC was never audited.”
Recently, the 17-million-dollar Swiss account of Velasco with two other relatives was unfrozen, according to Swiss authorities. The PCGG plans to appeal the decision of the Zurich district attorney.
PNOC, the country’s largest business enterprise, was set up by Marcos during the oil crisis in 1973 and was specifically exempted from normal auditing controls by presidential decree.
The absence of regulatory and public oversight allowed Velasco to defraud the enterprise he ran. Whenever he chartered tankers to bring crude oil to the Philippines, Velasco would add a 5-percent commission to be kicked back and paid through the treasurer of a shadowy Filipino firm who would deposit the money in banks in Hong Kong and the United States.
Velasco would use a similar scheme when PNOC bought insurance for each tanker voyage from an insurance company owned by another notorious Marcos crony.
The PNOC routinely paid more for its tanker insurance than its competitors.
PNOC also paid 10 percent more than the going price for three oil tankers the company bought from Japan in 1974 and 1975. This purchase was believed to have come from a 400-million-dollar discretionary fund, called the “Oil Industry Special Fund,” over which only Velasco and Marcos had authority. Tariffs on imported oil kept the fund full.
Raul Dancel, Inquirer News Service (The Nation), September 21, 2002