Secret wealth? 5 top bets
have undisclosed assets

THE PHILIPPINE PRESS, widely held to be the freest and most rambunctious in Southeast Asia, has no reason to boast and gloat as journalists across the globe observe World Press Freedom Day today.

Aside from the string of unsolved murders of journalists, spotty compliance and outright mockery of the law on the disclosure of statements of assets, liabilities and net worth (SALN) by the country’s justices, lawmakers and executive officials continue to hinder the people’s right to know – ironically this year’s theme in commemorating press freedom.

Public officials have observed the SALN law largely in the breach.

Since 2006, the Supreme Court has flatly refused to disclose the SALNs of justices and judges. This is despite a pleading for disclosure that the Philippine Center for Investigative Journalism (PCIJ) filed in October 2009 that had the high court creating a committee to study the issue and resolve the matter.

Last February, the committee headed by now retired Justice Minita Chico-Nazario recommended the creation on a Committee on Public Disclosure (CPD) to deal with requests for SALNs. The implementing guidelines for the CPD are supposedly being drafted and might be released before Chief Justice Reynato Puno retires on May 17.

If the Supreme Court justices are totally secretive about their SALNs, senators and congressmen file grudgingly, it seems.

These lawmakers, including the leading candidates for president and vice president, typically resort to material omission of data about all their business and financial interests, resulting in a virtual mockery of the SALN law.

Last April 30, the deadline for filing of the SALN for 2009 lapsed. The PCIJ obtained copies of the latest SALN of five of six senators running for president and vice president filed – the Liberal Party’s standard bearer Benigno C. Aquino III and his running mate Manuel Roxas II; the Nacionalista Party’s standard bearer Manuel B. Villar Jr. and his running mate Loren Legarda; and independent candidate for president Ma. Ana Consuelo ‘Jamby’ Madrigal.

No copy of the 2009 SALN of Bagumbayan Party candidate Richard Gordon was yet available as of 5 p.m. last April 30.

The filing of the SALN is a basic duty of all public officials, but most specially, of those serving in high office.

The essence of disclosing business interests and financial connections is to show information on other sources of income of a public servant aside from his salary from government. Theoretically, this would help explain an official’s lifestyle, in the case that he is able to live one that he could not have afforded though his salary alone.

Too, the SALN is a tracer and tracker. It serves as a check for public officials who might have an interest in a business that may be affected by his or her performance or functions in office.

To derive the list of business interests that the top candidates did not disclose, the PCIJ compared the candidates’ latest SALNs with their SALNs from prior years, and conducted a reverse-search on all their business and financial interests using the dabatase of the Securities and Exchange Commission (SEC).

The PCIJ’s research does not reveal any other active business interests or financial connections that LP candidate Aquino had not disclosed in his SALNs until 2009.

Hidden or forgotten?

However, the PCIJ research also showed that five candidates for president had omitted or failed to disclose some of their business interests and financial connections in their SALNs. For instance:

  • Villar failed to report in his 2008 and 2009 SALNs at least three other corporations in which he or his spouse have business and financial interests. But the PCIJ has also compiled a list of 29 corporations in which Villar has associated interests based on SEC data, as well as the articles of incorporation, general information sheets and financial statements of the same corporations.
  • Madrigal is an officer and stockholder of at least five corporations that are not listed in the SALNs she filed from 2004 to 2007, and for 2009. One of these companies is Harmony Therapy Centre Corp. (formerly Glorious Buddha, Inc.), which engaged in trade and first registered with the SEC on April 26, 2002. The corporation’s 2004 and 2005 general information sheet or GIS indicate that Madrigal and her husband Eric Dudoignon Valade are both officers and shareholders of the company. Madrigal has subscribed P8,000 worth of shares and Valade, P10,000.

Harmony Therapy Centre’s most recent GIS available in the SEC online database are for the years 2004 and 2005. Madrigal’s 2004 and 2005 SALNs do not list the company as one of her business interests.

The Madrigal listed in the SEC documents of Harmony Therapy has the same address of Senator Madrigal in her SALNs: 145 10th St., New Manila, Quezon City.

Four other companies – Madrigal Pacific Carriers Corp., Pino Armadora Corp., Radiant Holdings, Inc., and Revelstoke Holdings, Inc. – list in their 2007 general information sheets that a “Maria Ana A.S. Madrigal” is an officer and has subscribed shares worth P9.36 million, P100, P2.9 million, and P123,300 in each of the companies, respectively. The Madrigal that has shares in these corporations has the same tax identification number of Senator Madrigal in her SALNs. These four companies are not entered in Madrigal’s 2007 SALN.

  • Gordon did not list one non-stock foundation in his 2000 SALN as a tourism secretary, and two other non-stock foundations in his 2006 SALN.

The first, Olongapo City Foundation, Inc., was not enrolled in the 2000 SALN that Gordon filed as jointly with his spouse, then Olongapo City Mayor Katherine Gordon. According to its 2000 GIS, Olongapo City Foundation was registered as a non-stock corporation registered on January 24, 1985, with Richard J. Gordon as non-stock member and Katherine H. Gordon as vice-president. The Katherine Gordon listed in the 2000 GIS of the Foundation has the same address of Richard Gordon in his SALNs – # 48 Gallagher St., East Tapinac, Olongapo City.

Gordon is also listed as an incorporator and trustee of Victories of the Revolution Foundation, Inc. and Philippine-India Parliamentarians Friendship Association Inc., which were registered with the SEC on September 6, 2006 and September 7, 2006, respectively. Both non-stock corporations are not listed in Gordon’s 2006 SALN, and include other lawmakers and politicians as incorporators and trustees.

Teodoros, too

A similar material omission of business interests that he and his wife own has been committed by former defense secretary Gilberto C. Teodoro Jr., administration Lakas-Kampi-Christian Muslim Democrats (CMD) standard bearer.

Teodoro’s wife, Tarlac Representative Monica Prieto-Teodoro, is listed as an incorporator and trustee of Golden Roosters Foundation, Inc. (formerly Golden Roasters Foundation, Inc.), a non-stock corporation registered with the SEC on May 15, 2008.

According to its articles of incorporation submitted to the SEC on August 29, 2008, the foundation aims “to engage in philanthropic, humanitarian, civic and charitable purposes, all for the welfare of the Filipino children… to empower children who are oppressed, neglected, abandoned, rejected, orphaned and abused.” The lawmaker has contributed P800,0000 to the capital of the association.

The Monica Prieto-Teodoro in the SEC documents of Golden Roosters has the same signature and TIN (Taxpayer’s Identification Number) with that of the Monica Prieto-Teodoro in her joint SALN with Gilbert in 2008.

A “Monica Louise P. Teodoro” of Legaspi Village, Makati City is also listed as an officer and stockholder of Ringwood Holdings, Inc., according to its 2001 general information sheet. Teodoro has subscribed shares worth P100 in this company.

The TIN of Monica Louise P. Teodoro here is 123-492-619 and does not match the TIN indicated in her SALN. But Marybeth L. de Leon, treasurer and stockholder of Ringwood Holdings lists 123-493-627 as her TIN. De Leon’s TIN is Monica’s TIN in her SALN.

Golden Roosters Foundation and Ringwood Holdings are not listed in at least the 2008 and 2001 joint SALNs of Gilbert and Monica Teodoro, respectively,

JC has 3 firms

Even a less-affluent candidate like Kapatiran Party’s John Carlos De los Reyes is in penalty of non-disclosure of his being an incoporator of one entity: the Solidarity and Common Good Movement of the Philippines, Inc., which filed its articles of incorporation with the SEC on January 4, 2008.

The corporation was registered with the Commission on January 7, 2008. No such entity is listed in de los Reyes’s 2008 SALN. Aside from this entity, De Los Reyes had admitted in GMA Network’s television segment Votebook that aired in early April 2010 that he owns two more business interests – a brick manufacturing business called Legobrick and a water refilling station called Water Plus.

Neither business appears in De los Reyes’s 2008 SALN, according to the Votebook episode.

Villar’s web of firms

As may be expected, Villar, the wealthiest of the nine candidates for president, has not disclosed the most number of business interests and financial connections.

The SALNs that he had filed from 2001 to 2009 are typically sparse and scarce with data that could fully explain his P1.04-billion net worth as of 2008, which slid just slightly to P947.8 million in 2009.

Records show that his spouse Las Piñas representative Cynthia A. Villar is listed as an officer and stockholder of Gourmet Garage Inc., a company registered with the SEC on June 10, 2002.

The congresswoman has subscribed shares worth P84,400 in Gourmet Garage, which is engaged in establishing, operating and maintaining restaurants, coffee shops, refreshment parlors, cocktail lounges, and catering, according to the company’s 2007 and 2008 GIS.

Gourmet Garage, Inc. is not listed in at least the 2007 and 2008 joint SALNs of Manny and Cynthia Villar.

The Villar couple listed only two companies – Fine Properties, Inc. and Adelfa Properties, Inc. – in their joint SALN for 2008.

SEC data also show that Manny and Cynthia Villar are listed as incorporators of Villar Foundation, according to the foundation’s 2009 GIS. Villar Foundation is not listed in at least the 2009 SALN of the couple.

In their 2009 SALN, the Villars listed four companies, including two that they had reported in prior-years’ SALNs but unloaded in their 2008 SALN.

The four companies enrolled in the 2009 SALN of the Villar couple are Fine Properties, Inc., M.B. Villar Co. Inc., Macys, Inc., and Mooncrest Property Development.

Adelfa Properties, Inc. is no longer listed in the 2009 SALN of the Villars.

A reverse-search analysis of SEC records, as well as copies of the pertinent articles of incorporation and general information sheets, show that at least 29 other firms appear to be related to the Villars directly or through their holding companies and other corporations in which they have equity interest.

For instance, both Fine Properties and Adelfa Properties are listed as major stockholders, with shares worth over P3 billion and P1.9 billion, respectively, in the Villars’s publicly-listed real estate holding firm, Vista Land and Lifescapes, Inc.

According to Vista Land’s 2009 GIS, Fine Properties owns 35.63 percent, and Adelfa Properties, 22.48 percent, of Vista Land’s total stocks. The Villars’s sons, Manuel Paolo and Mark, are both members of the board of directors of Vista Land and Lifescapes.

Which owns which?

An investment holdings company, Vista Land has four subsidiaries: Britanny Corp. Camella Homes, Inc. (formerly C & P Homes, Inc.), Crown Asia Properties, Inc., and Crown Communities Holdings, Inc.

From these four Vista Land subsidiaries, the companies in which the Villars appear to have direct or associated interests branch out like a multi-layered cobweb of corporate entities, yet withnearly all represented by the same corporate executives, officers, and lawyers that represent and run the big Villar entities.

Camella Homes, Inc. (formerly C & P Homes, Inc.), a real estate company, also has subsidiaries: Mandalay Resources, Inc. and Household Development Corp.

Fine Properties is a stockholder of Household Development Corp. with paid-up capital worth P4 million, according to Household Development Corp.’s 2009 GIS.

Crown Communities Holdings, Inc., which changed its name to Communities Philippines, Inc., has at least 13 subsidiaries, representing the multiple property-development projects across the Philippines of the Villar companies.

Communities Philippines now consists of 13 companies that have separately registered with the SEC, namely Communities Batangas, Inc., Communities Pangasinan, Inc., Communities Bulacan, Inc., Communities Naga, Inc., Communities Pampanga, Inc., Communities Iloilo, Inc., Communities Cebu, Inc., Communities Davao, Inc., Communities Tarlac, Inc., Communities General Santos City, Inc., Communities Negros Occidental, Inc., Communities Leyte, Inc., and Communities Isabela, Inc.

As for Adelfa Properties, Inc., one of its major stockholders, Althorp Holdings Inc., is a subsidiary of Cambridge Group, Inc.

Cambridge Group, in turn, lists four subsidiaries: Carissa Homes, Casa Regalia, San Marino Homes, and Towns and Villas, Inc., according to its 2009 GIS.

Adelfa is also listed as a major stockholder in Polar Property Holdings Corp. According to the 2009 GIS of Polar Property Holdings, Adelfa has subscribed shares worth P2.57 billion, owning 53 percent of the company’s total stocks.

Polar Property Holdings, meanwhile, controls Polar Mines Realty Ventures, Inc., another real estate entity of the Villars.

Cross-sale deal

On October 29, 2009, Vista Land in a disclosure notice to the Philippine Stock Exchange (PSE) said that it had entered into an agreement with Polar Property Holdings “for the sale and conveyance of Polar Property in favor of VLL of its shares and subscription to shares of Polar Mines Realty Ventures, Inc.” representing total amount of P702.65 million.

In exchange for the shares and receivables of Polar Realty, Vista Land transferred to Polar Property 320,686,000 shares of Vista Land to Polar Property by way of a cross-sale through the PSE.

The shares-swap increased Polar Property’s interests in Vista Land from 5.35 percent to 9.11 percent, even as Polar Property and Vista Land acknowledged in the disclosure notice that they have common directors (including Manuel Paolo Villar) and a common significant shareholder, Adelfa Properties, Inc.

This multi-layered corporate structure is at best complicated to both untrained eye and even regulators.

Controlling interest?

The set-up may allow for indirect relationship of shareholders and companies, according to Ferdinand Sales, assistant director of the SEC’s Corporate and Partnership Registration Division.

Sales explains that if Stockholder A is one of the stockholders of Corporation A, and Corporation A is stockholder in Corporation X, when Corporation X declares dividends, this will definitely accrue to Corporation A and will constitute part of the retained earnings of Corporation A.

“(W)hen Corporation A declares a dividend, then that will be the time that it will accrue to Incorporator A. But, definitely, Corporation X cannot declare a dividend directly to Stockholder A of Corporation A unless Stockholder A is also stockholder in Corporation X,” he says.

Professor Rafael Rodriguez, former dean of the University of the Philippines College of Business Administration, affirms Sales’s explanation as correct. But Rodriguez says the size of a person’s shareholdings matters in terms of exercising control over a corporation, or a number of corporations.

“If a person is just a small shareholder of Corporation A, he would not normally have any control over the affairs of Corporation X even when Corporation A has an ownership interest in Corporation X,” he says. “However, if that person has a controlling interest in Corporation A, and in turn Corporation A has a controlling interest in Corporation X, then he can have control over the affairs of Corporation X.

In the professor’s view, bigness of interests may also command degree of control in companies, no matter how multi-layered the set-up is.

A corporation is, of course, governed by a board of directors, and the members of the board are elected by shareholders in proportion to their stockholdings.

Says Rodriguez: “If you have just one stock share, you have just one vote. That’s why the small stockholders are unable to elect directors.”

The picture changes for big shareholders who can command enough clout to elect some or all the company directors, he says.

Failure of candidates

“For example,” says Rodriguez, “the corporation has nine directors. Those nine directors will elect the president, the chairman of the board…If you own the corporation, all of those nine are yours, they’re all your people.”

In most cases, Rodriguez says, “it’s enough that you control 60 percent of the corporation because out of the nine, you need five. When voting time comes, when four want this person as president but I want you for the post, well, I have five votes and they’re just four so I win even though I don’t own the entire corporation.”

The failure of the candidates to disclose the foundations in which they are stockholders or officers is a breach of the SALN law, according to Arpee Jao, special investigator IV of the Civil Service Commission’s legal affairs office. The law specifies, in fact, that foundations should be disclosed in the SALN.

But Jao says that the disclosure of associated business interests is not strictly prescribed in the law. She adds that there is no need for an official to declare another firm in which the company directly related to him or her has stocks in.

“What it just required is for you as an official or employee of government to disclose where you are putting your money, where you are earning,” she says. “(If) you have invested your money for a certain number of stocks to Corporation A, so it is Corporation A which will be giving you in return, dividends or earnings based on your shares, ‘di ba? So it is with Corporation A that you have your financial connection, because it is with Corporation A that you have directly invested and not with Corporation X.” – With additional research by JC Cordon, PCIJ, May 2010