Buried Treasure: Much Marcos Wealth, Still

Buried Treasure: Much Marcos Wealth, Still Carefully Hidden, Eludes Investigators --- Political and Legal Problems May Help Ex- President Avoid Trial in Some Cases --- Huge Lists of Stolen Assets

MANILA, the Philippines -- Ferdinand Marcos had been in his Hawaiian exile less than a month last March when Michael De Guzman, a Filipino who ran his financial errands, presented Zurich-based Credit Suisse bank with a two-sentence power of attorney from the former president and proposed to withdraw $213 million from his accounts.

As investigators tell it, Credit Suisse balked at the size of the withdrawal and asked Mr. De Guzman to return the next day. Then, bank officers called the Swiss banking superintendent, who called the finance minister, who at a party that evening cornered other members of the Federal Council, the country's executive.

Mr. Marcos later tried to withdraw the De Guzman letter. "Whatever authority or power of attorney which Mr. Mike De Guzman may be using to represent me . . . I hereby declare null and void," he wrote the bank. But he acted too late: Switzerland froze the accounts, where most of his fortune is believed hidden, and invited the surprised government of President Corazon Aquino to petition for its return.

Mr. Marcos's fall from power began with a stolen election a year ago and ended, ignominiously, when he fled his outraged people 18 days later. For a time, Mr. Marcos's own greed and the ire of governments that once supported him seemed to promise that the fortune he had stolen would be quickly returned to the national treasury and that the economy he had subverted would be just as quickly returned to honest hands. But so carefully hidden is Mr. Marcos's wealth that investigators still can only guess at its size. Some of his investments may never be found because they are adroitly disguised and buried in layers of ownership. Some of the cases being prepared against him may never come to trial because they are politically troublesome. Marcos loyalists remain entrenched in the government bureaucracy and can stymie the investigation, and they are so powerful in business that they still largely control the economy.

When Mr. Marcos fled last February, he left behind in Malacanang Palace 75 file cabinets of documents, three paper shredders disabled by overuse, and two bonfires that had flared briefly on the fuel of his private correspondence and then faded with his regime.

The Marcos papers tell of Liechtenstein foundations, Netherlands Antilles corporations, Hong Kong money changers and coded Swiss accounts. They include stock certificates for companies nationalized by Mr. Marcos; an adding-machine tape that tots up his $2.3 million "commission" on a shipbuilding contract; and offers of "donations" from Manila businessmen in return for the right to sell sugar, import sardines or build a hydroelectric plant.

There is a careful accounting of $11,210,433 under the heading "Commissions received from Westinghouse 1976-1982." There are jewelry receipts ("to change rubies to real ones $64,000 less 10%," reads a note by daughter Imee Marcos Manotoc) and tantalizing hints of a 500-ton gold sale by Mrs. Marcos in 1982. There are orders to the national bank to move money into a fund to finance the war against a left-wing insurgency -- and withdrawals from the fund for Mrs. Marcos's shopping trips to New York.

The Malacanang papers illustrate how Mr. Marcos looted the country, siphoning off even war reparations from Japan. But for all their startling detail, Mr. Marcos's fortune remains elusive and unlikely to be returned for years.

The central case against Mr. Marcos charges him, his wife and children, and 25 other people with graft and corruption. The complaint is so broad that it covers much of the economic activity of the Philippines for the past 20 years. But more troublesome, it is a criminal case, and Mr. Marcos would have to be brought home if he is to be tried. Mr. Marcos and Mrs. Aquino bluff about his return. He says he yearns to come home to defend himself, but his passport has been lifted, and besides, he says, he is being held prisoner by the U.S. She says a Filipino doesn't need a passport to return, and besides, the U.S. and the Philippines don't have an extradition treaty.

But Mr. Marcos faces almost-certain conviction in a court armed with 20 years of evidence in his own handwriting, and Mrs. Aquino fears that simmering Marcos sentiments could ignite if he returned. Even so, only by filing a criminal case in Manila can the Aquino government petition Switzerland for return of the Marcos holdings there, and nowhere are the stakes greater than in Switzerland.

Two hours after Mr. Marcos fled Malacanang, Joker Arroyo, Mrs. Aquino's executive secretary, entered the former president's fetid bedroom and found the bank records that set off the paper chase to recover his fortune. Mr. Marcos claimed a net worth of $60,000 - - half of it in law books -- in his 1966 tax return, filed his first year in office. In two decades as president, he received an additional $250,000 in salary.

But the Malacanang papers included account statements for eight Swiss banks and 15 trusts into which Mr. Marcos poured a fortune. Among them, for example, two trusts called the Wintrop Foundations had bond portfolios worth $25.9 million. Two more, the Avertina Foundations, had cash accounts worth $115.5 million. And the Valamo Foundation, with Getty Oil, General Dynamics and International Business Machines bonds among its holdings, was worth $65.5 million.

Mr. Marcos's Manila lawyer, Rafael Recto, calls the Swiss bank records "forgeries" planted to incriminate the former president. Mr. Recto also says, in an unusual defense, that Mr. Marcos accumulated his money honestly but was a tax cheat: He vastly understated his net worth in 1966, then paid back "hundreds and hundreds of thousands of pesos" in a tax amnesty that he declared later.

That argument isn't likely to convince the Swiss. Largely because of pressure from U.S. prosecutors chasing drug pushers and money launderers, Switzerland eased its bank-secrecy laws last year to allow foreign governments access to a depositor's bank records if they suspect the money was accumulated illegally. Based on the Philippines' criminal case against Mr. Marcos, Swiss magistrates recently ordered the banks to open their records to Philippine prosecutors. Mr. Marcos has appealed the rulings and probably will take the case to the Swiss supreme court. So new and untested is the Swiss law that the Filipinos aren't sure of getting the money even if the courts rule for them.

Certainly, the banks will disclose the size of Mr. Marcos's deposits. A Philippine-government case filed against the Marcoses in California estimates their Swiss holdings at $1.5 billion, but "that's only a floor price," says Severina Rivera, who is coordinating the Philippines' recovery efforts in the U.S.

Whether the Swiss banks also turn over the money or, instead, wait for a judgment in the criminal case "isn't clear," says Abram Chayes, a Harvard professor advising the Philippines on international law. What is clear is that if the Swiss demand a judgment, the Aquino government faces a dilemma: Should it risk its political stability by trying Mr. Marcos or its financial recovery by abandoning his fortune?

Meanwhile, recovering the Marcoses' other overseas assets requires that the Filipinos also try the couple on civil charges. Foreign courts are loath to get involved in enforcing another country's criminal laws; instead, they want a Philippine civil-court ruling against the couple before they order Mrs. Marcos's Picassos, say, returned to Manila. But the path to a civil judgment is at least as tortuous as a criminal case.

Imelda Marcos liked nice things. She took 408 pieces of jewelry into exile with her, including a bracelet and earrings appraised at $1.5 million by U.S. customs agents who seized them. Sotheby's once canceled a two-day art auction when Mrs. Marcos bought the entire collection with a $6 million check -- and then tried to buy the apartment where it was kept. The Philippine solicitor general says the Marcoses bought 11 prime New York office buildings, plus houses in New Jersey, Manhattan, Long Island, Los Angeles, Hawaii, Cancun and Rome.

In their first action to recover that haul, the Aquino government in December sued the Marcoses to get back four of the New York office buildings. Mr. Marcos doesn't have to be in court, or even in the country, to be tried on civil charges. But if the former president is kept from the courtroom because his passport has been lifted or if he can't call witnesses because they, too, are in exile, U.S. courts might decide that he didn't receive a fair trial, and they could refuse to recognize the judgment.

"You have to give the guy an opportunity to defend himself, but how do you do that in a case like this?" Harvard's Mr. Chayes asks. Mrs. Aquino's solution is to authorize a special anti-graft court hearing the case to hold sessions in Hawaii. Even then, the case will be far from settled.

Only a U.S. court can decide who really holds title to property in the U.S., and all the Marcos buildings were bought through tiers of offshore holding companies. The Marcoses bought a 71-story office building at 40 Wall St., for example, through a Netherlands Antilles corporation whose shares are held by three Panamanian concerns, Philippine prosecutors contend. The Panamanian companies, in turn, issued blank or "bearer" shares -- whoever holds the shares owns the company -- and the holder of those shares is now "unknown," the Philippine suit concedes.

Not all the Marcoses' property is outside the Philippines, of course. Just 26 days after Mr. Marcos fled, Jose Y. Campos, a Chinese who changed his name to blend into Philippine society, surrendered to the Aquino government 2.2 billion shares of stock that he said he held for Mr. Marcos and a list of real estate that fills a nine-page computer printout. Moreover, Mr. Campos described how he set up and ran at least 34 businesses for Mr. Marcos, and the confession helps explain how the former president milked the economy.

Pressed by Mr. Marcos to give him shares in the Campos-family drug company, Mr. Campos said he hit on a solution: He created new companies for the Marcoses instead. "It was my policy," Mr. Campos says in a sworn statement, to deed the new company to an owner whose name was left blank-again, giving it to whoever held the paper.

Then, he would "deliver the original copy to the former president" and manage the business for him. That meant little more than collecting rents and dividends, investigators say: The new concerns were only holding companies for the vast tracts of land and huge stock portfolios that Manila businessmen surrendered to Mr. Marcos in return for his favors. Mr. Marcos ruled by decree after he declared martial law in 1972: He issued import licenses, granted trading monopolies, awarded government contracts, authorized bank loans -- and, in return, took a cut of a favored company's assets. An out-of-favor company might have its loans called, making it vulnerable to foreclosure and a cheap takeover. Or it might be confiscated: Mr. Marcos appropriated a television station and gave it to his law-school fraternity brother, a government motion contends.

Ruling by decree also gave Mr. Marcos one-man control of the treasury. For a decade, there weren't any budget hearings, and even after the national assembly was restored, military spending was secret. In an affidavit to be filed in another civil case, a Philippine National Bank auditor describes how he moved $21 million to accounts that government lawyers contend were Marcos- controlled. The money was either "absorbed" -- written off -- or "satisfied" with treasury warrants, IOUs payable by the central bank.

The Aquino government's main tool in recovering the Philippine assets of the Marcoses and their friends is sequestration, which allows it to seize and manage property while the courts determine who its real owners are or whether it was bought with money stolen from the treasury. Thus, the government already has seized 295 companies, $87 million in Philippine currency, Philippine real estate appraised at $44 million, Philippine stock with a par value of $50 million, 42 airplanes and helicopters, and 15 ocean-going ships -- plus 33 houses that Mrs. Marcos built around the country and Mr. Marcos's $5.5 million yacht, the President.

But the government isn't likely to be able to return many of the seized companies to their rightful owners or sell them to honest entrepreneurs. Under its new constitution, it must file a court case on each seizure within six months -- and it hasn't nearly enough prosecutors for the job.

Then, too, in an economy hobbled by years of corruption and weak world commodity prices, who would buy the confiscated companies? "The only people with money are the cronies," laments Mr. Arroyo, Mrs. Aquino's executive secretary. "We'll be putting the economy back in their hands" if the government sells them assets seized from other cronies only months before.

The possibility that the Aquino government will uncover all the businesses owned by the Marcoses and their friends is even more remote. Mr. Marcos held most of his companies, property and shares either through blank deeds or in the names of cronies; they, in turn, had up to a dozen nominees each. "If we have to clean up all the companies Marcos tainted, we'd have to go after 60% to 70% of the economy, maybe more," says Feliciano Cruz of the Commission on Good Government, which Mrs. Aquino appointed to find and recover the Marcoses' hidden wealth.

Meanwhile, Mr. Cruz, who is the commission's chief investigator, has a staff of 28, including secretaries and drivers. "The investigators you could count on your fingers," he says. His office has just acquired a minicomputer to organize its mounds of evidence.

The search isn't helped by the Philippines' chaotic record keeping. Property records, for example, are kept on the city and village level and are filed by title number; they aren't computerized or cross- referenced by owner. The Philippines' Securities and Exchange Commission files corporate charters according to the date they are registered, not by corporate officers or major shareholders.

Both the securities commission and the Bureau of Internal Revenue, long staffed by Marcos appointees, said computer problems destroyed some of their records right after the 1986 revolution. So investigators are digging through warehouses for paper copies of tax returns erased by the computer. Similarly, Aquino-appointed managers of the state oil company found that about 75% of the concern's records had been destroyed.

In addition, the Philippines' bank secrecy is proving tougher to crack than Switzerland's. Many Philippine banks are teetering, and an order to open their records to investigators could cause fatal runs on deposits, the government fears. Investigators can freeze an account only if they know its number; they can see what is in it only if they file a case against the depositor.

Moreover, not all foreign governments have been as willing to help as the Swiss. In a 1977 letter to Mr. Marcos, Baltasar Aquino, then the minister of public works in the Philippines, pledged his loyalty and silence to the former president, "on my life." Then, Mr. Marcos fell from power, and Mr. Aquino (who isn't related to President Aquino) changed his mind. Government lawyers say Mr. Aquino told them that Mr. Marcos opened and fattened his Swiss bank accounts with kickbacks from Japanese war reparations. Mr. Aquino knew this, he added, because he himself collected and deposited the money.

Japan paid its World War II reparations for more than 20 years in the form of big public-works projects. And from the Malacanang papers, Mr. Marcos clearly seems to have collected a 10% to 15% commission on each project. Indeed, on a Malacanang summary of one billion yen of road-building contracts with five Japanese companies, someone in the palace printed across the bottom: "We get 10%."

But Jovito Salonga, the chairman of the Commission on Good Government, says the Japanese have been "reluctant" to help with an investigation, and Mrs. Aquino, who needs Japanese aid, seems equally reluctant to ask.

Filipinos cite a clear reason: Kakuei Tanaka, who was Japan's prime minister while the Philippine kickbacks would have been made, still is politically powerful in the ruling Liberal-Democratic Party even though he was forced from office in the Lockheed Corp. payoff scandal years ago. The long delays in the Marcos investigation, and the realization now that pots of gold won't arrive any time soon, have damped even Philippine interest. For a time, investigators were swamped with tips about a Marcos bank account here, a tract of farmland there.

But tips have largely "dried up," says Ms. Rivera, the Washington lawyer. So the government has begun offering rewards: It will pay a tipster 10% of anything it recovers under $1 million, 7.5% of anything above that. And the Malacanang papers hint of plenty still to find.

Mrs. Marcos's receipts, carefully filed in the palace, suggest that she bought fabulous collections of art, jewelry and antiques in the U.S. -- and they never have been found. In April 1982, for example, she bought an especially nice pair of sapphire earrings from Van Cleef & Arpels Inc. in New York. However, they weren't among the things she carted into exile or among the 2,142 pieces of jewelry she left behind in her Malacanang vault. The earrings cost $1,250,000, and they are missing.

The average income in the Philippines, meanwhile, is $585 a year.