Manny Villar, JV Ejercito linked to offshore accounts

By Roel Landingin and Karol Ilagan, Philippine Center for Investigative Journalism

Posted at Apr 05 2013 08:34 AM | Updated as of Apr 05 2013 06:07 PM

(Last of Two Parts)

MANILA -- Senator Manuel ‘Manny’ B. Villar Jr. and Congressman Joseph Victor ‘JV’ G. Ejercito belong to rival political coalitions jostling against each other in the run-up to the May 2013 national and local elections. Villar’s wife Cynthia is running for senator with President Benigno Aquino III’s Team PNoy while Ejercito is part of the senatorial slate of the United Nationalist Alliance (UNA) led by Vice President Jejomar ‘Jojo’ Binay.

Relations between the two political clans are tainted by some degree of rancor owing to Villar’s leading role in the impeachment and eventual ouster of Joseph Estrada, Ejercito’s father, from the presidency in 2001.

But in one important respect, the 63-year-old Villar and the 43-year-old Ejercito are pretty much alike. Both businessmen-politicians own secret offshore corporations in the British Virgin Islands (BVI), a privacy and tax haven where a global elite of wealthy people like to keep their money away from the prying eyes of the authorities.

A year-long multi-country investigation by the Washington, D.C.-based International Consortium of Investigative Journalists (ICIJ) has resulted in a partial list of more than 500 mostly private Philippine residents with ties to offshore corporations.

Villar and Ejercito (and Imee Marcos Manotoc, who was the subject of an earlier ICIJ/PCIJ story), who are on the list, stand out because of their prominent political role. But there are also at least a couple of former public officials who were either owners or officers of offshore corporations while they were in government service.

To be sure, owning or managing offshore corporations or trusts in tax havens is perfectly legal in the Philippines. To defenders of offshore centers, these places are not necessarily about illicit activities but about legal and tax neutrality for international joint ventures. Compared to incorporating the joint venture in one of the investors’ home country, setting it up in an offshore haven does not give advantage to any of the investors. This also minimizes taxes on the joint venture itself, leaving it to the investors to pay taxes based on tax regulations of their respective home countries.

Offshore downside

Yet, offshore corporations and trusts remain controversial worldwide because they are sometimes used to hide illicit wealth and income from corruption, tax evasion, and shadowy economic activities. Many rich Western countries, under pressure to boost tax collections to curb the rapid growth in public debt from bailing out banks in recent years, have pressed offshore financial centers to share more information on rich country residents with accounts in so-called tax havens such as British Virgin Islands, Cayman Islands, and others.

In 2009, the G20 grouping of the world’s biggest economies announced its aim to bring about the “end of bank secrecy” as it stepped up moves to get offshore centers to sign up to higher standards of transparency and exchange of information on tax matters.

In low-income countries such as the Philippines, international experts are saying that funds kept offshore by the wealthy elite could be holding back economic development as vital financial resources are stashed abroad rather than used to build up domestic infrastructure and productive capacity.

James Henry, a former McKinsey & Co. chief economist who now works with the Tax Justice Network, a non-government organization campaigning against tax havens, estimated that the stock of flight capital out of the Philippines reached $97 billion as of 2010. That is more than the country’s external debt of only $60 billion that year as estimated by the Bangko Sentral ng Pilipinas.

Though they may not breaking any laws per se, politicians and public officials with ties to secret offshore corporations are regarded rather dimly by advocates of good governance.

“The intention is to hide the transactions or hide their income so they made use of tax havens or places where there are no rules on transparency,” said Milwida Guevara, a former undersecretary at the Department of Finance and one of the founders of the Movement for Good Governance, a civil society organization.

“It’s hypocritical that they are sponsoring legislation that calls for faithful compliance with laws. At the same time, they are themselves trying to get away with it,” says Guevara.

The ICIJ investigation, of which PCIJ was part, found that Villar is the beneficial owner of a BVI international business corporation called Awesome Dragon Holdings Limited. It was incorporated in the BVI on July 26, 2007 while he was president of the Senate.

Villar served as Senate president from July 2006 to November 2008.

The ICIJ investigation also found that Ejercito is a director of a BVI company called Ice Bell Properties Limited formed on July 8, 1999, when his father was still president. Ejercito was then a nominee to Congress of the Kabataan ng Masang Pilipino, a party-list group affiliated with his father’s Partido ng Masang Pilipino.

He eventually declined the nomination after a tweaking of the rules that helped KAMPI qualify for a House seat proved too controversial for him. Two years later, in 2001, he became mayor of San Juan City, Estrada’s political bailiwick.

Varied reactions

In a written reply to PCIJ’s questions, Villar admitted to being the “ultimate shareholder” of Awesome Dragon Holdings Limited but said it was a dormant company with a capital of just one US dollar. He said it was put in place in 2007 “as a ready corporate vehicle for any strategic multinational business opportunity that may become available.”

“I am indicated as owner of said company because we were informed that if a company wants to incorporate as a subsidiary-company in the British Virgin Islands, said company is required to identify the natural person or persons who is/are the ultimate shareholder/s of said company.”

He said: “While having a BVI company may be abused by some, there is actually nothing sinister about owning one, especially this company that was never used and has a capital of only a single dollar. This is being done by big companies worldwide.”

The senator, who is one of the country’s richest lawmakers, said Awesome Dragon Holdings Limited was not activated because he decided to focus all his entrepreneurial efforts in the Philippines. “As a businessman and eventually as a public official, I am proud to say that I invested heavily in the country economic-wise and generated employment opportunities for Filipinos,” he said.

But that was also the wise course of action to take, given the onset of the global financial crisis just a year after Villar set up his offshore corporation. Whatever opportunities abroad were available in 2007 evaporated the following year with the collapse of Lehman Brothers and the stock market meltdown in rich Western countries.

Still, contrary to Villar’s statement, the offshore company remains “active,” based on a check made by the PCIJ on Tuesday, April 2, 2013, with the government Financial Services Commission’s Registry of Corporate Affairs in the British Virgin Islands.

To maintain its active status, annual payments of at least $2,200 are being made to the BVI government and Portcullis Trust Net Limited by or on behalf of Awesome Dragon Holdings Limited, according to documents acquired by the ICIJ. The offshore company has an authorized capital of $50,000, implying that the issued capital of only $1 can be quickly raised to as much as $50,000 if needed.

Ejercito, for his part, did not confirm or deny his directorship in Ice Bell Properties Limited. Instead, he raised questions about the timing of this story, which, he said, “is highly suspicious considering the on-going electoral campaign of which I am one of the leading contenders among the UNA senatorial candidates.”

He added that it brought back “the sad memories of 2001 when I was accused of owning a house inside the posh Forbes Park, which actually was owned by relatives of the Sultan of Brunei, and false accusations of other supposed business assets that did not belong to me.”

Ejercito wrote: “I have held high respect to (sic) the PCIJ as an institution. I hope that you will not allow yourself to fall in (sic) the manipulative efforts of desperate people in (sic) dirty politics.”

Not in SALNs

Both Villar and Ejercito did not report their links with their respective offshore companies in their annual Statements of Assets, Liabilities, and Net Worth (SALNs), copies of which were gathered by PCIJ.

As public officials, Villar and Ejercito are required by law to list all their assets, liabilities, business interests, and financial connections, including those located in other countries, in their annual SALN.

In addition, the Philippine Constitution requires that “members of the Senate and the House of Representatives shall, upon assumption of office, make a full disclosure of their financial and business interests.”

Villar was a three-term member of the House of Representatives from 1992 to 2001, during which he was House Speaker from July 1998 to November 2000. Since 2001, he has sat at the Senate; his second term is expiring in June 2013. Villar ran for president in May 2010 but lost.

Ejercito was a three-term mayor of San Juan City. He became a freshman congressman in 2010, with his term ending middle of this year, too.

PCIJ was able to gather copies of Villar’s SALNs from 1992, when he was first elected member of Congress, to 2011, the latest available.

The documents show that his net worth, consisting mainly of investments in shares of stocks and other marketable securities, grew steadily from just P75.4 million in 1992 to a peak of P1.05 billion in 2008, the year after his family’s public holding firm, Vista Land and Lifescapes Inc., was listed in the stock exchange. Villar’s net worth fell to P947.9 million in 2009 and again to P725.2 million in 2010, when he made an unsuccessful run for the presidency, but it climbed to P854.2 million the following year.

Villar disclosed his business interests and financial connections in at least nine family-owned and publicly listed companies, including Adelfa Properties Inc., Fine Properties Inc., Hollinger Holdings, M.B. Villar Co. Inc., Macy’s Inc., Manuela Corporation, Mooncrest Property Development Inc., Philippine Long Distance Telephone Co., and Sun Life Financial, the insurance company. Awesome Dragon Holdings, however, was never mentioned in any of SALNs Villar filed after the offshore corporation was formed in July 2007.

In his reply, Villar said Awesome Dragon Holdings Limited does not appear in his SALN because it is owned by Fine Properties Inc., which he has already reported in his annual asset disclosure statements. “I do not own it – it is owned by Fine Properties Inc.,” he said.

As for Ejercito, his SALNs from 2001, when he began his political career as San Juan City mayor, to 2009, the year for which the latest copy is available, show his net worth steadily growing through the years. From P53.3 million in 2001, when he was only 32 years old, Ejercito’s net worth rose to a high of P64 million in 2009.

Ejercito disclosed a fairly detailed list of his business interests and financial connections in over two dozens of family-owned and publicly listed companies. But Ice Bell Properties Limited does not appear in any of Ejercito’s available SALNs.

In his written reply to PCIJ, Ejercito did not squarely address the question why Ice Bell Properties Limited is not mentioned in his SALN. He merely said: “To the best of my knowledge, I have truthfully and accurately declared all my assets, liabilities, and net worth in my Statement of Assets, Liabilities and Networth (SALN) since 2001 when I became Mayor of San Juan and up to the present, that I am now a member of the House of Representatives.”

Offshore details

Though Villar said that Fine Properties owns Awesome Dragon Holdings Limited, the Villar family’s private holding company does not appear as shareholder or officer of the offshore corporation.

Records maintained by Portcullis Trust Net Limited, the offshore servicing company that was instrumental in incorporating Awesome Dragon Holdings Limited in the BVI, list a certain Nicole Wheatley as incorporator, Execorp Limited as director, and Sharecorp Limited as shareholder. All appear to be nominee directors linked to Singapore-based Portcullis Trust Net, whose business is to help high-net-worth individuals set up offshore entities.

The master client, the party that introduced Villar to Portcullis, was UBS AG (Hong Kong), a unit of UBS AG, the underwriter for the initial public offering in 2007 of Vista Land and Lifescapes Inc., the publicly listed holding firm of the Villar group of companies. UBS also underwrote some of Vista Land’s US dollar borrowings in the next few years after 2007.

Indeed, the incorporation date of Awesome Dragon Holdings Limited in the British Virgin Islands — July 26, 2007 — is the same day that shares sold in the Vista Land IPO were listed at the Philippine Stock Exchange in Manila. Two days before, UBS AG, the international underwriter, reported it had raised $535 million from an international offering of Vista Land shares, according to BusinessWorld newspaper.

The listing of Vista Land, and the subsequent rise in the stock’s market capitalization, helped boost the market value of Villar’s financial assets.

In 2007, Villar’s net worth soared to $940 million, making him the Philippines’ fifth richest person that year, from only $110 million and a ranking of No. 24 the year before, according to Forbes magazine, which publishes an annual ranking of the world’s wealthiest people.

Villar passport

While Fine Properties gets no mention in documents and records of Awesome Dragon Holdings maintained by Portcullis Trust Net, Villar is listed as “beneficial owner” in the data sheet of the offshore corporation.

His ties to the offshore company are also apparent from the due diligence documents submitted by UBS AG (Hong Kong) to Portcullis Trust Net. In a September 5, 2007 letter to Portcullis with the subject heading “Re: Manuel Bamba Villar (‘the Client’),” UBS AG (Hong Kong) certified that Villar was a client of good standing of the bank since 1999 and confirmed his residential address.

Attached to the letter was a certified true copy of an image of the main page of Villar’s passport with a handwritten note stating “Re: BVI Co – Awesome Dragon Holdings Limited.” It was signed by Linda Chew, UBS AG (Hong Kong) executive director at that time.

While Villar said Awesome Dragon Holdings is dormant, Portcullis Trust Net records show that payments for nominee services, annual renewal, and other services by or in behalf of Awesome Dragon Holdings were made not just in 2007, but also in 2008 and 2009.

The payments presumably continue until now because Awesome Dragon Holdings Limited remains “active” according to a check made by PCIJ with BVI authorities two days ago.

JV is sole director

Like Villar, JV Ejercito’s name also appears in the documents – he is listed as the sole director of the offshore company called Ice Bell Properties Limited. Records gathered by the ICIJ show the same San Juan city residential address that Ejercito wrote in his 2001 SALN.

Ownership, however, is lodged in a single-bearer share, which means no record of ownership is maintained by the company. Rather, ownership rests with whoever is in possession of the bearer instrument at any given time.

Ejercito’s Ice Bell Properties was incorporated in the BVI in July 1999, a time when he was overseeing a business conglomerate of close to 30 companies, including almost a dozen founded by his mother Guia Gomez, one of Estrada’s wives who is now the re-electionist mayor of San Juan City.

PCIJ checked with BVI authorities and found that Ice Bell Properties remains “active” as of last Tuesday, April 2, 2013.

Among Ejercito’s companies was Best World Construction Corp, an affiliate of BW Resources Corp., the gaming company that lay at the heart of a giant stock-price manipulation scandal that rocked the local bourse in 1999.

That scandal was included in the impeachment charges against Estrada the following year. Ejercito, however, has denied any ties with BW Resources Corp, saying he divested from Best World Construction Corp. when shareholders of its parent company decided to go into the gambling business.

‘Not proper at all’

Alan Ortiz, a veteran official who served in various government posts, including the National Security Council, Development Bank of the Philippines and the Build-Operate-Transfer (BOT) Center, meanwhile readily admitted that he formed Windsor Star Consultants Limited while he was president of the state-owned National Transmission Corp. (Transco). Like Villar and Ejercito, Ortiz appears in the ICIJ list of Filipinos who have links to offshore corporations.

In an emailed response to queries from PCIJ, Ortiz confirmed that he was the sole shareholder and director of Windsor Star Consultants Limited, which was incorporated in the BVI on May 6, 2004. It lasted just four years as it was stricken off in November 2008 due to non-payment of fees.

Ortiz, however, was Transco president from March 2003 to September 2006, which meant he was still with the state firm when he set up Windsor Star Consultants. Transco ran the national power grid before it was privatized in January 2009.

In an emailed reply to PCIJ regarding Windsor Star Consultants, Ortiz said that he was “referred by a friend to a Hong Kong company that specialized in such off-the-shelf offshore companies.”

He added, “These friends and their associates thought they could generate business with Transco so they advised me to open the consultancy. They were wrong. All transactions under my watch at Transco were above board and no irregular and illegal transactions were obtained.”

But he also said, “From the very beginning, I realized that it was not proper for an official of a public company to have such an account. As a result, the account was never active and simply acted as a repository of my private savings.”

Records and documents gathered by ICIJ showed that the master client for Windsor Star Consultants was Jose P. Leviste Jr., who was then chairman of Oceana Gold (Philippines) Inc., a position he held from 2003 to 2005, and from 2007 to the present. Like Ortiz, Leviste worked for some time with the government before moving to the private sector.

After it was incorporated, Windsor Star Consultants Limited became a shareholder and director in Dragon Partner Investment Limited formed on May 18, 2004 along with other Leviste family members.

Learned from Leviste

In a subsequent email, Ortiz said Leviste was indeed the friend mentioned who advised him to create the offshore company with an eye toward doing business with Transco. Ortiz wrote, “Joey was my first boss after I graduated from college in 1975. We had always talked about doing business together and these consultancies seemed to be the right vehicle for doing this at that time. Neither of us were (sic) aware of the moral or legal implications of such a partnership at that time.”

Ortiz, however, said that they never got around to developing a business for the offshore consultancy with Transco. “None whatsoever,” he wrote. “Not even an attempt. We both got very busy in our respective responsibilities.”

Leviste did not respond to PCIJ’s letters, sent by email, fax and surface mail, requesting comment.

Jesus Alcordo, who took various energy-related government jobs in the early to middle 2000s, was another official revealed by the ICIJ list as having held a government post while maintaining links with an offshore company. Alcordo was president of the state-owned National Power Corporation from February 2001 to 2002, an advisor to the Department of Energy in 2002, and a commissioner of the Energy Regulatory Commission from October 2003 to July 2006. While in the ERC, he became a director in the offshore company Pentergy Limited in November 2005.

Pentergy was formed on October 27, 2005 in Labuan, Malaysia, an offshore financial center off Borneo Island, with Liau & Co in Singapore as master client. The shareholders of Pentergy Limited, included Portcullis Trustnet (Labuan) Limited and Super Class Development Limited. The directors were Gurker Sdn Bhd and CorpDirect Ltd. All were apparently nominee shareholders and directors being hired out by Portcullis Trustnet for an annual fee to shield the identity of the real owners and officers of Pentergy.

Alcordo, who had worked with Salim Group in Indonesia since 1985 and represented the group in some of their investments in the Philippines, said he was asked by his former boss in the Salim Group to be a director in Pentergy Limited sometime in 2005. Though he was already a full-time ERC commissioner then, he said he agreed, on advice of his lawyer, because Pentergy was based abroad and was meant to look for business opportunities in other countries, not the Philippines.

“It was outside, there was no activity in the Philippines,” Alcordo told the PCIJ in an interview. “There was no transaction at all inside or even outside (the Philippines).”

He added he did not report his ties with Pentergy in his SALN because he did not invest anything with the offshore company and was not receiving any payments or dividends from it.

“What I remember about the company (is that) I would receive certain documents every year just to certify meetings and so forth,” Alcordo said. “But it was just a shell company. There were no transactions and really I had no investment and I did not receive any compensation at all.” — With additional reporting by Malou Mangahas, PCIJ, April 2013