Cojuangco’s victory

Eduardo “Danding” Cojuangco Jr. and San Miguel Corp. (SMC) stand to earn a staggering P91.8 billion out of the coconut levy fund courtesy of the Supreme Court. This includes the 20-percent SMC shares worth P58.8 billion plus P33 billion from the conversion of SMC common shares to preferred shares. Meanwhile, the coconut levy fund’s true owners—the government and the coconut farmers—are left with only P56.5 billion. And if the United Coconut Planters Bank (UCPB) and Coconut Industry Investment Fund (CIIF) succeed in their attempt to “recover” P15 billion out of the P56.5 billion, then the true owners and beneficiaries will get only P41 billion.

The struggle to recover the coconut levy fund was initiated by peasant organizations way before the downfall of Ferdinand Marcos or the 1986 People Power Revolution. For instance, the Alyansa ng mga Magsasaka sa Industriya ng Niyog launched a campaign in Quezon in 1979 while the Asosasyon Pagpanghikawas sa Industriya sa Lubi started its own in Mindanao in 1982.

The total coconut levy resources to be recovered are the 51-percent SMC shares and the four major coconut-levy-funded corporations—UCPB, CIIF Oil Mills Group of Companies, CocoLife and Cocochem. The 51-percent SMC shares are categorized into three: 27 percent, 20 percent and 4 percent.

In its January 2012 ruling, the Supreme Court declared that the 27-percent SMC shares are owned by the government in trust for the coconut farmers. These comprise 753.85 million shares, which are currently held by 14 holding companies. Meanwhile, the 4-percent SMC shares are now sequestered treasury shares.

Last March 27, the high court ruled that the 20-percent SMC shares belong to Cojuangco. These comprise 494.88 million common shares valued at P58.8 billion at the current price of P119 per share.

The clear winners in the high court’s rulings are Cojuangco and SMC, who stand to also earn P33 billion from the 27-percent SMC shares. This became possible because in September 2009, the Supreme Court then headed by Chief Justice Reynato Puno agreed to the Arroyo administration’s proposal to convert the 27-percent SMC common shares to preferred shares. The proposal also stipulated that SMC will have the exclusive option to redeem and purchase on the third year (i.e. in 2012) the 27 percent, or the 753.85 million SMC shares, at a fixed price of P75 per share instead of at the prevailing market price.

Because of this stipulation, the government will get only P56.5 billion from the sale of the 753.85 million shares instead of P89.7 billion had these shares been sold at the prevailing market price. Hence, if Cojuangco and SMC now decide to sell or unload these shares at a current market price of P119 per share, they will obtain a price differential of P44 that will earn them a hefty sum (or balato) of P33 billion.

Incidentally, Puno now sits as a member of the SMC board.

But this is not yet the end of the story. Since November 2010, the market price of SMC shares had never dipped below P75. The lowest recorded price per share was P109 in May 2011. In February 2011, the price per share even rose to P180! This would have provided a price differential of P105, which would have earned Cojuangco and SMC a potential windfall of P79 billion. In short, the balato would have been bigger than the original price!

The recovery of the coconut levy resources will not be complete without obtaining control and administration of the four corporations. Unfortunately, it is Cojuangco who now controls these corporations, and this was made possible through the generosity of Malacañang.

The Inquirer headline “New-old UCPB boss alarms coco farmers” (11/15/11) says something about how ineffective the Presidential Commission on Good Government has become in its effort to recover the coconut levy fund and the administration of the four corporations. President Aquino’s two years in office show lack of appreciation of the importance of the coconut levy as an asset reform program. The administration of the four corporations remains in the hands of people who have exploited and profited from the coconut levy fund and acted contrary to the interest of the coconut farmers.

For example, the present manager of CIIF is known to be a friend of Cojuangco and an appointee of then President Gloria Macapagal-Arroyo. He was reappointed by the PCGG and Malacañang. He was one of those officers of CIIF and UCPB who pushed for the conversion of the 27-percent SMC common shares to preferred shares. This conversion turned out to be detrimental to the interest of the government and the coconut farmers. Even the PCGG’s subsequent review of the conversion showed that it was grossly disadvantageous to the government. This finding alone should have been sufficient basis for the PCCG to object to his reappointment.

Back then, this man’s reappointment was initially viewed by coconut farmers as just a fluke—one of Malacañang’s “kapalpakan” in the appointment of public officials. Later, this was suspected to be a systematic handover because UCPB, the administrator and depository bank of the coconut levy fund, was entrusted to Cojuangco’s lackey. This man’s performance as a former chair of UCPB prompted the coconut farmers to question not only his allegiance but also his qualifications. Based on evidence that has surfaced, it now appears that corporate good governance is alien to the newly appointed CEO of UCPB. According to an independent audit report conducted in 2003, this man and other bank officials facilitated the approval of controversial loans to Cojuangco amounting to billions of pesos that had compromised the bank’s financial position.

With this and other appointments, Cojuangco has obtained virtual control of the coconut-levy-funded corporations. Combined with his victory in the major legal battle for the ownership of the SMC shares, it is Cojuangco, and not the coconut farmers, who has fully recovered three major business entities (i.e., SMC, UCPB and CIIF Oil Mills) that were created and funded with the use of the coconut levy money.

The irony in this turn of events is that it happened after the so-called Presidential Task Force on Coco Levy was created by Malacañang. This task force composed of Cabinet officials is assigned to recover the coconut levy fund and protect the interest of the coconut farmers. As things stand now, the task force and the PCGG have succeeded in handing over the administration of the coconut-levy-funded corporations to the wrong camp.

Perhaps perceiving that the “handover” and control of these corporations have been completed, P-Noy has ordered the winding up of PCGG operations, purportedly because “it has already fulfilled its primary mandate of recovering ill-gotten wealth.”  Recovered for whom, may we ask?

Omi C. Royandoyan is executive director of Centro Saka Inc.