The inside story of the raids on Stonehill firms

(Continued from Monday)

CANBERRA—It all started with whistle-blowers.

The P10-billion pork barrel fund embezzlement scandal first broke into newspaper headlines on March 22 when agents of the National Bureau of Investigation raided the unit of Janet Lim-Napoles at Pacific Tower Plaza in Taguig City to rescue Benhur Luy, a key witness in the government’s investigation into the controversial diversion of public funds to Napoles’ group of NGOs.

The raid freed Luy, a former employee of Napoles, from three months of captivity by her starting on Dec. 19, 2012, supposedly to prevent him from revealing further incriminatory insider information on the operations of the JLN Corp. Luy is now in the custody of the NBI under the government’s witness protection program.

More than 50 years ago, a major corruption scandal—the Harry Stonehill case—erupted in Manila. Menhart Spielman, an executive of Stonehill’s group of companies, walked into the US Embassy in Manila on Dec. 9, 1961, to present documents on “serious acts of wrongdoing” by his employer. Spielman betrayed Stonehill after the latter mauled him in a violent altercation over intracompany  matters. Subsequently, Spielman filed  with the Manila City Fiscal a complaint of attempted murder against Stonehill and his business associate, Robert P. Brooks, also an American citizen.

Spielman’s walk into the embassy initiated a chain of sordid and complex events that led to the entanglement of the then newly elected president, Diosdado Macapagal, in Stonehill’s “web of corruption.”

The following narrative traces the deepening involvement of the Macapagal administration with Stonehill. This recollection is based on stories (in my files) that I wrote for the front page of the Manila Daily Bulletin every day for six months as its court reporter. The stories covered the NBI’s raid of Stonehill’s 27 business establishments on March 2, 1962, up to his deportation in August 1963.

This recollection is amplified by the authoritative 125-page book, “The Rise and Fall of Harry Stonehill in the Philippines” (1989) by Lewis E. Gleeck Jr., consul-general of the US Embassy at the time of the controversy. This recapitulation of the Manila Daily Bulletin series of articles on the Stonehill case serves to describe the milieu under which the Philippine political and judicial systems responded to the most critical challenge posed by corruption to Philippine democracy in the first three decades of the postwar years.

Early morning Saturday of March 2, 1962, President Macapagal’s Justice Secretary Jose W. Diokno called asking me to go to the NBI headquarters on Taft Avenue. “I have a big story,” he said. “Don’t delay.” I jumped out of bed. When I arrived at the NBI, three other reporters covering the courts from the major dailies (the Manila Times, Manila Chronicle, and Philippines Herald) were already there. At the time, newspapermen (that’s what we called ourselves, not the pompous title “journalists”) did not cover events in packs, unlike the way multimedia journalists do it today.

After I went through the iron-grilled main gate of the NBI, it was locked behind us. Diokno and Col. Jose Lukban, the NBI director, told us: “NBI agents are raiding the offices of Harry Stonehill. You are not to leave the building until the raids are over. You can’t use the phone, even to call your homes. The doors are locked. You have to spend the night here.”

Inside the building, we found that we were not the only ones impounded, ostensibly to prevent leakage. In other rooms, government prosecutors and justices were busily typing out search warrants. Honorio Poblador Jr., lead lawyer of Stonehill, would denounce the raids as a huge “fishing expedition.”

“The warrants were couched in such broad terms that the raiding party could just haul off anything on the premises,” Poblador told us in a press conference after the raids. The warrants “didn’t specify the papers, documents or things to be searched or seized.”

The warrants authorized the search and seizure of “books of accounts, financial records, vouchers, journals, correspondence, receipts, credit journals, typewriters, and other documents or papers showing all business transactions, disbursement receipts, balance sheets and related profit and loss statements.” According to Gleeck’s book, Stonehill protested: “They even took away my love letters to my wife, written 11 years ago. My wife (a Filipino) kept them all these years for sentimental reasons. My wife pleaded they be returned. But they have not.”

Armed with the warrants, the NBI teams raided the offices of Stonehill firms, among them Republic Real Estate Corp., Universal Trading Corp., Industrial and Business Management Corp., Philippine Tobacco Flue-Curing and Redrying Corp., US Tobacco Corp. and Republic Glass Corp.

Stonehill was about to leave his office in Ramon Magsaysay Building on Roxas Boulevard to join his poker cronies at Wack Wack Golf and Country Club on Saturday afternoon when the NBI teams arrived. Stonehill told Gleeck later that the agents wanted to talk to him at the Department of Justice, and he went along. It was supposed to be a “short meeting” with Diokno.

Instead, the agents took him to the NBI headquarters where he was fingerprinted and photographed—ordinary procedures in the Philippines—and “treated like an ordinary criminal.” He was detained for three days in a “rat-infested cell” that was “bugged throughout for the slightest sound,” according to Stonehill.

It was in Stonehill’s office in the Magsaysay building that NBI agents seized the “blue book” containing the list of officials who allegedly received bribes from him. (Concluded on Friday)