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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

AsiaweekTimeAsia NowAsiaweek story

FEBRUARY 4, 2000 VOL. 26 NO. 4

Accusing the President
Allegations of meddling by Estrada stir up Manila
By RICARDO SALUDO and ANTONIO LOPEZ Manila


Struggling to improve his sagging popularity, Estrada finds his efforts hobbled not just by economic bumps but also by increasing anti-government arrest Anastasia Vrachnos
If it is true - a gigantic if - it would be the most revealing and disturbing sign yet of how Philippine President Joseph Ejercito Estrada uses his clout to help people close to him. In the afternoon of Jan. 19 at the Philippine Stock Exchange auditorium in suburban Pasig, the head of the Securities and Exchange Commission, Perfecto Yasay, alleged before the Senate banking committee that Estrada told him on the phone to exonerate businessman Dante Tan, a friend of the president's. Tan was among those being investigated by the SEC for possible stock manipulation in the trading of BW Resources, a gaming firm whose stock went on a wild roller-coaster ride last year (see story page 32).

"I am under oath, and I will have to fully disclose everything," Yasay began his testimony at the Senate hearing, part of the drafting process for a new securities law. Opposition Sen. Raul Roco, chair of the banking committee, replied: "Even if you are not under oath, you should tell the truth." Yasay then said: "Soon after I ordered the investigation of BW, I got a call from the president telling me, complaining [about] why I was investigating. I told him it was my job. I told him that our task of investigating was, in fact, reinforcing the responsibility of the president and making sure that the Philippines is going to be an attractive investment haven. And so he left it at that. I continued with my direction to have the SEC's PED [prosecution and enforcement division] investigate. Then the president calls me up again and tells me to immediately terminate the investigation."

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"And you did?" the senator asked. Yasay replied: "To be more accurate [about] what he said, he told me to specifically clear individuals insofar as the investigation was concerned." Roco continued: "Ah, yeah? Which individuals?" Yasay: "He specifically gave instructions to clear Mr. Dante Tan." Roco: "Of what?" Yasay: "Of any wrongdoing. Because he [the president] honestly believed that, for one reason or another, Mr. Dante Tan was a victim more than an offender. I told him, 'Mr. President, at this point, the SEC is no longer investigating, because under the self-regulatory set-up, it is now the Philippine Stock Exchange."

Immediately after that revelation, the Senate hearing adjourned. Within an hour, foreign wire services were dispatching stories about what Yasay said. If the allegation is true, Estrada would be open to charges of obstructing justice and graft and corruption, crimes which could constitute "betrayal of the public trust" - a catch-all ground for the president to be impeached and removed from office by Congress. At the very least, Yasay's accusation appears to have dealt a strong blow to Estrada's credibility and popularity, which have been under siege in recent months.

Four hours after his testimony, however, Yasay tried to backtrack. "Is it true that you told the Senate committee that the president ordered you to clear Dante Tan of any wrongdoing?" Asiaweek asked him in an evening telephone interview. "No, it is not true," was his quick reply. "I did not say that the president ordered me to clear Dante Tan of BW. What I said in answer to the question of Sen. Raul Roco was, 'Yes, it is correct that the president called me up on BW. He expressed his view, because he is a friend of Dante Tan, that Dante Tan was innocent, that Dante Tan is more of a victim rather than an offender. That's what he [the president] said. But he never gave me instructions to clear Dante Tan."

"In fairness to the president, I believe he was really expressing his own honest opinion," Yasay continued. "But he never gave specific instructions to pressure me to say that I should clear Dante Tan or that I should clear BW." An hour after talking to Asiaweek, the SEC chairman told the local ABS-CBN television news program: "He [the president] didn't tell me to clear Mr. Dante Tan." But the SEC chief maintained that the president made four calls regarding the BW investigation. "I felt the calls were intended to pressure me," he told the TV network, "but I didn't feel pressured."

That wasn't the end of Yasay's flip-flop. On Jan. 23, Asiaweek asked him why he backtracked on his charges. His explanation: "I didn't want to hurt the president. I have always been polite to him. When I made the Senate testimony, and my testimony was the whole truth and nothing but the truth, I was hurting the president. But I stand by my statement that the president called me to clear Dante Tan, [to] clear BW of any wrongdoing, and to stop the investigation of BW."

With Yasay's on-and-off testimony, readers may be excused for thinking the man is either confused, untruthful or under heavy pressure. His reputation is not exactly sterling. There have been 10 graft cases filed against him, of which he has won seven. In 1998 he was suspended twice while his cases were being tried.

In early December, Executive Secretary Ronaldo Zamora told him the president wanted him to resign, as part of the cabinet revamp. The SEC chief countered: "No matter how you sugarcoat the matter, the perception is that the president wants me to resign because of the pending investigation of BW." He bargained to stay on until the new Securities Act is passed. On Jan. 25 the palace said once the law is enacted - possibly in a few weeks - Yasay will probably be replaced.

For Estrada, the situation is clear. "He's a liar, a consistent liar," the president fumed after the testimony. "Yasay is trying to malign me so he can keep his job." The president has long wanted Yasay out of the SEC. He denied pressuring Yasay to clear Tan and BW. "How can I do that when I believed that Tan was innocent?" Estrada argued. "Even if Dante Tan is my friend, I will never ask Yasay to clear him. Secondly, the SEC is a collegial body. Mr. Yasay had just been reinstated after his suspension for six months [during his investigation for alleged graft]. I knew Mr. Yasay was an appointee of Mr. [ex-president Fidel] Ramos. So before I approach Mr. Yasay, I should approach the other SEC commissioners first." Ramos and Estrada had been at odds over the predecessor's criticism of the incumbent's administration.

The problem for Estrada, however, is having made the calls in the first place, despite all the criticism that he is too accommodating to his friends. Even before he took office at the end of June 1998, he whipped up a storm trying to get the body of Ferdinand Marcos buried in the Heroes' Cemetery, widely seen as a favor to the late strongman's family.

Cronyism charges escalated soon after with the return of Eduardo "Danding" Cojuangco as boss of San Miguel, the beer giant, backed by state-owned or -sequestered shares. Estrada had long argued, though, that Cojuangco was elected CEO by directors appointed under Ramos.

Also widely seen to have gained from Estrada's rule is airline, banking, beer and cigarette tycoon Lucio Tan. A $600-million tax evasion case against him was dropped, and his debt-ridden Philippine Airlines got the government to curtail flights of at least three foreign carriers.

Add to that slate the controversial appointments of dozens of "advisers." Among them is wheeler-dealer Mark Jimenez, who is wanted by America's FBI but is seemingly being protected by the Philippine government. The president's image was probably further tarnished when government enterprises and supposedly pro-Estrada businesses pulled their advertisements from the Philippine Daily Inquirer, the largest-selling daily, for its critical coverage of the administration.

With such a record, Estrada could hardly fault critics for again suspecting cronyism in his phone calls to Yasay about the BW probe. Not to mention the very public pressure Malacaņang Palace has put on the SEC chairman to quit over the past year, even if his legally guaranteed term lasts until 2004.

Yasay blames the people around Estrada for the brouhaha. "The president is being ill-advised," he says. "You hurt the stock market if the SEC, as the regulator, is unable to penalize [wrongdoing] . . . if the SEC is perceived as not independent." While denying Estrada's actions are grounds for impeachment, Yasay believes "the president is guilty of impropriety."

Others are less kind. "What the president did was reprehensible," protests Solita Monsod, an economic planning secretary during Corazon Aquino's presidency. "It destroys the institution of the SEC. What he talked about [with Yasay] is immaterial." Monsod also blames Estrada's advisers for the fiasco.

"It reinforces the impression that our regular agencies are permeable to political pressure and the whole idea of cronyism," adds political scientist Alex Magno. "The controversy cancels out whatever gains in popularity he [Estrada] made by appointing Local Government Secretary Alfredo Lim and Philippine National Police chief Panfilo Lacson as crime fighters."

The president got kudos for his recent mini-reshuffle of the Cabinet, after his approval ratings plunged in December. He replaced the secretaries of finance and interior and local government, as well as the tax and customs chiefs. He accepted pro-forma resignations from 25 of advisers, and retreated a bit from his unpopular push to amend the Constitution. In a speech to foreign correspondents, he vowed to crack down on corruption, and told his friends he would repay political debts "by giving you good government that serves all, not just a few." But after Yasay's revelations, Estrada's popularity, says Magno, is "back to the downward momentum."

"The prognosis is not very good for Estrada," the political analyst maintains. While most Filipinos care little for share shenanigans, the BW scandal may have made businesses wary - just when the economy could use more capital spending. Senate Minority Floor Leader Teofisto Guingona says: "Calling the SEC chairman conveys the impression that the economic, as well as political, climate is not suitable for safe, sound and stable investment."

Newly designated Trade and Industry Secretary Manuel Roxas admits: "A doom and gloom mentality is prevailing." The latest bad news:industrial output fell 11.7% year-on-year in November, after three straight months of growth. This week oil prices may surge again, and the peso slump further. Manila has to slash deficit spending, while initiatives to reduce power costs and expand mass housing will not show positive effects for at least six months. At a "national prayer breakfast" on Jan. 26, Estrada spoke of "the crisis that grips the country."

Any impeachment move would further rock confidence. No such action is likely, though. Opposition Congressman Sergio Apostol contends that the president could be impeached for ordering Yasay to stop the investigation and clear Tan. But the problem, frets Apostol, is Yasay: "Suppose Congress initiates proceedings and he is not willing to testify? We will be left holding the bag."

Former Senate president Jovito Salonga, a constitutional lawyer, adds: "As long as the president honestly believed that Dante Tan was a victim more than an offender, there is no reason to believe there is a cause for impeachment." Moreover, says Salonga, "the reality that Lamp [Estrada's party] members of Congress are overwhelmingly in the majority" means no petition to impeach is likely to prosper. The ruling party comprises three-fourths of the 220-seat lower House.

Salonga points out, however: "If the president directs Yasay to refrain from issuing statements on BW and policy declarations affecting the market, this would be clear abuse." Beyond legalities, there is damage to confidence. Senate President Blas Ople accused Yasay of blackmail and insubordination. "He has harmed the reputation of the president and the stock exchange," Ople said, warning of perjury charges if Yasay had lied to the Senate banking committee. Its chairman Roco says "the purpose of the investigation is to establish credibility in the market." Sadly, the whole affair has helped erode the public's confidence not only in the exchange, but in Estrada himself.

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