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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

MARCH 3, 2000 VOL. 26 NO. 8

Promises, Promises
Manila struggles to get over the BW fiasco
By CESAR BACANI and ANTONIO LOPEZ Manila


Edwin Tuyay for Asiaweek
Happier Days: Tan (right) and Ho last year when BW's stock was hot

Dante Tan was choking with anger and bitterness. "I warn those of you who have committed this injustice against me that you will be made to answer for your deeds as I seek legal justice," said the major stockholder of controversial Philippine gambling company BW Resources Feb. 21. "I promise you that I will not rest until my name has been cleared, my honor restored and my dignity returned." Ten days earlier, investigators at the Philippine Stock Exchange (PSE) had accused him of price manipulation and insider trading. A Manila newspaper later placed the PSE's confidential fact-finding report on the Internet. And Tan's close friend Joseph Estrada, the country's president, has declared: "No one is above the law, so what can I do for him? If he is innocent, he has to prove it."

That hurts. Estrada had previously defended his buddy, describing Tan as a victim of the BW fiasco. According to Securities and Exchange Commission chairman Perfecto Yasay, the president phoned him four times to intervene on Tan's behalf, although Estrada denies pressuring Yasay. There is no evidence that the president or his family benefited from the 5,250% rise of BW's stock price to $2.65 last October. But tongues are wagging. And foreign money is fleeing, pushing down the stock market index to a 14-month low (see chart). "The president knows the presidency is at stake," the Philippine Daily Inquirer quoted Finance Secretary Jose Pardo as saying. Economic Planning Secretary Felipe Medalla says: "The mere fact that we say the full force of the law will be applied . . . will not be taken at face value. Obviously action speaks louder than words."

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For now, the PSE report drowns out everything else. It presents documents showing that Tan opened numerous accounts with stock brokerages to buy and sell BW shares. In 1998, he acquired 18.7% of the company, but did not disclose it to the exchange (the law requires that acquisitions of at least 10% be reported). From January to June last year, Tan bought some 414 million more shares and sold 256 million - 21% of the aggregate trading volume in BW. The PSE estimates Tan's average acquisition cost at 2.83 pesos and average selling price at 18.64 pesos. That translates into profits of 820 million pesos - $20.5 million - for the six-month period.

But the spike in the stock price was allegedly contrived. The PSE claims that Tan was both the buyer and seller for some 37.9 million shares in a series of 130 transactions, with the price escalating as the deals were completed. In June, say the investigators, Tan changed tack and entered into private placements with several clients of PCCI Securities. The agreements prescribed lock-up periods during which the buyers can sell the BW shares only upon Tan's instructions.

In addition, 261 million BW shares in Tan's accounts were evidently transferred to accounts owned by others, including Estrada backers Carmelo Santiago and Wee Peng Lee. Tan later bought back these holdings, creating an illusion, claims the PSE, "that there was an overwhelming demand for BW shares, pushing its price upward." But the alleged scheme unraveled in October when news broke that Macau gambling boss Stanley Ho would become BW chairman. The stock price levitated to $2.65 - from $0.05 at the beginning of the year. Tan's brokers had instructions to acquire BW shares at any price, alleges the PSE, so they continued buying on his behalf - until Tan ran out of ammunition. He apparently borrowed money from friends, including George Go, an Estrada ally whose medium-sized Equitable Bank beat bigger rivals last year to acquire PCI Bank with the aid of two state-run pension funds.

A pack of lies, says the businessman angrily of the PSE report. "This is a witch-hunt against Dante Tan," he charges. "There may have been a deliberate attempt to exclude certain persons and stockbrokerage companies from the highest levels of the PSE [from the investigation]." The PSE names eight stockbrokers that it claims colluded with Tan. He asks why the PSE did not investigate four other brokers that were among the heaviest traders in BW shares when its price plunged. (BW closed at $0.07 Feb. 22, down more than 97% from its peak.) "Instead of focusing on answering the charges, [Tan] tries to focus on other brokers to cast aspersion on my integrity and our competence to investigate this case," counters lawyer Ruben Almadro, the head of the PSE's compliance and surveillance group.

What next? The PSE board of governors will soon decide what sanctions to impose on Tan and the eight stockbrokers - then the exchange will elect a new board in early March. The Securities and Exchange Commission says it will file charges and probe other stockbrokers not named in the report. The Bureau of Internal Revenue says it will investigate whether Tan has paid an estimated $250 million in capital-gains taxes - the PSE considers many of his transactions to be over-the-counter trades, which are subject to the levy. Congress is finalizing a Revised Securities Act that will toughen sanctions against fraudulent acts. Estrada says he will name a no-nonsense Securities and Exchange Commission chairman when Yasay steps down March 25. Everyone else is waiting to see whether all the talk will result in real action.


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