The Gardener’s Tale of The Real Status of the Coco Levy Funds

President Rodrigo Roa Duterte in his 2020 State of the Nation Address referred to the urgency of resolving the issue regarding the utilization and control of the billions of pesos in assets and funds derived from the coco levy during the Marcos era.

The question  often asked today is, “Where are the Coco Levy Funds now? How much are they worth in both cash and assets?”

“If you can’t be accurate in answer, at least try not to make unfounded guesses,” cautioned Ka Efren Villasenor, Chairman of CONFED – the Confederation of Coconut Farmers’ Organizations of the Philippines or CCFOP.

The bill that came out of both law-making houses in the past Congress experienced an incredible on-again-off-again bicameral treatment. It was  submitted to Malacañang and then returned twice to the legislature in unprecedented Legislative-Executive volleyball games. The propaganda surrounding the “historic character” of the bill remained a consistent hyperbole, for no bill on this subject has yet been signed into law by the President. In fact, he vetoed them. Why? Did he not promise to attend to this soonest during the 2016 presidential campaign?

Some well-placed sources say that his finance team advised Duterte to delay because the funds which were the subject of the proposed law were not intact; government had to dribble the ball some more to recover illegally-used funds. Was there ever a basis to this rumor?  Let’s look at the record.         

September 04, 2012

The Supreme Court in GR 178193 ordered that: “The net dividend earnings and/or redemption proceeds from the Series I Preferred Shares [of Coconut Industry Investment Funds-San Miguel Corporation] shall be deposited in an escrow account with the Land Bank of the Philippines or the Development Bank of the Philippines” (Cf. 600 SCRA, 102 AT 145-146/ GR 178193/SEPT.04, 2012). Later the SC added the UCPB as the third depository bank in addition to DBP and LBP. The Escrow Account as ordered by the Supreme Court was to be in the name of “PCGG in trust for CIIF 14 Holding Cos.”  The Supreme Court has decided with finality that these holding companies are beneficially owned by all the coconut farmers and trust-owned by the government for the development of the industry and the benefit of the farmers.

October 05, 2012

A month later, however, the (Aquino) government through a PCGG Instruction to the President of the CIIF 14 Holding Companies caused the transfer of the checks to the Bureau of Treasury – in clear violation of the Supreme Court Order.  These were the same checks issued by San Miguel Corporation representing the proceeds of the redemption price of, and dividends that had accrued on, the CIIF Block of SMC Shares. The instruction to CIIF Holding Companies’  President Jesus L. Arranza was signed by Andres D. Bautista, PCGG Chairman ( cf. 05 October 2012 communication of Bautista to Arranza). Immediately, with Arranza’s obedience to Bautista, Php 56.4 Billion of the coco levy funds were hijacked into the general funds while only Php 14.2 Billion remained with the UCPB – and  only for a while. Why did the PCGG do this?  To what purpose?

October 08, 2012

The “BTr transferred Php 1, 130,772,468 to UCPB for further credit to PCGG Trust Account. This amount represents the payment for the dividends from the Series I Preferred Shares included in the P57B remittance to BTr.” according to a December 5, 2012 communication of Rosalia V. de Leon, Treasurer of the Philippines to Jeronimo U. Kilayko and Menardo B. Jimenez, President and Chairman respectively of the UCPB.

December 05, 2012

The Treasurer of the Philippines told UCPB that the [farmer-inspired] letter of 19 November 2012 requesting for information on the P57Billion representing the funds CIIF Block of SMC Shares which was turned over to the BTr on October  05, 2012 cannot be answered by BTr directly. Their excuse was that “the law and rules pertaining to the Secrecy of Bank Accounts also apply to the Bureau of Treasury” but nonetheless gave the requested data later through the PCGG, the recognized account-holder-of-record.

January 09, 2013

The BTr through Deputy Treasurer of the Philippines Christine L. Sanchez, submits a Statement of PCGG Escrow Account (Coconut Industry Investment Fund) Balance as of November 30, 2012 including Net Interest Earned AND subtracting a 2% “Management Fee!

In sum, the coco levy funds in cash at this time would be: With BTr –P56.4Billion; with UCPB –P14.2Billion; Subtotal of P70.6Billion; With earnings a Grand Total in cash of P74.3Billion.

April 30, 2015

After the CONFED or Confederation of Coconut Farmers’ Organizations of the Philippines announced that they would seek a halt from the Supreme Court to the implementation of two Executive Orders dealing with the fate of the coco levy funds, E.O.’s that CONFED considered anti-farmer and illegal, PCGG Bautista rushed an order to UCPB with particular reference to the latter’s Trust Banking Group “to release, transfer and deposit to the Bureau of the Treasury all monies pertaining to SMC dividends and all interests,  income, profits, and earnings derived therefrom specifically the fund balance under Escrow Account No. 10-2533 and IMAQ Account No. 11-3565” emphasizing “prompt action” on the matter because they had a “limited period of time” obviously due to the high probability of the Court’s granting the farmers’ Petition for a Restraining Order – which, in fact, happened  (cf 30 April Communication of PCGG Bautista to UCPB Board). Government again succeeded against the farmers in a second hi-jack operation.

In this operation government caused the change of the coco levy account name to “BTr/PCGG/Coco Farmers” in violation of the Supreme Court Order to put the fund in the name of “PCGG in trust for CIIF 14 Holding Companies”. Again the question- why? To what purpose?

ITEM: Government revenue collections in September (By Prinz P. Magtulis, The Philippine Star November 27, 2015 – 12:00am) As of September, the budget deficit – which indicates more revenues spent than earned – stood at P25.5 billion, below the P283.7-billion target for the year. Broken down, revenues collected by the Bureau of Internal Revenue (BIR) accounted for 11.28 percent of the economy. The goal for that year was pegged at 12 percent. The Bureau of Customs, meanwhile, recorded a tax effort of 2.82 percent, still lower than its 3.1-percent target for the year. The “savior” was the coco levy fund per SC decision of 2012 whose effect the government booked precisely that year 2015. This referred to the transfer of 24 percent of shares in San Miguel Corp. to the government, part of the total stocks it sequestered in 1986 on suspicion they were purchased using coco levy funds. The high court said the coco levy is public in nature. The stocks were then worth P62.1 billion as per DOF estimate at that time

To the above question, then, “why? To what purpose?” – “the reason why” jumps out of the facts, namely, the transmutation of a P25.5Billion deficit with a P62.1Billion pseudo collection! Add to this the fact that the funds would now no longer be with the government-for-farmers’ special world (CIIF’s 14 Holding Companies) but with the government’s larger universe or general fund (the BTr or Bureau of the Treasury): the farmers’ capital became most vulnerable to misuse, abuse and outright magical diversion.

Finance Undersecretary Beltran admitted at that time that “we got revenues from the transfer of coco levy funds. These are revenues which are [a one-time event] not likely to be there in the long run.”

Through all that, at the House Hearing on the coco levy funds, PCGG responded to CONFED’s complaint by saying that all the funds in question are intact at the BTr. Question: were criminally diverted funds in aid of budget window dressing being returned at last in fear of investigations? Senator Poe did make a motion for such an investigation but her motion dove into the freezer. The majority senators had neither the time nor the inclination to touch it warmly. Chairman (formerly of PCGG and then of COMELEC) Andy Bautista seemed off the hook again – saved by senators who were grateful for his service to them in the previous election .

But the question remained and President Duterte should be asking it too now: what really happened? Not only the coconut farmers but all the Filipino people have a right to know. When government uttered the word “intact” does it include interests and other earnings? The previous administration, as reported above, announced they had used the funds (illegally, of course) because of a mere P25.5-Billion budget deficit. How many times that amount is today’s  deficit? So…  Before he makes his next move it would really be good for the President to look at this case by himself, personally, and not merely depend on his “experts’ advice,” even if one of them was his class valedictorian whose brilliance dazzles him up to now.  After all, there are some who say that this President is a lawyer with a coconut farmer’s heart.

And he must make sure that the Trust Fund being created by law will be managed by a Corporation and not a mere committee. A public trust fund of the magnitude of the coconut levy funds (cash of Php 74 billion, and an immediate slice of P 10 billion?) and assets (a few billions more in oil mills, the bank and such), will need not a mere committee but a full-fledged government-owned corporation (Nograles et al version]  that has the requisite characteristics of stability, flexibility, autonomy, transparency, accountability and therefore the capacity for good and effective governance. A mere committee can never exhibit the properties of such a corporation but can easily be subject to momentary political approval and desire.

Can one imagine an analogous trust fund of the workers being managed by a mere committee rather than by GOCC’s like the SSS and the GSIS? Had such funds not been corporate-managed but merely committee-managed they would have vanished into thin air ages ago.

A mere committee can never exhibit the properties of such a corporation but  can easily be subject to the politics and vagaries of partisan desire and approval. The new law must precisely seek to give teeth to the decision of the Supreme Court that the coconut levy funds and assets are to be used exclusively for the development of the coconut industry to the benefit of all the coconut farmers. 

Lastly, the President must make sure that the law that Congress will submit for his signature is quite in line with the resolution by the Supreme Court of the case brought to it by CONFED: “The coconut levy funds are special funds allocated for a specific purpose and can never be used for purposes other than for the benefit of the coconut farmers or the development of the coconut industry. Any attempt to appropriate the said funds for another reason, no matter how noble or beneficial, would be struck down as unconstitutional” (G.R.No.217965, CONFED versus Pres. B.S. Aquino III et al.).  And this applies to all coco levy-funded or coco levy originated assets such as the UCPB, the CIIF Oil Mills Group, Coco Life Insurance, et cetera cum ceteris. FINIS.