The Baltazar Aquino Papers (BAP)

The Baltazar Aquino Papers (BAP) are documents generated by the ‘perpetuation of testimony’ proceedings (Special Proceedings No. 002) conducted by the Sandiganbayan from September 1988 to November 1989.  The Sandiganbayan is a special court created by the Philippine government to try corruption cases filed against government officials.

After the ouster of President Marcos in February 1986, the government of President Cory Aquino initiated several  moves for the general purpose of recovering so-called ‘ill-gotten wealth’ from the Marcoses and their cronies and to prosecute them for ‘grave crimes against the Filipino people.’  Among these moves included the creation of the Presidential Commission on Good Government (PCGG) and the subsequent filing of several suits (civil and criminal) in various courts in the Philippines and in other countries.

The Sandiganbayan ‘perpetuation of testimony’ proceedings were conducted for the purpose of recording for posterity and future use the testimony of an ailing Baltazar A. Aquino (who was 78 years old in 1989), former Secretary (or Minister when the Philippines adopted a parliamentary form of government in 1978) of Public Highways during the Marcos highways.  The proceedings were actually done in conjunction with the hearing of several civil suits against Marcos, his family, and friends where Baltazar Aquino himself was a prosecution witness.  At the time, the government of President Cory Aquino had decided, based on national security considerations, against allowing the Marcoses to return to the country.  For this reason, only civil suits were filed against the Marcoses in Philippine courts.  Under existing Philippine laws, when a criminal case is filed, the defendant must be physically present in the court and face his accuser.

 

The perpetuation of Balatazar Aquino’s testimony was done before the 2nd division of the Sandiganbayan.  Meanwhile, the civil suit against Marcos, his family, and friends (Civil Case No. 0002) was heard at the graft court’s 3rd division up to November 1989.  Ferdinand Marcos died while in exile in Hawaii on 28 September 1989.  In the light of Marcos’ death, the perpetuation of Aquino’s testimony was terminated in early 1990.  Solicitor General Francisco I. Chavez withdrew the petition for the perpetuation of Aquino’s testimony on 2 February 1990.

 

A general picture of Marcos’ irregular relationships with Japanese firms and suppliers vying for Japanese government-funded projects in the Philippines emerges from the Aquino testimony, the papers supplied by Oscar Rodriguez, and documents pertaining to the Angenit Investment Corporation headed by Marcos crony and former parliamentarian Andres Genito Jr.  The Marcos-Japanese relationship started with the Japanese Reparations Program, administered by the Reparations Commission headed by Marcos war buddy Gen. Eulogio Balao.  It continued up to the last years of the Marcos presidency when the Overseas Economic Cooperation Fund (OECF) became the main conduit of Japanese public funds into the country following the end of the Reparations Program.

 

In general, the Japanese government-provided funds are to be used to finance several general infrastructure and development contracts in the Philippines.  The equipment requirements of these projects were to procured from Japanese manufacturers or suppliers in the usual manner of so-called ‘tied aid.’  Ostensibly, the Japanese contractors must compete with each other in a bidding process where the qualified bidder submitting the lowest bid was awarded the contract.

 

However, Marcos and his associates perfected a system wherein no Japanese firm could win a contract unless a 15 percent (of the total contract price) ‘commission’ was paid.  This ‘commission’ would be included in the total contract price to be paid by the Philippine government out of Japanese government-provided funds.

 

Except for a specific instance (i.e., the Cagayan Valley Electrification Project) where they attempted to win contracts without paying any ‘commission’ to Marcos, the Japanese firms generally acceded to the ‘commission’ system.  All qualified bidders, therefore, knew that they were expected to pay the ‘commission’ if they wanted to win a contract.  They would still ‘compete’ in the bidding process.  One cannot be blamed however for thinking that since all were willing players anyway, the contracts were judiciously assigned to individual contractors in some sort of a queueing system.  This meant that if a firm was unable to win a contract for a particular project, it was sure to get one for another project in the future.

 

The key Marcos aides involved in the operations were Gen Eulogio Balao, Secretary Baltazar Aquino, Deputy Secretary Oscar Rodriguez, and Andres Genito Jr.  Balao collected ‘commissions’ on projects financed under the Reparations Program; most of these projects were administered by Philippine government agencies other than the Department of Public Highways.  Genito took Balao’s place when the latter had a stroke and eventually died in 1977.  In a kind of division of labor, Aquino collected commissions on projects administered by the Department of Public Highways and financed by the Overseas Economic Cooperation Fund (OECF).  Rodriguez, who was accountable only to Marcos, though technically Aquino’s subordinate, took care of the technical function of accepting and evaluating bids and recommending (to Marcos) the award of contracts to specific Japanese suppliers.  He could have been in charge of the ‘queueing’ system alluded to earlier.

 

The Japanese firms that paid regular contributions to Marcos through Balatazar Aquino included Sakai Heavy Industries, Sumitomo Corporation, Toyo Corporation, Nissho-Iwai, and Mitsui & Company.  Four representatives of Japanese firms–Susumu Makino of Sakai, Yoshio Kotake and Mr. Hara of Toyo Corporation, and Mr. Sato of Sumitomo–alternatively handed over these payoffs to Baltazar Aquino in Hongkong.

 

Among the key revelations of the Sandiganbayan proceedings include the following:

 

1. On several occasions from July 1975 to July 1976, Secretary Aquino travelled to Hongkong to receive monies from Japanese firm representatives, particularly Susumu Makino of Sakai Heavy Industries.  Aquino would then deposit the money to a numbered account (No. 51960) with the Hongkong office of the Swiss Bank Corporation.  A Swiss Bank Corporation official in Hongkong, a Mr. Barasoni issued deposit receipts which Aquino will turn over to Marcos upon his return to Manila.
2. Baltazar Aquino testified that Marcos instructed him to keep his Hongkong activities secret and unknown even to Aquino’s wife.  Aquino wrote Marcos a letter dated 25 May 1977 promising to keep his mouth shut.
3. After Gen. Balao’s death, Marcos expressed some worry that Genito was not giving a proper accounting of ‘commissions’ received through Angenit Investment Corporation.  Rodriguez was asked to perform an audit and he was able to prepare a schedule of collections made by Balao and Genito.  Genito was found, in one instance, to be short of a hundred thousand dollars (US$100,000.00).  For his part, Genito tried to persuade Rodriguez to withhold his deficiency from Marcos.
4. Yoshiko Kotake of Toyo Corporation wrote Genito to advise President Marcos not to use Baltazar Aquino to collect ‘commissions’ from Japanese firms.  Kotake warned of a possible scandal (similar to the Lockheed affair which led to the imprisonment of former Japanese prime minister Kakuei Tanaka) since Aquino was a high government official.  Aquino was himself in charge of Japanese government-funded projects in the Philippines.

 

The Oscar Rodriguez Papers (ORP)

The papers collectively known as the Oscar Rodriguez Papers (ORP) are documents given to a parliamentary mission sent by the Japanese Socialist Party (that later changed its English name to Social Democratic Party of Japan in 1991) to the Philippines in March 1986.  The parliamentary mission was dispatched to Manila following the release of the Marcos Honolulu Papers (MHP) by the US government.  Media coverage of the MHP in Japan was extensive since the papers strongly hinted at corrupt business practices and other irregularities of several prominent Japanese business firms awarded contracts in connection with Japanese-government funded projects in the Philippines.

In Manila, the parliamentary mission was able to meet Oscar Rodriguez, who allowed the visiting parliamentarians to copy the almost 1,400-page document set he had in his possession.  Rodriguez, undersecretary of the Department (or Ministry) of Public Highways, was appointed by President Ferdinand Marcos as the implementing officer of the Philippine-Japan Project Loan Assistance Program (PJLAP).  The PJLAP was a special government agency organized by President Marcos to oversee to oversee all Japanese government-funded yen credit projects in the Philippines after the imposition of martial law in September 1972.

Four years earlier, the Japanese Reparations Program ended.  A provision of the peace treaty between Japan and the victorious powers provided that Japan must pay indemnify the nations it conquered and occupied during the Second World War.  Under this program, the Philippines organized the Reparations Commission to receive the Japanese indemnifications used to finance infrastructure and other development projects.  The Commission was headed by Marcos’ friend, war-buddy, and fellow Ilocano, Senator (formerly General and Secretary of National Defense) Eulogio Balao of Cagayan province.

It could be discerned from the perpetuation of testimony proceedings of former Marcos cabinet member Baltazar Aquino (subject of another blog post), and documents pertaining to the Angenit Investment Corporation in the Marcos Honolulu Papers (MHP) that Balao ensured that percentages of Japanese reparation payments found their way into President Marcos’ bank accounts.  Since these Japanese public funds were used to purchase Japanese equipment and services (in the manner of ‘tied aid’), Japanese suppliers had to pay ‘commissions’ to Marcos through Balao so they can be awarded the suppliers’ contracts.

For his part, Baltazar Aquino said he collected ‘commissions’ arising from contracts with Japanese suppliers.  He also revealed that Balao collected these ‘commissions’ for Marcos when Balao headed the Reparations Commission Mission in Japan.  Andres Genito Jr., president of Angenit Investment Corporation and former Batasang Pambansa assemblyman took over Balao’s duties when the former general and senator died in 1977.

It appears that Rodriguez was on the technical, ‘clean’ side of the Marcos ‘squeeze’ operations on Japanese contractors.  His office coordinated, among others, the preparation of pre-bidding requirements and qualifications, and the acceptance and evaluation of bids from competing Japanese and (sometimes, Filipino) suppliers and contractors vying for Japanese government-funded projects.  This coordination function was needed because particular projects were handled by distinct public agencies.  For example, projects in the Bataan Export Processing Zone (BEPZ) were handled by the Export Processing Zone Authority (EZPA) while the National Power Corporation (NPC) had oversight over the Cagayan Valley Electrification Project.

In the ORP collection, one could find several letters of recommendation from the heads of such agencies and evaluation reports of these agencies’ technical committees and/or boards all addressed to Rodriguez.  He would then recommend to President Marcos the award of particular contracts to specific suppliers.  President Marcos would approve or disapprove Rodriguez’ recommendation through marginal notes on the same recommendation-memoranda.  Most of the documents in the ORP set are of this nature.  In a few instances, presidential approval was communicated by aides Jacobo Clave or Joaquin Venus Jr.

Rodrigues sometimes recommended the amendment of existing contracts.  Requests and recommendations for the purchase of additional equipment received by Rodriguez from various government agencies served as bases for these contractual changes.  The changes were then relayed by Rodriguez to the Overseas Economic Cooperation Fund (OECF), the new Japanese new aid agency, that had first to approve the changes before the new contracts can be implemented.

 

In the evaluation of bids submitted by Japanese contractors for a particular project, the administering public agency solicited the technical opinion of hired project consultants.  These consultants included Filipino and Japanese experts and firms.  Some of these evaluation reports are included in the ORP set.  Also included in the collection are several offer/bid letters of Japanese suppliers addressed to Rodriguez as well as his letters to the latter.  In his replies, Rodriguez asked for improvements in the offers such as the shortening of delivery periods, assumption of supervisory expenses, and the like.

 

The ORP included summary reports that provide a macro-picture of Japanese government-funded projects in the Philippines during the Marcos years.  These documents include the following:

 

1. The set of papers entitled “Approval of Awards of Contracts” lists the pertinent papers for several project contracts entered into by the governments of Japan and the Philippines from 1977 to 1986;
2. A status report as of February 28, 1986 on Overseas Economic Cooperation Fund (OECF) project loans.  The status report covered a total of 54 projects organized in 10 loan packages involving some 180.75 billion yen.  Of this total, 36 projects were completed while the rest were ongoing; and
3. An untitled set of papers offer detailed information on loan use including the list of contracts concluded, description of contracts, name of contractor, contract identity number, and contracted amount.

 

[Subject of next blog post: Baltazar Aquino Papers (BAP)]