President Ferdinand Marcos of the Philippines has ordered a government takeover of three corporations controlled by a close friend and golfing partner who has acquired vast wealth during the past five years of martial law.
Marcos' action against industrialist Herminio Disini, who is related to the president by marriage, comes per accounts, beginning with a story Dec. 19 in The Washington Post, of Disini's success in building a giant conglomerate of 35 companies, in part through his connection with Marcos.
Earlier, Marcos ordered a government in the sale of a $1.1 billion nuclear power plant by Westinghouse Electric, one of the largest U.S. sales ever to the Philippines.
The actions reveal Marcos' extreme sensitivity to any unfavorable publicity that might lead the U.S. Congress eventually to disapprove substantial concessions Manila is seeking in a new U.S. military bases agreement.
Marcos has recently taken several steps to defuse criticism of martial law, including an announcement today that he will hold national elections on April 2, the first in five years, to elect a National Assembly.
Although Disini is not expected to suffer serious financial loss from the takeovers, the action may scare off investors in his other projects who banked on Disini's close ties to a president who can issue trade and tax edicts by fiat.
Information Secretary Francisco Tatad told reporters in Manila yesterday that Marcos was divesting Disini of three companies in which the government had already invested $70 million. They are Cellophil Resources Corp., Philippine Cellophane Film Corp. and Herditex Mill Inc. A Herditex source said the company had used inflated invoices in purchases of foreign equipment to accumulate substantial sums in European banks. Disini has turned down several requests to be interviewed on this and other allegations.
Tatad justified the takeovers on the grounds of the large government investment and alleged no wrongdoing on Disini's part.
Disini, in a statement to Manila newspapers, said, "We recognize that these projects could better fulfill their purpose under government or government-sponsored ownership and we accept the president's decision."
Disini companies received agency fees said by one source to total "a few million dollars" for helping Westinghouse secure the Philippine government contract. Other companies in Disini's Herdis group won contracts to provide all civil construction on the project, install communications on the site and write a $668 million insurance policy for the plant.
Marcos said in December interview that Westinghouse was selected over a competing proposal from General Electric because of a report from foreign technical consultants. He said Disini had nothing to do with the decision. One Westinghouse negotiator told businessmen, however, that the influence of Disini and one key lieutanant "was essential" to Westinghouse's success.
An official of the government's National Power Corp. said "the decision to choose Westinghouse was a political decision."
Disini, 41, was the owner of a small cigarette filter company before Marcos declared martial law in 1972. Disini's wife is a first cousin and personal physician to Imelda Marcos, the president's wife and the governor of greater Manila.
Disini's equity in the three companies he is losing because of the presidential order could not be immediately ascertained.All three appear to have great, but so far unrealized, income potential and have been funded largely by government-backed loans.
Cellophil Resources and another Herdis company have been granted a lucrative pine-logging concession by the government that is valued by the company at $7 million. Philippine Cellophane Film has reportedly constructed a $30 million plant expected to supply 70 per cent of the country's cellophane needs. Herditex has $19 million in outstanding loans for a knit fabrics plant in Bataan.
Tatad said Herditex would be sold to a quasi-government veterans group and the other two companies would be taken over by local government cooperatives.
Sources close to Marcos said Disini had been called in by Marcos shortly after publication of the Post article and told to defend himself against any allegation of impropriety. Disini maintained a public silence, however, and Imelda Marcos spoke out early this month saying, "I'm sick and tired of name droppers. I've always said you can choose your friends but not your relatives."
The Wall Street Journal published a long story on Disini Thursday. Marcos, in a joint interview with the New York Times and Time magazine Friday, said he planned to look into any alleged wrongdoing on Disini's part, particularly any evidence that he had been bribed by Westinghouse to help win the nuclear plant contract.
Disini and Westinghouse issued statements later denying that there was anything illegal or improper about the fees paid to Disini companies. They did not disclose the amount of the fees.
Rep. Clarence D. Long (D-Md.), a member of the House Appropriations Committee, reportedly has written the U.S. Nuclear Regulatory Commission asking them to look into U.S. approval of the project.
It is backed by the U.S. Export-Import Bank with a $227 million direct loan and a $356 million guaranteed loan.