A group of Japanese manufacturers and leading trading companies formed a cartel to oppose efforts by one of Ferdinand Marcos' middlemen to collect millions of dollars in "commitments" on government construction contracts in the Philippines, according to documents the deposed Philippine president took with him from Manila.
Philippine government officials then refused to award the contract to C. Itoh & Co., the leader of the cartel, and "froze" the project in 1977, the Marcos documents disclose.
The documents reveal what appears to be the pieces of a pipeline that channeled payments from Japanese companies into an obscure Philippine firm, Argenit Investment Corp. In 1982, Andres V. Genito Jr., the head of the firm, invested $1 million in certificates of deposit in one of the bank accounts listed in the Marcos documents.
The correspondence describes a showdown between the apparently well-connected Marcos middleman and the powerful Japanese cartel.
It also reveals the plight of Caterpillar Tractor Co., which lost an opportunity to bid on one of the Philippine contracts when its Hong Kong regional manager refused to approve the payment apparently sought by Argenit.
And the documents also show that one Japanese company, Toyo Corp., paid millions of dollars in commissions to Argenit.
Washington Post correspondent John Burgess reported yesterday from Tokyo that the president of Toyo said it made the payments because that was the only way to get good contracts in the Philippines.
Hisashi Nomura, Toyo's president, said the payments were "proper" and reflected extensive work by Argenit to help Toyo win the contracts.
"We knew that the final decision on business in the Philippines was in the hands of Marcos, and we thought the company had some trust or confidence with Marcos," Nomura told a press conference yesterday. "If we hadn't used them, we could not have obtained good work." Nomura said Toyo never paid any money to Philippine government officials, Burgess reported.
In a letter to the company dated Oct. 14, 1977, Argenit's Japanese contact summed up the standoff between Argenit and the cartel of manufacturers and trading companies, headed by C. Itoh, the cartel's appointed "champion." All of the members of the cartel refused to pay a 15 percent "commitment" demanded by Argenit in 1977.
"The cartel is becoming weak. We know some members are willing to improve the offer just in order to get the award, but the rules of the cartel are such that, if any member makes a 'commitment' without the cartel approval, the member must be penalized," wrote Yoshio Kotake, managing director of Toyo, a Japanese supplier of construction equipment and materials. Toyo paid the majority of the $213 million in "commitments" to Argenit recorded in the documents found in Marcos' posession when he arrived in Hawaii.
The documents were made public Thursday by Rep. Stephen J. Solarz (D-N.Y.) and the House Foreign Affairs Subcommittee on Asian and Pacific Affairs, of which he is chairman.
"I think this is the game of patience," Kotake wrote in the October 1977 letter to Argenit.
Some members of the cartel had become "hungry for business" and had asked C. Itoh to make a "commitment" below the amount Argenit had specified -- 15 percent of the value of the contract, Kotake wrote. The offer was not accepted, and the stalemate continued.
"Eventually, the cartel will give in little by little, although we doubt very much if it will reach 15 percent," his letter said. "While, on the other hand, you should not force the issue because they might run to OECF and our embassy again."
OECF is Japan's Overseas Economic Cooperation Fund, which has provided hundreds of millions of dollars in development loans to the Philippines. The money was used to finance major public works and other projects. Japan's manufacturers and trading companies were among the leading bidders to carry out the projects.
The Argenit correspondence is one of the mysteries threaded through the 2,000 pages of documents that Marcos took with him when he fled Manila. The documents were obtained under subpoena by Solarz's subcommittee.
The correspondence is preceded in the Marcos files by a shipping label addressed from Genito to Marcos at the Malacanang Palace.
Several pages of a financial report list dozens of contracts received by Japanese firms from the Philippines government between 1973 and 1977.
In most of the contracts received by Toyo, there is an entry -- typically 15 percent of the final contract amount -- listed in a separate column under the heading "BBB."
One memo on Argenit stationery explains that "BBB" means "delivered to general." The recipient of the Argenit memo isn't identified. It begins, simply, "Sir:."
The general is not identified in the documents, either, although there are several references to a general who was involved in the awarding of the OECF contracts and was linked closely to Argenit.
In Kotake's letter, he argues against allowing a person referred to as Mr. Aki to become involved in the arrangement. Kotake wrote that Aki, a government official, was on a Japanese government blacklist, and scandal might ensue if he "starts collecting."
Nomura said yesterday he could not understand why such a letter would have been written by Kotake, who he said died of cancer last year.
Nomura said that Toyo's business today is the import and export of calculators and their components, but in the 1970s the company was involved in exports for development projects in the Philippines. The company had no business there after 1978 because of low profitability, which he said was caused partly by high fees paid to middlemen.
A spokesman for Mitsui and Co., Japan's second-largest trading firm, said yesterday he could not understand why its name had appeared in the Marcos documents in connection with a certain development project, because it had not won the contract. C. Itoh and Co., Japan's third-largest trading house, said references to it in the documents actually show that it was not paying commissions in the Philippines.
An unsigned Argenit memo addressed to "Sir:" reports that Caterpillar's regional manager in Hong Kong "has refused to honor previous commitment" apparently regarding the supply of construction equipment under a contract received by Toyo. "May I request clearance to award same to Komatsu, who has executed a letter of commitment to the corp. for 15 percent. (Pls refer to letter of Mr. Kotake.)" Komatsu Ltd. of Japan is Caterpillar's chief worldwide rival.
The Kotake letter reports that "our negotiation with Caterpillar was not successful." Of Caterpillar's Hong Kong manager, Kotake said, "this American is very hard to talk to . . . he insists that our commission is too much and is now asking us to reduce it. So please give up Caterpillar, and give it to Komatsu."
Caterpillar officials, who have not seen the Marcos documents, had no comment on the specific transaction.
"We aren't surprised" at the reference to the lost contract, said one senior official. "We've lost a lot of business over the years in the Philippines and elsewhere because we will not pay bribes or kickbacks. We have a code of conduct that prevents us from doing so."
Takeshi Yokota, a director of Komatsu Ltd., said, "We have had no business with Toyo Corp. From time to time, we have business in the Philippines, but it is always through major trading companies." Kotake reportedly wrote that Komsatsu might pay a 15 percent commission, but Yokota said his company had never heard of such a thing.
Sumitomo Corp., also a trading company, announced yesterday it had paid about $213,000 in 1979 to an agent, but said it was a legitimate commission on a sale.
In another development, the Philippines' new natural resources minister, Ernesto Maceda, was quoted by Japan's Kyodo News Service as saying Japan had been an important market for timber smuggled out of the Philippines during Marcos' rule. Maceda reportedly said that 938,000 cubic meters of logs were unloaded in Japan from January to November 1984, but the authorized export quota was only 599,082 cubic meters. The excess could have been worth as much as $55 million, he said.
Many of the logs were owned by cronies or relatives of Marcos, as well as military men associated with Gen. Fabian Ver, his armed forces chief of staff, Maceda said. He said a task force had been created to stop log smuggling within 90 days, and predicted it would mean a shortage in Japan, which takes 85 percent of the Philippines' log exports.