Suit Accuses Marcoses of $5-Billion Crime Scheme

Former Philippine President Ferdinand Marcos and his wife, Imelda, employed a series of elaborate financial schemes to build illegally a $5-billion fortune during his 20 years in office, the Philippine government has alleged in new documents filed in federal court in Los Angeles.

The documents, in providing the most detailed account to date of how the Marcoses’ wealth was accumulated, attempt to portray the couple as sophisticated schemers who ran the nation as if it were their personal enterprise.

They describe, for instance, how the Marcoses allegedly received payment of $20 million in interest by a Philippine bank. The bank paid the couple for the “privilege” of using money that the Marcoses had looted from the national treasury, the documents allege.

Filed late Tuesday to amend a 3-year-old civil suit lodged by the Philippines against the Marcoses, the court papers allege that the Marcoses embezzled Philippine money and property and extracted kickbacks from foreign and domestic companies doing business in the Philippines. They allege further that the Marcoses stole money from government-owned financial institutions, converted to their own use foreign aid money designed to benefit ordinary Filipino citizens and engaged in illegal money laundering to conceal the funds from authorities.

The lawsuit was originally filed in June, 1986, in U.S. District Court in Los Angeles. The case, one of several actions pending against the couple, is being pressed in the United States because the Philippine government believes that many of the Marcoses’ assets are now in this country.

The suit seeks $50 billion in damages. The theory of the case is that Marcos, from 1965 to 1986, ran the Philippines as a racketeering enterprise. Last year, the Marcoses were indicted in federal District Court in New York based on a similar set of allegations. There also are 39 cases pending in the Philippines seeking to recoup money and other assets that the Aquino government contends the Marcoses obtained illegally.

Marcos left the Philippines on Feb. 26, 1986, shortly after it became clear that a majority of the citizenry had shifted its support to current President Corazon Aquino, the widow of one of his longtime rivals. Today, Marcos is believed to be gravely ill in a Honolulu hospital.

The papers filed this week represent “the most complete (public) description to date” of the Marcoses’ alleged illegal activities, said Ronald L. Olson. Olson and Alan D. Bersin head a team of lawyers at the Los Angeles firm of Munger, Tolles & Olson, which is representing the Philippine government.

The documents include a list of bank accounts controlled by the Marcoses and their associates, including the numbers of accounts of three banks in the Philippines, seven in Switzerland, five in Hong Kong, one in Lichtenstein, and one in England.

The documents also list numerous corporations, some of them “dummy firms” and several sham foundations used to perpetrate the alleged racketeering acts in the Philippines, the Netherlands Antilles, the Grand Cayman Islands, the Channel Islands and other places.

Another exhibit is a 23-page U.S. Customs Service inventory of the thousands of gems and other property and cash that the Marcoses took to Hawaii in February, 1986.

These include, for example, a set composed of a bracelet, earrings and a brooch consisting of sapphires, rubies and diamonds valued at $1.5 million by the Customs Service.

The jewels were brought into the country on one of two planes provided to the Marcoses by the Reagan Administration when they fled the Philippines. Much of the inventory consists of expensive jewelry, often multiple copies of the same item, and several million dollars in Filipino pesos.

A red russet leather suitcase contained 93 separate jewelry items, ranging from a $5 earring to a brooch of Burmese ruby and diamonds worth $290,000. The inventory also included five handguns.

All of the possessions contained in suitcases, crates, attache cases and boxes are still in the possession of the Customs Service in Honolulu. The Marcoses are attempting to regain control of the guns, jewels and money in an action currently pending in federal court there.

The Marcoses and “their accomplices” used a bevy of dummy corporations, sham foundations and other entities to facilitate the illegal deals starting in 1965, according to the third amended complaint in the complex lawsuit.

The suit--formally titled Republic of the Philippines v. Ferdinand E. Marcos et. al.--asserts that the Marcoses violated U.S. law by transporting stolen money to the United States and concealing investment of the funds through cronies and offshore companies.

There currently are nine defendants in the case: Marcos and his wife, now living in Honolulu; Adnan Khashoggi, a Saudi Arabian mogul now in custody in Bern, Switzerland; Roberto D. Benedicto, a longtime Marcos associate who is now a fugitive from federal criminal charges in New York stemming from many of the same incidents described in the Los Angeles case; the California Overseas Bank in Los Angeles and Redwood Bank in San Francisco, which allegedly were controlled and misused by Marcos and his associates; and three offshore corporations, Krodos Properties, N.V., of the Netherlands Antilles, Al Djebel Corp. of the Cayman Islands and Lei Investments Ltd. of the Channel Islands.

John J. Bartko, a San Francisco attorney who represents the Marcoses, was unavailable for comment Wednesday. Frederick J. Hoey, chief administrative officer of Redwood Bank, said he had not been served with papers in the case and therefore would not comment. Lawyers or representatives of the other defendants did not return calls seeking comment.

The allegations contained in the lawsuit are based substantially on information gathered by a special Filipino commission created to investigate the Marcoses after they left the country.

The court documents allege that some of the illegal acts have continued since the Marcoses fled to Honolulu in February, 1986, in direct violation of a court order issued here in June, 1986, by U.S. District Judge Marianna R. Pfaelzer freezing their assets worldwide.

In particular, according to the documents, a foreclosure sale was conducted in February, 1988, in order to transfer ownership of a large Beverly Hills house to Krodos, the Netherlands Antilles company, “in order to conceal” the Marcoses’ partial ownership of the property, which was once owned by actor George Hamilton. The papers assert that the sale was conducted in violation of Pfaelzer’s order.

The papers also assert that Pfaelzer’s order was violated by Marcos setting up a phony $200-million line of credit agreement with Saudi Arabian businessman Mohamaad Al-Fassi. The purpose of this arrangement, according to the papers, was to allow Marcos to move some of his hidden funds into a new account in order to circumvent the asset freeze.

The papers contend that $2.4 million was moved illegally and spent before Al-Fassi’s attorney, Richard Hirschfeld, told a congressional committee in July, 1987, that he believed Marcos planned to use the money to invade the Philippines and seize power.

After Hirschfeld testified, the U.S. government ordered Marcos not to leave Honolulu. He currently is in St. Francis Hospital, being sustained by life-support machines.

Many other transactions also are delineated in considerable detail. They allege, for instance, that from July, 1965, to February, 1986, the Marcoses garnered $53 million in “kickbacks” on contracts negotiated between the government and seven Japanese as part of a war reparations treaty.

And the papers list a number of companies controlled by Marcos, his family members and associates, including firms used to siphon off from the government treasury proceeds from the sale of sugar, coconuts and other commodities. Between 1975 and 1978, the Marcoses illegally obtained $7 million as a result of sales from one sugar contract, the documents state.