Saving Mr. Tan

The Manila Times

Monday, December 21, 1998

Charivari

By FRANKIE LLAGUNO

PRESIDENT Joseph Estrada is trying to save Lucio Tan on two fronts: a P25 billion tax evasion case and the crash of Philippine Airlines. In both cases, it may be at the expense of Filipino taxpayers.

When the Ramos administration filed the tax evasion case against Tan's Fortune Tobacco Corp., in 1993 Tan's supporters cried political persecution.

Tan allegedly backed Eduardo Cojuangco Jr. in the 1992 presidential election which Fidel Ramos won.

For being on the wrong side of the political fence, it is claimed that Tan was punished with a mega tax evasion suit.

Now the wheels of political fortunes have turned: Tan, a leading financier of Estrada in the May 1998 presidential elections is eager to collect a political debt.

In saving Tan from his tax case, Malacañang has given the old political persecution argument a new twist.

Why single out Tan when there could be other big tax evaders, using the same dummy marketing arms and ghost buyers in order to pay lower ad valorem taxes, in the cigarette industry?

That appears fair enough. But while Tan may have been singled out by the Ramos administration, it doesn't mean that he was innocent of the tax evasion charges.

But the myth of this more fair coverage was shattered when the Bureau of Internal Revenue (BIR) tripped the Department of Justice who had refiled the suits against Tan.

On Dec. 8, the BIR chief Beethoven Rualo asked a Marikina Metropolitan Trial Court to withdraw the case because the evidence against Fortune Tobacco Corp. was not strong enough.

Cuevas caves in

DOJ Secretary Serafin Cuevas, who has been asked by Malacañang to toe the BIR line, insists that the government's case against Tan is strong enough to merit DOJ's refiling.

And besides, he said, it is the courts, not Malacañang who is the competent body to assess the evidence at hand.

Former BIR Chief Liwayway Vinzons Chato insists that the BIR has collected enough evidence to convict Tan (see yesterday's TIMES report by Richel Langit).

Chato said that the same people who investigated Fortune and unearthed the evidence against Tan in 1993 are the ones now claiming there was never any evidence to begin with.

The question is whether Osias Baldovino, Chief of BIR's Appellate and Litigation Division, who filed the motion to withdraw before the Marikina court last Dec. 8 was lying in 1993 or lying today.

To add to Cuevas' isolation, Malacañang has also asked Finance Secretary Edgardo Espiritu to evaluate the strength of the government's tax evasion case against Tan.

Invoking his role as a team player and “after ago of the president,” Cuevas seems to have bowed to Malacañang full court press.

If he wants to pursue the case out of principle—he was apparently not in communication with the set play of the Malacañang team—but is blocked by his own team mates, the honorable thing to do is resign.

By aborting a ruling on the evidence by the courts, the public has been deprived of the satisfaction of finding out whether or not there was a strong case against Tan.

If there was Malacañang, lawyering for Tan, has deprived the Filipino people of billions of Pesos in cigarette taxes.

PAL's pal

On a parallel track, President Estrada has been moving heaven and earth to save Tan's Philippine Airline from crashing out of existence.

“With $2.2 billion in debt, plunging revenues, and losses of close to $1 million a day, Asia's oldest airlines is in desperate shape,” reports the New York Times (“Philippine Airlines May Not Survive Bailout,” by Andrew Tanzer. Dec. 19).

Most options run out when negotiations for Cathay Pacific Airways to acquire a stake in PAL collapsed earlier this month.

“The rescue effort is not just huge, it is astronomical,” Nicholas Ionides, a Singapore-based editor of Transport Intelligence, a news agency that covers the industry, told the NYT. "The question is, do you keep an airline like this alive for pride reasons? My opinion is that they should just shut it down.”

Some analysts, notes the NYT, assert that other carriers already serve the most critical domestic and international routes, and "that a new airline—without PAL's baggage—could soon assume the mantle offing carrier.”

“If you are nonemotional about it, there is no loss,” David Sherman, a consultant who specializes in transportation at A.T. Kearnye in Hong Kong, also told the NYT. "If you are emotional about it, this is a tragedy.”

The NYT notes that Estrada, wary of foreign investor opinions, has so far refused to inject public money to rescue PAL.

But: "As the losses pile up, though, Philippine Airlines will be an acid test for the movie star-turned-politician, who has been in office for six months. Estrada may find it hard not to help a friend in need, even if it reinforces the image of the Philippines as a den of crony capitalism."

Estrada on trial

The NYT notes some steps requested by PAL and responses by key Malacañang officials that will test whether or not Estrada will help his friend in need.

Recently, PAL asked Malacañang to cut back flights open to foreign carriers to pre-Ramos levels.

Finance Secretary Edgardo Espiritu said the government would probably grant the request to reverse the "unhealthy actions" of the Ramos administration.

Espiritu has also asked several government-affiliated banks, especially. the Philippine National Bank, to make bridge loans to PAL.

Cutting foreign and domestic competition will prove costly to airline passengers, Filipinos and foreigners alike.

Huge bridge loans to PAL could deprive taxpayers' money from making better gains from safer investments.

The question may be asked: in snatching Lucio Tan from the jaws of BIR, is not Estrada trying to ease Tan's huge losses in PAL?