Lucio Tan - Into the light

PCIJ January – March 1999
Lucio Tan - Into the Light
Demonized by his foes, Lucio Tan is hailed a hero by the new administration.
by Sheila S. Coronel
LUCIO TAN is obviously uncomfortable with the camera. He looks at it with a plastic grin that barely masks the grim forbearance with which he faces crowds.

Yet, unknown to many, both men go a long way back. The president himself said so last April, at the height of the election campaign, when he was guest at a dinner at the Tan-owned Century Park Sheraton Hotel for the managers of the tycoon’s sprawling business empire. “Alam ninyo, itong si Mr. Tan, mayor pa ako ng San Juan, magkaibigan na kami (Mr. Tan and I have been friends ever since I was mayor of San Juan),” Estrada told the gathering, according to Salvador Mison, a retired general who heads Tan’s management company, Basic Shareholdings, Inc.

Mison remembers a smaller and more intimate dinner just days before the May 11, 1998 elections, this time at the Tan residence on Biak-na-Bato street in Quezon City. Lucio Tan and his brothers were there, as were key officials of Tan companies. Estrada came with Senator Franklin Drilon, both of them assuring the tycoon about the prospects of the campaign. Tan was, after all, not only Estrada’s long-time friend; it is widely acknowledged that he was also a major donor to the Erap campaign. Although the tycoon is not included in the list of contributors submitted to the Commission on Elections, his brother Harry is shown as having contributed P3 million to the ruling party. Well-placed sources in the Erap camp, however, estimated Lucio Tan’s donation at P1.5 billion.

Not only that, says Mison, the resources of the Tan companies—trucks, distributors, salesmen and other employees—were mobilized for Estrada, as they were for Ramon Mitra in 1992 and Ferdinand Marcos in 1986. The grassroots sales and distribution network of Tan’s cigarette and liquor conglomerate is an asset to any campaign. Extending to the remotest reaches of the archipelago, it is rivaled only by San Miguel Corporation, the biggest company in the country.

To the politically sophisticated, this is nothing new. Money is a central feature of Philippine elections, and businessmen have invariably bankrolled campaigns. The conventional wisdom is that a campaign contribution is an investment that guarantees access and favorable treatment once the recipient of the contribution is elected. Ethnic Chinese businessmen have traditionally been the big spenders: Before the 1970s, when they were awarded Filipino citizenship, their uncertain status made their enterprises vulnerable to political intervention and election contributions were an insurance against shakedowns. Citizenship made Chinese-Filipino businessmen more secure, but unlike native Filipino entrepreneurs, who have access to high officials through family networks, the ethnic Chinese are outsiders who literally have to buy political influence.

Lucio Tan just happens to play this role on a far grander scale than any other Chinese-Filipino businessman before him. Moreover, the questionable origins of his business empire and his unorthodox business practices make him a controversial character. But more than that, the sheer obstinacy—and audacity—with which he has taken on the Aquino and Ramos governments stand in stark contrast to the generally politically safe and compliant behavior of ethnic Chinese tycoons. His high-profile support for Estrada also breaks the traditional mold of Chinese businessmen putting their money on both sides to avoid political controversy.

Not surprisingly, the image of Lucio Tan—whose multibillion-dollar business empire makes him probably the richest man in the Philippines and who is facing legal charges for evading over P26 billion in taxes—side by side with Joseph Estrada, as president the most powerful individual in the land, makes many Filipinos shudder. In a country where the intimacy between wealth and power has had such disastrous results and where businessmen with access to Malacañang had always ended up looting the nation’s coffers, the alarm bells were sure to ring.

Says Solita Monsod, economics professor and former economic planning secretary: “Lucio Tan is a role model for the worst kind of conduct as far as our national economic objectives are concerned. He signals that you can evade taxes and get away with it, pay the courts and get the judges to decide in your favor, get good lawyers and delay your cases. The messages that are given by the kind of treatment that he gets from the government are the antithesis of what we need for sustainable development: an even playing field and government intervention of the right kind.”

TAN’S DEFENDERS, though, portray him a victim of elitism and racism. In the 1950s and ‘60s, Eugenio Lopez Sr. was as audacious in his dealings with the government. Today, if a blueblood Lopez or Ayala were seen publicly so cozy in presidential company (as indeed Jaime Zobel de Ayala was during the Aquino administration), most people would probably shrug it off as their birthright. But Tan stirs things up not because he is believed to be evading taxes or paying off politicians—after all, many businessmen in this country do so—but because of the magnitude of his alleged sins: supposedly billions of pesos in unpaid taxes and outsized campaign contributions that make politicians too beholden to one man. There is, moreover, the discomfiting fact that Tan is a parvenu, a Chinese upstart, an outsider. Tradition dictates that his place is in the shadows.

Which was where, not too long ago, Lucio Tan was. His beginnings are as obscure as they come; his story, the classic émigré rags-to-riches tale. Born in 1934 to a struggling immigrant family in Naga, he worked his way through college, set up a business dealing with scrap in the late 1950s, and also found employment in a cigarette factory, where he was assigned to buy leaf tobacco in the Ilocos provinces. This was where Tan probably encountered the young congressman Ferdinand Marcos, says a long-time associate who asks not to be named. Politicians were then, as now, very much involved in the trading of the region’s biggest cash crop, and were often dealing directly with the ethnic Chinese traders who were buying it.

By the time Tan ventured off on his own and set up Fortune Tobacco in 1966, Marcos had just been elected president. Fortune grew phenomenally after martial law, thanks to generous tax and other incentives (at one point, it would later be alleged, the Bureau of Internal Revenue allowed Tan to print his own cigarette stamps). By 1980, Fortune was the country’s biggest cigarette manufacturer. Today, it accounts for over half of the cigarettes sold in the country and buys 75 percent of all the tobacco produced here.

In 1977, Tan acquired from the government the bankrupt General Bank and Trust Co. for only P500,000, in what is widely described as a sweetheart deal. Genbank is now Allied Bank, one of the country’s top banks. In 1982, Tan put up the Asia Brewery, benefiting from a Marcos ruling that lifted the ban on the establishment of new beer companies.

Without doubt, Tan has extraordinary business acumen, but like other businessmen close to Malacañang during martial law, he flourished not only because he was “smarter than others” but with the help of generous incentives from the Marcos regime. Such generosity came with a price. As Marcos’s financial adviser, Rolando Gapud, revealed in an affidavit issued in 1987 to the Presidential Commission on Good Government (PCGG): “I know that Mr. Marcos and Mr. Lucio Tan had an understanding that Mr. Marcos owns 60 percent of Shareholdings, Inc. which owns shares of Fortune Tobacco, Asia Brewery, Allied Bank and Foremost Farms...Mr. Lucio Tan, apart from the 60 percent equity of Mr. Marcos, had been regularly paying, through Security Bank, P60 to P100 million a year to Mr. Marcos, in exchange for privileges and concessions Mr. Marcos had been giving him.”

In 1986, when Marcos was fighting for his political life, Tan gave him full support, even busing employees to the ailing dictator’s rallies. Romeo Magtubo, Fortune Tobacco’s union president who is now a party list representative in Congress, recalls how the factory’s workers were loaded into “Love Buses” and sent en masse to cheer for Marcos, after which they were given allowances by the company for their effort.

When Marcos fell and Corazon Aquino became president, Tan, like other Marcos cronies, was out of favor. The PCGG investigated his companies, several of his firms were sequestered, and he found himself, at least in the beginning, without a lifeline to Malacañang. What transpired in the next 12 years is a remarkable story of how a politically savvy tycoon has subverted government efforts to keep him in line and tame his influence. Tan’s triumph, his journey from the shadows into the light, shows the power of money and connections, the weakness of government, and the vulnerability of individuals and institutions.

Dr. Fu-Manchu lording over the Filipinos!