Enrile seeks probe of coco levy investment fund

Senate President Juan Ponce Enrile today pushed for an investigation of the reported P1.5 billion net operating losses incurred by the Coconut Industry Investment Fund Oil Mills Group (CIIF-OMG) from 2005 to 2007.

In filing Senate Resolution 389, Enrile said he wants to find out what actions were taken by the Presidential Commission on Good Government (PCGG) to address the CIIF-OMG's financial difficulties during the three-year period and to assure the continued preservation and conservation of sequestered assets.

Enrile said the probe also seeks to know why the P1.7 billion representing cash dividends on SMC shares that were paid to the 14 CIIF Holding Companies were caused to be transferred to the CIIF-OMG companies to allegedly cover for the accumulated losses and to settle certain maturing operations of the CIIF-OMG companies with various creditors.

Notwithstanding the fact that a turn-around was made following the appointment of a new leadership in the CIIF-OMG in 2009, leading to positive operating incomes of P82 million in 2009 and P171 million in 2010, Enrile said, an inquiry should be made to determine whether irregularities were committed in the transactions and operations of the CIIF-OMG that resulted in huge losses during the said 3-year period.

Enrile said he also wants to determine whether the PCGG had adopted timely and adequate remedial measures to address the problem considering that former PCGG Chairman Camilo Sabio was concurrently the chairman of all the CIIF-OMG companies and 14 CIIF Holding Companies as well as a member of the Board of Directors of the United Coconut Planters Bank during the period in question.

It is estimated that the aggregate value of the plants and properties of the CIIF OMG companies together with the SMC shares now amounts to at least P150 billion.

Enrile said it is "paramount that the government undertake the necessary steps to assure the continued preservation and conservation of the assets of the CIIF OMG companies and the 14 CIIF Holding Companies and prevent their dissipation for the benefit of the 3.3 million coconut farmers of the country."

Presidential Decree No. 276 issued August 20, 1973 established the Coconut Consumers Stabilization Fund (CCSF) for the purpose of stabilizing the retail prices of coconut-based consumer products like cooking oil, laundry soap and filled milk which were steadily increasing at the time as a result of high prices of coconut oil in the world market. Later, the Coconut Industry Development Fund Levy (CIDF) was imposed to finance, among others, various coconut planting and replanting programs, coconut research and extension services programs, establishment of model plantations including the propagation of hybrids, and acquisition of coconut related industries and the operations of such industries. All these were supposed to benefit the coconut industry in general and coconut farmers in the country in particular.

A portion of the coco levy funds, or roughly P2.572 billion, was used to acquire certain companies engaged in the business of coconut oil milling and refining. These were Legaspi Oil Company Inc., San Pablo Manufacturing Corporation, Cagayan de Oro Oil Co. Inc., Southern Luzon Coconut Oil Mill Inc., Granexport Manufacturing Corp. and Iligan Coconut Industries, Inc., which formed a conglomerate now commonly referred to as the Coconut Industry Investment Fund Oil Mills Group.

Through loans obtained from the banking sector, the CIIF-OMG through 14 subsidiaries acquired P1.656 billion worth of common shares of stocks in San Miguel Corporation in 1983.

On suspicion that CIIG-OMG companies and its subsidiaries including the SMC shares formed part of the ill-gotten wealth of former President Ferdinand E. Marcos and certain individuals, the PCGG sequestered the CIIF-OMG Companies, the 14 CIIF Holding Companies and SMC shares in 1986. Consequently, the government instituted a suit before the Sandiganbayan asserting ownership over and title to the CIIF-OMG companies, the 14 CIIF Holding Companies and the SMC shares.

As a result of the sequestration, the government through PCGG wielded effective control of the CIIF-OMG companies, its subsidiaries and the SMC shares as it had caused from time to time the election of its nominees in the boards of directors of all the CIIF-OMG Companies and its subsidiaries, including the appointment of the group's President/Chief Executive Officer.

Through the years, and because of its substantial exports of crude coconut oil and other bi-products, the CIIF-OMG generated respectable operating incomes that were always plowed back to the CIIF-OMG companies to fund working capital requirements, capital expenditures and coconut industry related developmental projects all for the benefit of the coconut industry and coconut farmers.

Reports indicate that upon the direction of the PCGG, the SMC shares have been converted into preferred shares and have now a redeemable value in the aggregate sum of roughly P60 billion.

On May 7, 2004, the Sandiganbayan (First Division) in Civil Case No. 0033-F, rendered a Partial Summary Judgment declaring that the CIIF OMG companies, 14 CIIF Holding companies as well as the SMC Shares are owned by the government "in trust for all the coconut farmers", thus ordering their reconveyance to the government. However, this judgment has not been implemented pending final determination of the case involving said assets.