US on the Trail of the Marcos millions

By Lucy Komisar
Asia Times, Jan 8, 2003

At a time when the integrity of global accounting firms is being questioned, the US Securities and Exchange Commission (SEC) and Justice Department are looking into charges that KPMG Zurich, a division of the international audit company, helped Credit Suisse hide hundreds of millions of dollars looted by the late Philippine dictator Ferdinand Marcos. A KPMG spokesperson confirmed the investigation.

Dan Burton, a conservative Republican congressman, wrote the SEC that he had been informed that the agency has been presented with evidence against KMPG concerning money-laundering and subversion of a joint Philippine and Swiss freeze order for a series of accounts containing millions of US dollars. Burton, a member of the US House of Representatives International Relations Committee, requested prompt action by the SEC in seeking out the truth. The SEC passed on its information to the Justice Department.

The freeze order had been issued by the Swiss Banking Commission in March 1986, after Marcos was ousted. Documents supplied to the SEC purport to show that the funds were moved to Liechtenstein foundations controlled by KPMG and Credit Suisse, both in Zurich. KPMG – then known as Fides – had been a Credit Suisse subsidiary until a few years before.

KPMG Zurich is a member of KPMG International, headquartered in Amsterdam, which includes the giant British audit firm of the same name. Credit Suisse is part of the Zurich-based Credit Suisse Group, the world’s third-largest private banking group, which owns the Credit Suisse First Boston and Credit Suisse Asset Management in London. Credit Suisse spokespersons in Zurich and New York declined to speak about the investigation. KPMG spokesperson Kate Maybank in London said, We are aware of it, but it isn’t something we would make any comment on.

The key documents in possession of the US government include:

Records found in Malacanang Palace after Marcos fled that detail transactions involving his foundations and accounts in Switzerland and Liechtenstein.

An affidavit from a Philippine banker who said that in March 1986 he was given power of attorney by Marcos to move his money out of Switzerland. The banker, Michael de Guzman, said a Credit Suisse official in Zurich told him the transfer order was unnecessary because Marcos’ foundations and account names had been changed to ensure that neither the Philippine government nor Swiss authorities would get the Marcos deposits and investments.

The testimony of Marie-Gabrielle Koller, a former lawyer for KPMG in Zurich, who told a French parliamentary committee, and attempted to interest the US Justice Department in, her account of how officials of Fides moved the Marcos money. She said she learned from colleagues in 1997 how their predecessors had worked to hide the accounts to beat an expected freeze order.

During his 20 years in power, Ferdinand Marcos routinely siphoned off cash from the treasury, pocketed bribes, and stole money from International Monetary Fund and World Bank loans and US foreign aid. When I was in the Philippines in 1986 to cover the political turbulence that ended with Marcos’ overthrow, US embassy officials told me that the Central Intelligence Agency had calculated that the dictator had stashed US$5 billion outside the country. His favorite bankers were the Swiss, and among them Credit Suisse.

From 1928, Credit Suisse had an accounting subsidiary called Fides Trust. Fides would split several times, yielding the present Credit Suisse Trust (Vaduz) and KPMG Fides (Zurich). KPMG Fides continued to provide audit and tax advice to Credit Suisse. In its annual report, KPMG lists as an affiliate Limag AG, which happens to be located in the same building as Credit Suisse Trust in Vaduz, the capital of Liechtenstein. Credit Suisse, KPMG Fides and Limag Management AG maintain a tight relationship, with easy communication as the cities are just 116 kilometers apart.

Limag is a fiduciary, or asset manager. Documents found at the presidential Malacanang Palace showed that Limag had set up Marcos foundations on whose boards Limag president Ivo Beck and vice president Ulrich Siegfried served. Liechtenstein foundations, or Anstalts, are not required to keep books, present balances to tax authorities, or undergo any state supervision. They are shells notoriously used by money launderers. Malacanang documents showed that Fides Trust and Credit Suisse officials sat on Marcos foundation boards.

After Marcos fled to Hawaii aboard a US military plane on February 28, 1986, Philippine banker Michael de Guzman, then 38, thought he could pick up some easy cash. He knew the son of Marcos’ security chief, and so he visited the dictator in Honolulu and, as he later described in a 1986 affidavit, offered to move his money to his Export-Finanzierungsbank GmbH, Vienna, which had impenetrable bank secrecy. Marcos gave him a power of attorney and had his son Bong Bong alert Ernest Scheller, a senior vice president and principal contact for Marcos at Credit Suisse.

Credit Suisse officials informed the Swiss government of the transfer attempt. According to de Guzman, when he arrived March 24, he was informed by Scheller that the Banking Commissioner had decreed that all Swiss banks must monitor movements of accounts directly related or even indirectly related to Ferdinand E Marcos and his family. He said Scheller told him that two weeks earlier that he had received instructions from a Marcos aide to hide accounts – that funds and assets had been transferred to Fides Trust. De Guzman said that when he asked for account statements, Scheller replied they weren’t available, because Fides people were in the process of moving the accounts and foundations.

That evening, the Federal Council (the Swiss cabinet) issued an emergency order freezing assets of Marcos, his family, his corporate entities, and cronies. It was the first time the Swiss had frozen a dictator’s accounts.

De Guzman returned in the morning and learned of the freeze. Gustave-Adolphe Rychner, a senior Credit Suisse officer, told him that foundations and account names had already been changed, that neither the Philippine government nor Swiss authorities would be able to freeze Marcos’ deposits and investments.

The Malacanang documents revealed that the Marcoses and their cronies had 60 accounts under the names of 17 foundations at six Swiss banks, including Credit Suisse in Zurich, and in New York, where securities and gold were kept in a Marcos sub-account of the Credit Suisse account at Swiss American Securities Inc (SASI).

Weeks after the dictator’s escape, Philippine authorities had opened a criminal action against Marcos and consorts and on April 7, 1986, lawyers officially asked Bern for legal assistance. The request cited documents indicating where stolen money had gone – to Credit Suisse Zurich; Societe de Banques Suisse in Fribourg and Geneva; Banque Paribas, Geneva; Bankers Trust, Geneva and Zurich; Banque Hoffman & Cie, Zurich; and Banque de Paris et des Pays Bas, Geneva.

The Philippines also sought information from Swiss banks relating to securities deposited in foreign countries, in particular in Liechtenstein (Limag AG and the foundations certainly) or in New York (SASI New York through Credit Suisse). And the request named 15 individuals, including the Credit Suisse and Fides officials who had worked with Marcos accounts.

But the Swiss investigative magistrates and prosecutors refused to act. There would follow years of efforts by the Philippines to recover the Marcos money and years of stonewalling by Swiss banks, helped by their government. The only person the Swiss district attorney ever interviewed was Markus Geel, Credit Suisse general counsel.

Not until the Philippines gave Swiss authorities documents about specific accounts did Bern announce that those and only those were the ones it had frozen, valued at $356 million in Credit Suisse and Swiss Bank Corp. It wasn’t until December 1990 that the Swiss Supreme Court authorized the transfer of the Swiss bank documents to Manila authorities. The banks denied records on 51 other accounts identified by the Philippine government.

A chance event in 1997 would lead to another revelation about the events of 1986. Fides had gone through various splits and spawned KPMG, Zurich. Marie-Gabrielle Koller, a Canadian lawyer, had started work there in 1996 and was assigned the Credit Suisse account.

She’d left her previous job in Liechtenstein after she discovered that her boss was involved in a scheme to sell improperly tested blood. She told Liechtenstein authorities about the blood scheme and, after a Swiss inquiry, a prosecutor called her to testify. Her ex-boss’s accounts were in Credit Suisse and he was a good friend of a director of Credit Suisse Trust. Koller says KPMG fired her that same day at the behest of Credit Suisse, the firm’s principal Swiss bank client.

In May 2000, Koller told a French National Assembly parliamentary commission investigating money laundering in Switzerland that KPMG/Fides had moved the Marcos money. She had learned about the transfers to Liechtenstein from officials of Limag AG and KPMG Fides who allegedly bragged about how clever the firms had been in not being caught by legal actions after Marcos fled the Philippines.

She recounted how staff had worked through the night to redocument accounts holding $400 million and that Limag resolved Liechtenstein officials’ nervousness by giving a well-paid board chairmanship to Prince Constantin, the 70-year-old cousin of the ruling Prince Franz-Josef II. Officials of the companies denied the charges.

The money with interest now would approach $1 billion.

Last year Koller approached the US Justice Department via Virginia lawyer David Smith, a former associate director of the department’s asset forfeiture office. Smith on June 28, 2001, sent New York Federal Bureau of Investigation (FBI) agent Mark Lauer a fax that said, I hope you find the attached e-mail letter from Koller useful. Have you had a chance to read the write-up I previously sent you? Have you circulated it to others at the bureau or in the US Attorney’s Office? Is there any interest? It’s very frustrating to us, because we believe the information is extremely valuable. As far as we know, the government hasn’t followed up on any of it, even the Marcos stuff that asset forfeiture & money laundering said it was interested in. I may send a copy to Mr Freeh. Louis Freeh was FBI director from 1993-2001.

Smith and Lauer said they could not discuss the matter. Justice Department and FBI spokespersons also declined to comment.

Did Marcos money end up in Liechtenstein? The German Intelligence Agency in a classified February 2000 paper cited several Vaduz asset managers that it said handled Marcos money and were also launderers for drug traffickers. Asked to authenticate the document, a BND press spokesperson replied by e-mail, We certainly regret that the report you mentioned has been leaked. Yet we do not wish to comment [on] this issue any further and hope you will understand.

Zurich district attorney Peter Cosandey and his successor Dieter Jann have never interviewed any of the bankers or fiduciaries who dealt with Marcos accounts. Cosandey said, As far as I remember, I interviewed a guy from Credit Suisse, Markus Geel of the legal department of the bank. No others? The Philippines didn’t ask for it. That is contradicted by the Philippine legal assistance request.

When in 1998 Cosandey quit as the official Swiss searcher after the Marcos plunder, he was appointed partner and director of Forensic and Litigation Services at KPMG Switzerland.

Article on Asia Times Site.

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One Response to "US on the Trail of the Marcos millions"

  1. Gracie   Nov 7, 2007 at 6:00 pm

    That’s why Imelda must go to jail!!! For crying out loud, so much evidence!!! Wake up Pinoys. From Pinoys in Europe


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