PRESIDENT ESTRADA’S

BW RESOURCES SCANDALLAWRENCE BAUTISTA

NICO EBORA

MISHAEL BELOCURA

JUSTIN ILAGAN

5IE-A

OVERVIEW

• THE BW RESOURCES SCANDAL WAS A MAJOR STOCK SCANDAL IN 1999 THAT ALMOST PUT THE PHILIPPINE STOCK EXCHANGE INTO COLLAPSE.

• DANTE TAN, A FRIEND OF ESTRADA, FORMED THE COMPANY, BEST WORLD GAMING AND ENTERTAINMENT CORPORATION (BWGE) IN 1998.

• DUE TO THE CLOSE FRIENDSHIP, ESTRADA ALLEGEDLY PROFITED GREATLY FROM THE INCREASE OF THE BW STOCK AT AN ASTOUNDING 18,025% FROM 1998-1999, BECAUSE OF STOCK MANIPULATION BY TAN AND HIS COHORTS.

• IT IS SAID THAT THIS SCANDAL IS LINKED TO THE DACER-CORBITO DOUBLE MURDER CASE.

COMPANY PROFILE: BEST WORLD (BW) RESOURCES INC.

• A SMALL GAMING COMPANY IN THE TRAVEL AND LEISURE INDUSTRY, FORMED IN 1998 BY DANTE TAN.

• BOTH BWGE AND BW RESOURCES ARE SUBSIDIARIES OF BW.

• BECAME CERTIFIED BY THE SEC IN 1998, LISTED AT THE PHILIPPINE STOCK EXCHANGE.

• MAJOR STAKEHOLDER WAS STANLEY HO, A GAMING TYCOON IN MACAU.

• CHANGED ITS NAME TO FAIRMONT HOLDINGS IN 1999, AND THEN SUN TRUST HOME DEVELOPERS INC. IN 2000. IT IS NOW IN THE REAL ESTATE DEVELOPMENT, STILL LISTED AT THE PSE.

THE BEGINNING• IN 1999, TAN BECAME A MAJORITY SHAREHOLDER

OF A TOURISM AND LEISURE COMPANY CALLED BW RESOURCES AND BWGE BECAME A WHOLLY-OWNED SUBSIDIARY OF BW.

• ALLEGEDLY DUE TO TAN’S CLOSE RELATION WITH PRES. ESTRADA, TAN’S COMPANIES WERE ABLE TO SECURE GAMBLING LICENSES FROM THE PHILIPPINE AMUSEMENT AND GAMING CORP. (PAGCOR).

THE ENDORSEMENT• IN DECEMBER 1998, BWGE WON THE EXCLUSIVE CONTRACT TO

OPERATE A NATIONWIDE ONLINE BINGO FRANCHISE AS WELL AS THE JUETENG-LIKE QUICK PICK-2 GAMBLING GAME.

• ALICE REYES, THEN CHAIR OF PAGCOR, LATER TOLD A CONGRESSIONAL HEARING THAT BWGE GOT THE ONLINE BINGO LICENSE BECAUSE “IT HAD THE ENDORSEMENT OF THE OFFICE OF THE PRESIDENT.”

• IN 1999, BW AND BWGE WAS ALSO ABLE TO CO-BORROW P600 MILLION FROM THE PHILIPPINE NATIONAL BANK (PNB), THEN A GOVERNMENT-OWNED BANK.

THE UPSURGE• THESE DEVELOPMENTS TRIGGERED MASSIVE INTEREST IN THE BW

STOCK FROM STOCK TRADERS AND ANALYSTS

• RUMORS THAT MACAU’S GAMBLING MOGUL, STANLEY HO, WAS COMING IN AS BW CHAIRMAN ALSO FUELED FURTHER STOCK-BUYING, WHICH FURTHER INCREASED THE PRICE OF STOCK.

• ALTHOUGH THE STOCK MARKET WAS STILL IN A BEARISH TREND FOLLOWING THE 1997 FINANCIAL CRISIS, THE BW STOCK BUCKED THE TREND WITH ITS PRICE CONTINUOUSLY RISING.

• AT ONE POINT, IT EVEN BECAME THE MOST TRADED STOCK IN THE PHILIPPINE STOCK EXCHANGE, BEATING PERENNIAL BLUE CHIP STOCK TEL (PHILIPPINE LONG DISTANCE TELEPHONE CO.)

THE SCANDAL• BW RESOURCES A SMALL GAMING COMPANY LISTED ON THE PHILIPPINE STOCK

EXCHANGE AND LINKED TO PEOPLE CLOSE TO ESTRADA EXPERIENCED "A METEORIC RISE” IN ITS STOCK PRICE DUE TO SUSPECTED STOCK PRICE MANIPULATION

• THE ENSUING INVESTIGATION LED ONLY TO FURTHER CONFUSION WHEN THE HEAD OF THE COMPLIANCE AND SURVEILLANCE GROUP OF THE PHILIPPINE STOCK EXCHANGE (PSE) AND HIS ENTIRE STAFF RESIGNED. THE EVENTS CREATED A NEGATIVE IMPRESSION

• THE BW CONTROVERSY UNDERMINED FOREIGN INVESTOR CONFIDENCE IN THE STOCK MARKET AND ALSO CONTRIBUTED TO A MAJOR LOSS OF CONFIDENCE IN THE PHILIPPINES AMONG FOREIGN AND LOCAL INVESTORS ON CONCERNS THAT CRONYISM MAY HAVE PLAYED A PART.

TIMELINE: THE DACER-CORBITO MURDERS AND THE BW SCAM

• 8-APR-98 DANTE TAN IS ELECTED BY SHARE SUBSCRIBERS OF BW CONS. CORP. AS TREASURER OF THE CORPORATION.

• JUN-98 JOSEPH EJERCITO ESTRADA TAKES HIS OATH OF OFFICE AS PRESIDENT OF THE PHILIPPINES. TAN TELLS FRIENDS THAT HE WAS ONE OF THE FIRST CHINESE FILIPINOS TO HAVE BET ON ESTRADA'S PRESIDENTIAL BID, AND HAD BEEN DELIVERING FUNDS LONG BEFORE MAY 1998. HE WAS LISTED AS A CONTRIBUTOR TO ESTRADA'S PRESIDENTIAL CAMPAIGN. AS SOON AS ESTRADA TOOK HIS OATH OF OFFICE IN JUNE 1998, PAGCOR SIGNED AN AGREEMENT WITH BW, PROMISING TO TRANSFER ITS CORPORATE OFFICES AND THREE CASINOS TO SHERATON MANILA, BW'S PLANNED ENTERTAINMENT AND GAMING COMPLEX IN MANILA. 

• DEC-98 BW GAMING WINS THE EXCLUSIVE CONTRACT TO OPERATE ON-LINE BINGO AS WELL AS TO INTRODUCE QUICK PICK-2, WHICH IS VERY SIMILAR TO JUETENG. ALICE REYES, CHAIR OF THE PHILIPPINE GAMES AND AMUSEMENT CORPORATION (PAGCOR), LATER TOLD A CONGRESSIONAL HEARING THAT BW GAMING GOT THE ON-LINE BINGO LICENSE BECAUSE "IT HAD THE ENDORSEMENT OF THE OFFICE OF THE PRESIDENT." 

• MAR-99 PAGCOR CHAIRPERSON ALICE REYES ADMITS THAT BWGE ACQUIRED THE LICENSE “BECAUSE IT HAD THE ENDORSEMENT OF THE OFFICE OF THE PRESIDENT.”

• 18-JUN-99 DANTE TAN OWNS 10% OF BW RESOURCE CORP.

• 30-JUN-99 BW RESOURCES SIGNS A MEMORANDUM OF AGREEMENT WITH PAGCOR. PAGCOR AGREES TO BE THE “ANCHOR TENANT” AT THE SHERATON MARINA.  BW AND BEST WORLD GAMING CO-BORROW P600 MILLION FROM THE PHILIPPINE NATIONAL BANK. THE GOVERNMENT, AT THIS TIME, WAS STILL A MAJOR SHAREHOLDER OF PNB.THE OFFICE OF THE PRESIDENT, THROUGH PAGCOR, GAVE BWGE A NATIONWIDE ONLINE BINGO FRANCHISE. UNDER THE CONSTITUTION, ONLY THE CONGRESS CAN GRANT FRANCHISE TO OPERATE ANY GAMBLING ACTIVITY. ANY GAMBLING ACTIVITY NOT FRANCHISED BY THE CONGRESS IS ILLEGAL.

• JUL-99 SEC AND PHILIPPINE STOCK EXCHANGE (PSE) BEGAN INVESTIGATIONS, UNCOVERING HEAVY SHARE-BUYING BY TAN. INVESTIGATIONS BY THE SEC, PSE, AND BY THE PHILIPPINE SENATE REVEALS THAT, TO JACK UP THE PRICE OF STOCKS, TAN SOLD HIS SHARES TO FRIENDS AND CLIENTS AT DISCOUNTED RATES. THE TRANSACTIONS ARE REPORTED TO THE PSE BOARD WHICH APPEARED TO BE TWICE THE AMOUNT ACTUALLY PAID. THIS IS DONE SO STOCK OF BW RESOURCES WILL APPEAR ACTIVE. PSE AND SEC FOUND OUT THAT BW’S DAILY TURNOVER CIRCULATED AROUND 10 BROKERAGE FIRMS.

• 1-SEP-99 1,000,000 SHARES ADDED TO TAN'S 75 MILLION SHARES IN BW RESOURCE CORP., AT THE SAME TIME, GARCIA'S SHARES REDUCED TO 150,000

• NOV-00 ESTRADA IS IMPEACHED BY THE HOUSE OF REPRESENTATIVES. AMONG OTHERS, HE STOOD ACCUSED OF INTERVENING WITH THE DUTIES OF A PUBLIC SERVANT WHEN HE CALLED UP YASAY IN RELATION TO THE BW SCANDAL.

DACER MEETS WITH PRESIDENT ESTADA IN MALACAÑANG REGARDING A MEDIA CAMPAIGN TO HELP HIS REPUTATION.

TWO FARMERS, ALEX DILOY AND JIMMY LOPEZ, COME OUT AS EYEWITNESSES TO THE DACER-CORBITO MURDER CASE. DACER WAS REPORTEDLY ABDUCTED AND KILLED NOVEMBER 24. BOTH TELL REPORTERS THAT DACER AND HIS DRIVER WERE STRANGLED BY POLICEMEN USING ELECTRIC CORDS BEFORE THEIR CORPSES WERE SET ON FIRE.

• 15-JAN-01 DURING ESTRADA’S IMPEACHMENT TRIAL, YASAY SAYS THE BW SCANDAL IS CONNECTED WITH THE DISAPPEARANCE OF DACER, WHO, HE CLAIMS, HAS KNOWLEDGE OF THE GAMING FIRM’S ACTIVITIES.

• 16-APR-01 FOUR SUSPECTS IN THE DACER-CORBITO CASE CLAIMS THAT ESTRADA ORDERED TO KILL DACER THROUGH CHIEF INSPECTOR GLENN DUMLAO OF THE PAOCTF. THEY ARE SAYING THAT ESTRADA ORDERED SEIZE OF DACER THROUGH DUMLAO, BYPASSING VIÑA. THE FOUR USUALLY RECEIVE ORDERS FROM VIÑA, THEIR IMMEDIATE SUPERIOR, NOT DUMLAO. VIÑA, WHO WAS PREVIOUSLY ACCUSED OF BEING THE BRAINS BEHIND THE DACER DOUBLE MURDER CASE, TURNS OVER SEVEN SUSPECTS TO PHILIPPINE NATIONAL POLICE DIRECTOR GENERAL LEANDRO MENDOZA DURING LENTEN SEASON. 

• 13-APR-09 THE COURT OF APPEALS ORDERS THE CRIMINAL PROSECUTION OF DANTE TAN, FREDERICO GALANG, EDUARDO LIM JR., HERMOGENES LADDARAN, RAUL DE CASTRO, EMMANUEL EDWARD CO, MARIO JUAN AND JIMMY JUAN FOR THE INSIDER TRADING AND STOCK PRICE MANIPULATION OF BW RESOURCES CORP. IN 1999.

ETHICAL ISSUES• THE MAIN LESSON TO LEARN FROM ETHICS IS TO VALUE LIFE ABOVE ALL. THIS CASE SHOWS HOW

THE PHILIPPINE GOVERNMENT ON THE TIME OF PRESIDENT ESTRADA CORRUPTED THE COUNTRY BY MANIPULATING THE PSE AND KILLING A LIFE JUST TO COVER THE EVIL DEED THAT THE PRESIDENT AND HIS COLLEAGUE DID.

• THE DUTY OF THE PRESIDENT IS TO SERVE HIS PEOPLE BEFORE HIS OWN INTEREST BUT ON THIS CASE HE ABANDONED HIS DUTY BY TOLERATING THE ACTIONS OF HIS FRIEND DANTE TAN BY ALLOWING ILLEGAL GAMBLING IN THE COUNTRY AND THE MANIPULAION OF THE PSE.

• THERE ARE FOUR CHARGES AGAINST THE PRESIDENT: BRIBERY, CORRUPTION, BETRAYAL OF THE PUBLIC TRUST AND CULPABLE VIOLATION OF THE CONSTITUTION. FOR MR. ESTRADA TO BE CONVICTED AND REMOVED FROM OFFICE, HE MUST BE FOUND GUILTY BY A TWO-THIRDS MAJORITY OF THE 22 SENATORS JUDGING HIM.

PROBLEM (ISSUE) STATEMENT• THE MAIN PROBLEM WAS THE STOCK MANIPULATION OF PSE FOR THE BENEFIT OF ESTRADA.

• STOCK MANIPULATION IS PROHIBITED BY THE PSE.

• FAVORING DANTE TAN’S COMPANY IN GETTING GAMBLING LICENSES.

• THERE WAS OBVIOUSLY A CONFLICT OF INTEREST SINCE DANTE TAN AND ESTRADA WERE FRIENDS.

• THE ALLEGED KILLING OF INNOCENT LIVES TO HIDE THE TRUTH.

GENERATING ALTERNATIVES

• ESTRADA SHOULD HAVE FOLLOWED THE CORRECT AND FAIR PROCEDURE IN BUYING STOCKS, AND WAITING FOR IT TO GROW.

• ESTRADA SHOULD HAVE FOLLOWED CORRECT BIDDING PROCESSES IN AWARDING LICENSES, ALLOWING MORE TRANSPARENCY.

KEY DECISION CRITERIA

• TRANSPARENT AND FAIR TRADING AT THE PSE, FOR THE BENEFIT OF INVESTORS AND OVERALL TO THE LOCAL ECONOMY.

• LIVES OF PEOPLE THAT CAN BE AT RISK BECAUSE OF THE SCANDAL.

ALTERNATIVES ANALYSISTRANSPARENT AND FAIR TRADING AT THE PSE

LIVES OF PEOPLE

ESTRADA SHOULD HAVE FOLLOWED THE CORRECT AND FAIR PROCEDURE IN BUYING STOCKS

Transparency in trading is assured if this alternative was followed.

No lives will be at risk if Estrada was not influenced by greed.

ESTRADA SHOULD HAVE FOLLOWED CORRECT BIDDING PROCESSES IN AWARDING LICENSES

In choosing a bidder to be awarded with licenses, the best and more deserving bidder should have been chosen.

There would be no whistleblowers. Lives of people will not be at risk if the awarding of contract was transparent.

RECOMMENDATION• ESTRADA SHOULD HAVE BEEN PATIENT IN BUYING STOCKS AND WAITING FOR THEM TO

GROW. HE SHOULD HAVE NOT ALLOWED DANTE TAN TO MANIPULATE STOCKS. OBVIOUSLY, THERE WOULD BE NO WHISTLEBLOWERS IF HE DIDN’T DO SOMETHING UNETHICAL. THIS SCANDAL REALLY DID TARNISH ESTRADA’S IMAGE.

• AS A PRESIDENT, HE SHOULD HAVE KNOWN THE RIGHT AND ETHICAL THING TO DO. HE SHOULD HAVE PRIORITIZED HIS COUNTRY FIRST OTHER THAN HIS DESIRE FOR WEALTH. THE STOCK MANIPULATION ALMOST CRIPPLED THE PSE AND COULD HAVE HURTED THE NATIONAL ECONOMY.

• THIS IS A CLASSIC EXAMPLE THAT FAVOURING A FRIEND IS NOT ALWAYS RIGHT. DANTE TAN WAS OBVIOUSLY BRIBING ESTRADA TO INCREASE THE PRICE OF HIS COMPANY’S STOCK.

ACTION AND IMPLEMENTATION PLAN

• THE PSE SHOULD BE MORE CAUTIOUS WITH THESE TYPE OF CASES. BRIBERY SHOULD NOT BE TOLERATED AT ALL COSTS, ESPECIALLY IF THE ECONOMY AND PEOPLE’S LIVELIHOODS ARE AT STAKE.

• FURTHERMORE, SUPPORT FROM INDEPENDENT AGENCIES IS NEEDED TO PROPERLY IMPLEMENT AND ENSURE THE FAIR TRADING PRACTICES AT THE PSE.

END