Charges of Hidden Wealth

By Jill Smolowe

A recurring accusation against President Ferdinand Marcos is that he, his wife Imelda and their friends have used their power to plunder the Philippines, thereby aggravating the country's economic plight. Opposition Candidate Corazon Aquino played on the issue last week, promising a thorough investigation of the Marcos family's financial dealings if she wins. "The new leadership will exert all efforts to eliminate the social cancer of graft and corruption," she declared. "What belongs to the people will be given back to the people."

In Washington last week a congressional subcommittee held hearings on accusations that since 1981 the Marcoses had invested more than $200 million in four Manhattan buildings and a Long Island estate. New York Democrat Stephen Solarz, chairman of the House Foreign Affairs Subcommittee on Asian and Pacific Affairs, estimated that the properties, which include the gilt- leafed Crown Building on Fifth Avenue and a new nine-story shopping mall in Herald Square, are worth $350 million. "Mr. and Mrs. Marcos are now in the world class of corrupt national leaders," Solarz said. "They may have secretly led a headlong, multibillion-dollar flight of capital out of their country."

Although speculation about the Marcoses' holdings abroad has been rampant for years, proof has remained elusive. Last June the San Jose Mercury News reported that in March 1984 a New York investor brought a lawsuit that linked Mrs. Marcos to an estate on Long Island. The report also documented sizable real estate purchases in California by friends of the Marcos family, lending weight to charges by opposition politicians that as much as $10 billion has fled the debt-ridden Philippines in recent years. Since then the U.S. has launched several investigations of allegations that the Marcos regime may have misappropriated U.S. aid to the Philippines. Marcos dismisses all this as a "malicious lie."

The narrow legal issue is whether the Marcoses or their political friends have siphoned U.S. economic or military aid to build private nest eggs. While Solarz has hinted strongly at the possibility, he has failed so far to produce evidence of wrongdoing. "Solarz has devoted 100 hours to the issue," acting Foreign Minister Pacifico Castro said last week in Washington, "and has not found a single iota of evidence that would stand the test of judicial process."

The General Accounting Office and the inspector general's office of the Agency for International Development have done no better. "These audits have not found instances of misuse or misappropriation," State Department Spokesman Bernard Kalb said last week. A GAO team is currently in Manila trying to substantiate suspicions of misspent funds, but State Department officials expect no new findings when the team's report is published next month. Meanwhile, a federal grand jury in Alexandria, Va., is looking into whether millions of dollars in military aid have made their way into the pockets of high-ranking Philippine military officers. So far, no indictments have been returned.

The House subcommittee's main concern last week was to establish whether the Marcoses are indeed landlords in the U.S. Attention focused primarily on a 13.7-acre waterfront estate in Center Moriches, Long Island, called Lindenmere. The paper trail begins with the lawsuit cited in the San Jose Mercury News, and a virtually identical February 1984 case that was revealed by New York City's Village Voice. In each suit the plaintiff charged that he and several partners, including Mrs. Marcos, had purchased Lindenmere in 1981 through a Cura(pi202)FIX THIS!ao-based corporation called Ancor Holdings N.V., with plans to develop the property into a $19 million resort.

Both men claimed to hold a 10% interest in Luna 7, a company that was set up to develop the estate. Six months after the property was purchased, they charged, Mrs. Marcos decided to make Lindenmere a personal residence and demanded that the Luna 7 shareholders surrender their stock to her. Each man said that Mrs. Marcos had swindled him out of $1 million. Both settled out of court for less than that amount.

Testimony before the subcommittee was not packaged as neatly as the lawsuits. Because most of the alleged Marcos holdings have been purchased through offshore corporations and layers of agents, much of the evidence has the quality of hearsay.

Barry Knox, a New York financial adviser, testified that he met twice with Mrs. Marcos in 1984 to discuss the status of four Manhattan properties. Knox said that Joseph Bernstein, a New York developer who has been linked in court records and press reports to supposed Marcos real estate transactions, had told him in several conversations that Mrs. Marcos owns all four properties. Bernstein, who faces contempt charges before the full House for failing to answer subcommittee questions, told TIME last week that the Marcoses "have no equity participation in any of the real estate deals we are handling."

Indeed, the hearings raised more questions than they answered. What is the Marcoses' share, if any, in each of the New York properties? Did they actually put millions of dollars into them? Much of the testimony suggested that the properties were highly leveraged, having been purchased with little or no cash.

In the Philippines, as in the U.S. and many other countries, it is not against the law to invest abroad. Thus even if it could be shown conclusively that the Marcoses did own the properties mentioned, they would not be liable ( for prosecution--unless, of course, it was proved that they had pocketed U.S. aid funds intended for their country. No one seems even close to proving that.

With reporting by Michael Duffy and John E. Yang/Washington