Family’s wealth depends on Noynoy presidency

Posted at 05/08/10 3:56 PM

Will he use his position to bail out the bankrupt Hacienda Luisita?

MANILA, Philippines—Hacienda Luisita, the vast landholdings whose distribution to farmers has been dodged for decades by the family of presidential aspirant Benigno “Noynoy” Cojuangco Aquino III, is bankrupt.

Excuses, excuses

In the last 3 months, presidential candidate Benigno “Noynoy” Aquino III has modified his statements on the reason his family cannot distribute Hacienda Luisita to the farmers yet.

In a press conference in Catbalogan, Samar on March 17, he even said his family is the one oppressed in this issue because his opponents are allegedly out to distort the truth about the hacienda.

“Kami na nga po ang naaapi d’yan,” Aquino said.

His family, since the time of his maternal grandmother, has kept the estate away from the government agrarian reform program. Currently, their form of agrarian reform is the distribution of shares of stocks to farmers so they can partake of the hacienda’s profits.

The hacienda has liabilities of P1.34 billion and a capital deficiency of P773.6 million of as June 2008, the last financial report filed by Hacienda Luisita Inc. with the Securities and Exchange Commission.

Below is a compilation of reasons that have been cited by Aquino, his running mate Mar Roxas, and the HLI spokesman for non-distribution of lands. Across each reason, we are citing counter-arguments from various sources.


Cojuangco-Aquino or Ally Says Expert or Critic Says

“Maybe I can sponsor a dialogue. But at the end of the day, [a solution to the problem] cannot be dictated upon by any government officer” on a private company – Noynoy Aquino, Feb 5, 2010, Davao City

The private corporation referred to, Hacienda Luisita Inc. (HLI) , was formed to implement the stock distribution option for farmers under the government’s comprehensive agrarian reform program (CARP). The supervisory power of the Presidential Agrarian Reform Council (PARC) over properties covered by CARP is specified in Republic Act 6657. HLI has been submitting to PARC updates on the distribution of stocks to farmers.

“Ang problema lang po kung paano ililipat [ang lupa] nang wala na pong utang doon sa aming mga kasamahan.” – Aquino, Feb. 9, 2010, Concepcion, Tarlac


“Ang kalaban ng mga magsasaka, hindi si Noynoy at yung kanyang pamilya, [kundi] ang mga bangko dahil ang lupain ay nakaprenda, nakasanla sa mga bangko.” – Mar Roxas, Feb. 9, 2010, Concepcion, Tarlac

HLI mortgaged the parcels of land to the banks, according to the financial statements filed with Securities and Exchange Commission. The banks should not be faulted for keeping the lands until HLI has settled its debts.


Since the lands mortgaged to the banks are covered by CARP, the government has more lien on the lands. Under the
agrarian reform law, government can buy them from the bank, based on CARP valuation.

“If we do that, the 10,000 farmers will only get less than 1 hectare, and that will not be enough for a single individual, much less an entire family, to live on.” – Aquino, weekend before Feb. 2010, online interview with bloggers

“The distribution of land is not automatically equated to social justice” – HLI spokesman Antonio Ligon, ANC interview, April 2010
(He is citing the case of other farmers who are not interested in owning the land because they do not having the skills and capital to make the farm productive)

Dr. Mahar Mangahas, who served as consultant to the Cabinet Action Committee on Agrarian Reform that was created by President Aquino, wrote in a 1986 study called “Land and Natural Resources Reform”:

“Productivity does not have to sacrificed because land reform does not oblige the operating unit to be dismembered; only the concentration of ownership need be broken up, and this can be accomplished by shifting ownership to some kind of farmers’ cooperative or workers’ union.”

“If we sell this, which is part of the Agrarian Reform Program, we can sell the 4,500 hectares at P100 per square meter and get around P4.5 billion," – Aquino, interview on “Unang Hirit,” March 15, 2010

According to House Deputy Majority Floor Leader Crispin Remulla, the highest rate paid by DAR for irrigated sugar land is P40 per square meter. Since Hacienda Luisita is not irrigated, it could fall under the P12-20 per square meter price range.

He said that CARP is a social legislation, so even if the lands could be worth more, they are priced based on productivity index of DAR (whether sugar, corn, rice, etc.)—and therefore lower—so the farmers can afford it.



Abs-cbnNews.com/Newsbreak studied the financial statements for a 13-year period of Hacienda Luisita Inc. (HLI), the company formed by the Cojuangcos to administer the stocks sharing scheme with farmers, and found that:

  • It is down by P2 billion, as of 2008 (their latest submission to the Securities and Exchange Commission)—with total liabilities of P1.34 billion, and capital deficiency of P773.6 million.
  • Most of its P1.34 billion obligations are payable to at least 7 companies that are also owned by the Cojuangco families, indicating an extensive interlocking of finances that will be affected by whatever happens with HLI.
  • HLI has mortgaged undisclosed parcels of the hacienda to various banks, thus adding another layer of claimants on lands that would have otherwise been directly distributed to farmers.

Whether the Cojuangco clan will be able to buy time to turn the estates’ finances around, or be left with substantial debts and be forced to part with almost 4,200 hectares of agricultural land, will be up to the next administration.

And as far as Aquino’s campaign team is concerned, that next administration will be under President Noynoy, if only for the fact that he has topped pre-election surveys.

That puts Aquino in a bind.

Motive doubted

The next president will be appointing a new chief justice, who will preside over a pending case to allow farmers, after more than 40 years, to finally get Hacienda Luisita from the Cojuangcos under the government’s agrarian reform program.

Under the next president, too, the final extension of the comprehensive agrarian reform program (CARP) will be implemented until 2014. During that period, the remaining CARP-able lands across the country will have to be distributed to farmer-beneficiaries.

The CARP Extension with Revisions law also does not allow anymore the stock distribution option (SDO) like what the Cojuangcos availed of under the old agrarian reform law.

Inevitably, Aquino’s reason for seeking the most powerful office is doubted; his adherence to family interests, closely watched.

While his allies think that he is sincere when he promised at the start of his presidential campaign that he would distribute Hacienda Luisita to the farmers, his critics are convinced that he would bow to pressures from his family—just like his mother, President Corazon Aquino, did.

The critics have reason to be wary. In the past 3 months, Aquino has modified at least 3 times his statements on what to do with the hacienda, indicating that he does not have his own firm position on the matter.

Various media reports show that just before the campaign period, Aquino said that he wouldn’t be able to dictate on HLI because it’s a private company. Days later, when he kicked off his campaign in his home province of Tarlac, he said that although his family wants to, the lands couldn’t be distributed yet because some parcels had been mortgaged with banks when some loans matured and had to be restructured.

There was a point that Aquino also said that direct distribution of lands wouldn’t be productive for farmers because each of them would get less than a hectare.

He has also issued conflicting statements about how his family intends to settle the hacienda’s debts, not helping at all to douse suspicions that they simply don’t want to let go of the property, which is said to be as big as Makati and Pasig cities combined.

Politician and businessman

Complicating the matter was the statement made by Aquino’s first cousin, lawyer Fernando Cojuangco, in an interview with the New York Times in April—that the family has no intention of distributing the lands.

Fernando, who administers the estate for the clan, was also quoted by the NYT to be questioning whether his late aunt, when she was president, actually said or signed any document that declared agrarian reform as her administration’s centerpiece program.

Critics are saying that if Aquino is indeed his mother’s son—the supposed advantage that his political lieutenants have been hammering on to sustain his popularity—then he, like her, may not be relied upon to keep the campaign promise of surrendering the hacienda to CARP.

Political scientist Allen Surla of the De La Salle University thinks that “the promise [of Noynoy Aquino] is probably sincere,” but “it’s in the delivery of the promise that we would have concerns.”

Surla, who grew up near Hacienda Luisita in Tarlac, told the ABS-CBN News Channel (ANC) in an interview that Aquino promising land distribution and his cousin saying otherwise are “two [different] parties talking.”

“One party is the politician (Aquino), and the other party would be the businessman (Cojuangco). It would be a big family discussion if Senator Aquino wins. If he doesn’t win then we can forget about all the promises and possibly Hacienda Luisita will remain” as such, Surla said.

‘It’s all about Luisita’

Others are more cynical. BusinessWorld columnist Rene Azurin is convinced that Aquino’s bid for the presidency is fueled by nothing else but his family’s resolve to keep Hacienda Luisita.

“It is reasonable to believe that Noynoy Aquino’s presidential campaign is really only about land, about a last-ditch attempt of his family to hang on to their pelf and power,” he said in a commentary.

Citing the mounting debts of the hacienda, Azurin added, “Bottom line: if he does not become president, the family will lose their wealth and power.”

Aquino’s spokesman Edwin Lacierda insisted that “it’s not an empty promise.”

He said that in Aquino’s campaign is a group that’s studying how to rationalize the distribution, since “it’s a multi-tiered problem [where] you have to deal with creditors, family members, and farm worker-beneficiaries.”  He didn’t identify the members of the group.

The 6,400-plus-hectare Hacienda Luisita and sugar mill was bought by Noynoy Aquino’s maternal grandfather, Jose Cojuangco Sr., in 1957, using money that the Government Service Insurance System and the Philippine central bank released on the condition that the lands will be distributed to farmers after 10 years. The Cojuangcos has since been able to dodge government efforts to recover the hacienda.

During the administration of President Corazon Aquino, Noynoy’s mother, Hacienda Luisita was able to evade land distribution by engaging the farmers in a stock distribution scheme covering 4,900-plus hectares.

Under the scheme, farmers would get 33% shares of stocks in HLI in increments within 30 years. The 67% is with the Tarlac Development Corp. (Tadeco), the holding company of at least 7 entities that are owned by the Cojuangcos and are doing business with HLI.

In 2003, the farmers complained with the Presidential Agrarian Reform Council that they had benefited little from the scheme and would like it revoked. In 2005, the council sided with the farmers and ordered the Cojuangcos to distribute the lands to them.

The Cojuangcos went to the Supreme Court and obtained a temporary restraining order (TRO), which is still in effect.

Not enough money

In the years that the stocks sharing scheme with farmers was in effect, there were indications that HLI’s funds were not being prudently utilized, thus leading to its current insolvency.

The losses were sustained even before the labor dispute and work stoppage in 2004 that HLI spokespersons have been blaming for the company’s financial woes.

Abs-cbnNews.com/Newsbreak’s analysis of how HLI and other Cojuangco-owned companies juggled funds until Hacienda Luisita started to seriously bleed financially will be detailed in Part 2 of this series.

To put it briefly, however, HLI does not have enough money to pay its obligations. For every P1 worth of assets, the amount of its obligation is almost double at P1.74.

And the clock is ticking toward the 2014 deadline for the distribution of all CARP-able lands in the country.

Here is where Aquino, if he wins as president, will be tested on possible conflicts of interest.

Will the Supreme Court, with a chief justice appointed by him, lift the TRO and allow land distribution to progress? And, with heads appointed by Aquino, will other government agencies involved in agrarian reform proceedings not favor or give special treatment to Hacienda Luisita?

If stocks sharing continues

If the TRO stays, and in the face of the government deadline for CARP completion, HLI in effect will be given 4 more years to try to turn its finances around.

How? A real estate lawyer consulted by abs-cbnNews.com/Newsbreak said that the only way to salvage a company of the same nature as HLI and with such big losses is to abandon the agricultural business. The company should then convert the properties for industrial, commercial, and residential use.

This is apparently what the Cojuangcos have had in mind as early as 1995, although

De La Salle’s Surla thinks, “It seems sinful for an agricultural [company] to be converting highly arable [land]. Tarlac would have probably won [the title as] the best arable land in the country. And yet we will be forced to convert it for other uses.”

In 1995, a related company, Luisita Realty Corporation, had prepared a land use plan that would turn 3,295 hectares of agricultural land for into a commercial, industrial, and residential area.

On September 1 that year, the municipal council of Tarlac adopted a resolution reclassifying Hacienda Luisita to fit the said land use plan. In 2 weeks, the provincial board of Tarlac issued a resolution “affirming the validity” of the municipal action.

A member of the clan, Mikaela Cojuangco, was among the board members who approved of the resolution. The provincial governor then was her mother, Margarita Cojuangco, wife of Jose Cojuangco Jr. (Aquino’s uncle).

The following year, in August 1996, HLI’s Pedro Cojuangco (another Aquino uncle) got the approval of the Department of Agrarian Reform (DAR) to convert 500 hectares of the hacienda from agricultural to industrial and residential purposes.

Since then, smaller parcels of land had been converted, leaving only around 4,100 hectares of the original 4,900 covered by agrarian reform, and farmer shareholders of HLI claim that they were not consulted on these matters.

The validity of the conversions could be questioned because these happened when the stocks sharing scheme was already in effect at HLI, the lawyer told us.

The agricultural lands that are being re-classified or eyed for reclassification are properties of HLI, which, according to its financial report, is mainly into agricultural businesses, and not into commercial or industrial activities.

Watch the appointees here 

Corazon Cojuangco Aquino decided to run for president in December 1985, just 2 days before the regional trial court of Manila was to hand down its decision, in favor of the government, that her family’s Hacienda Luisita had to be placed under the agrarian reform program. 

The court was acting on the agrarian reform ministry’s petition that cited the agreement between the government and Jose Cojuangco Sr. (Corazon’s father) that the Government Service Insurance System and the central bank would release the funds for the acquisition of Hacienda Luisita and the Central Azucarera de Tarlac on the condition that lands would be distributed to farmer-beneficiaries after 10 years. 

The order was never carried out. When Aquino was swept to power, she appointed the family’s lawyer in the hacienda case, Sedfrey Ordoñez, as solicitor general. Two years later, her new solicitor general, Francisco Chavez, withdrew the government’s case against Hacienda Luisita. 

Aquino’s agrarian reform secretary, Philip Ella Juico, approved of the stock distribution scheme proposed by the Cojuangcos where farmers would be given shares of stocks in the hacienda instead of lands.  

The next agrarian reform chief, Miriam Defensor-Santiago, recalled that she got kicked out after she asked Aquino to inhibit herself as chair of the Presidential Agrarian Reform Council (PARC) that monitored the implementation of the stocks distribution. 

If Corazon Aquino used the government to protect her family’s interest, then critics are afraid that her son, Benigno “Noynoy” Aquino III, might do the same if he wins. 

If and when Noynoy decides to follow his mother’s footstep on this one, it would serve the public well to keep this list government branches or agencies that will play a role in the proceedings, and watch who he will appoint there. 

If the lands will be distributed:

  • Supreme Court – will decide on whether to lift the 4-year-old temporary restraining order on the PARC resolution revoking the SDO and ordering the distribution of lands to farmers. All other cases that may arise in the process are expected to be brought to the tribunal, too.
  • Office of the Solicitor General – will represent the government in the case.
  • Department of Agrarian Reform – will decide if the conversion of some parcels of Hacienda Luisita’s agricultural lands for industrial, commercial, and residential use was valid, or if they should be distributed to farmers, too.
  • Presidential Agrarian Reform Council – has the power to withdraw the earlier revoking the SDO.
  • Landbank – computes the valuation of the property and makes the payment to landowners.
  • Bangko Sentral – has the power over banks where HLI took out loans, which the farmers refuse to assume; and where the hacienda has mortgaged parcels of lands, which may turn out to be covered by agrarian reform. 

If the lands will be converted, developed, and sold, and the farmers will get a share of the profits:

  • Department of the Interior and Local Government – has supervisory powers over local government units, which approves the re-classification of lands and issues development permits.
  • Department of Environment and Natural Resources – will issue environmental compliance certificates to development projects.
  • Department of Trade and Industry – will issue permits and certifications in the event that property is turned into an export processing zone.
  • Board of Investors – has the power to give incentives to locators in Luisita
  • Department of Tourism – will issue permits in case Luisita is turned into an tourism estate.


Wholesale land conversion

Nevertheless, if the wide-scale reclassification of Hacienda Luisita is approved by DAR, another series of debates will have to be resolved over the farmers’ share in the proceeds from land sale.

Aquino said in a TV interview in March that if his family could sell the hacienda to the government at P100 per square meter, or a total of around P4.5 million, around “70% of that would be ours,” meaning he’s aware that 33% of the sale proceeds should got to the farmers.

His family’s record on that front is not as ideal, however.

In 2 well-publicized conversions—the 500 hectares for the Technopark, and the 80 hectares for the Subic-Clark-Tarlac Expressway (SCTEX)—the Cojuangcos gave the farmers only 3% of the proceeds, when they own 33% of HLI. HLI was paid P2 billion and P83 million, respectively for those lands.

This division of proceeds is flawed, according to Cavite Rep. Jesus Crispin “Boying” Remulla, who initiated a congressional probe into the overpricing of the ight-of-way payment made by the government to Hacienda Luisita in connection with the SCTEX project.

There is a big difference between production and sale of land, he said. “They are applying the 3% share in gross production to real estate transactions. Sale of land in an agricultural enterprise is not production, it is sale of capital goods and assets. So [in dividing the proceeds], it should be the ownership structure that should be

followed—33% for the farmers.”

If stocks sharing is revoked

All the plans to convert and then develop or sell the lands as a quick way of settling HLI’s obligations and paying the farmers will have to be set aside if and when the Supreme Court lifts the TRO on the case and effectively revokes the stocks distribution option (SDO).

Lacierda defended the SDO, saying that its revocation by the agrarian reform council was a way for the Arroyo administration to get back at former President Aquino when the latter called for President Arroyo to resign in 2005.

“There was nothing wrong with SDO until President Cory called upon GMA to resign. That (scheme) has been approved 3 times,” he told abs-cbnNews.com/Newsbreak. That is why “it’s a matter of principle” for the Cojuangcos to ask for a TRO.

Critics have dared the family to withdraw their opposition to the case to prove their sincerity in distributing the lands, but Lacierda said: “To withdraw is to admit that they made a mistake. That is not something they are prepared to make.”

If the TRO is lifted and Republic Act 6657, the comprehensive agrarian reform law, will be strictly enforced, the Cojuangcos will be left with less than 200 hectares of agricultural land.

The law allows owners of agricultural lands to keep only up to 5 hectares for themselves, and an additional 3 hectares for each child who is older than 15 years and is personally cultivating the land. The remaining area will be bought by government valuation cost (meaning, lower than market prices) and distributed to farmers.


Remulla said that the P100 per square meter price that Aquino used in computing possible proceeds from land sale is overpriced.

It was the same amount that HLI got the Bases Conversion and Development Authority to pay for the right-of-way for the SCTEX project, when the market price of farm land in Tarlac at the time was only P6 to P8 per square meter.

BCDA’s payments to HLI were made during the campaign period of 2004, when former President Aquino and then congressman Noynoy Aquino supported the presidential bid of Gloria Arroyo.

“The Cojuangcos are asking for P100 per square meter when the highest rate paid by DAR for irrigated sugar land is P40 per square meter (in Negros Occidental),” Remulla said.

There are only about 4,000 hectares of agricultural area left with Hacienda Luisita—not discounting the undisclosed parcels that have been mortgaged with creditor banks. If the land will be bought under the government’s CARP at P40 per square meter, the Cojuangcos will get only P1.6 billion—not enough to cover HLI’s P2-billion liabilities and capital deficiency.

But since Hacienda Luisita is not irrigated, Remulla pointed out, it could fall under the P12-20 per square meter price range under the CARP. The Cojuangcos will therefore get only P480 million to P800 million.

‘The new poor’

The farmers wouldn’t assume the debts and obligations of HLI, according to one of their lawyers, Romeo Capulong. He said that the farm workers were unaware of and didn’t benefit from the loans incurred by the Cojuangcos.

“Let it be the personal obligation of those who benefited from the loans,” Capulong said.

If HLI fails to pay the creditor banks, said the lawyer we consulted, foreclosure proceedings will come in, and the deficiency judgment is charged against those who owned the properties before and signed as co-makers of the loans. “And the banks would not have lent to Luisita if none of the co-makers were a Cojuangco,” the lawyer said.

Meanwhile, the converted portions of the hacienda will be a collateral issue that the DAR may rule out as illegal, and therefore will be subject to CARP as well.

Candidate Aquino has said that their family wants to make sure that the farmers are “without any financial baggage” if and when the lands are distributed to them.

But Lacierda said that the Cojuangcos are of the position that “everybody shares in the debt, including the farmers,” because the farmers are shareholders of HLI.

HLI spokesman Antonio Ligon, in an interview with ANC, also said if the SDO is revoked and the farmers would claim the lands, the HLI can always ask the farmers to pay return the P3-billion worth of total benefits that the company has extended to them over the years.

“Puwedeng sabihin naman ng HLI: “Eh di sige…’yung mga binigay sa kanilang benepisyo isasauli, ibibigay iyong karapatang lupa,” he said, although admitting that it would be difficult and impractical.

Remulla said it all boils down to this: “If the TRO is lifted, they will go bankrupt. The Cojuangcos will be the new poor.”

Eyes on the Supreme Court

This is why, according to columnist Alvin Capino of Manila Standard Today, there are speculations that Noynoy Aquino is criticizing President Arroyo’s apparent intention to name a new chief justice before she steps down on June 30. Aquino wants himself, if elected, to make that appointment.

Lacierda said, “That’s a lie. The issue is [the] constitutionality” of the midnight appointment to the judiciary.

He pointed out that “the chief justice is one vote; the rest are GMA appointees,” which is actually “a cause for concern” to Aquino.

Critics say that any lawyer, like Lacierda, should know that the chief justice may only be one voice among 15 justices, but his holds sway in the court.

“And given how politicized the Supreme Court is, it’s anybody’s guess,” the real estate lawyer we consulted said. “A phone call from the President will always change things.” —with reports from Carmela Fonbuena and Lala Rimando (abs-cbnNews.com/Newsbreak)