By Lucy Komisar
Multinational Monitor, March 2003

AT A TIME WHEN THE INTEGRITY of global accounting firms is being questioned, the U.S. 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 Member of Congress, wrote the SEC in August 2002 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 U.S. dollars. Burton 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 Zurich 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 U.S. 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 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 acknowledged the investigation, but declined to comment on any of the allegations against the firm. We are aware of it, she said, but it isn’t something we would make any comment on.

The key documents in possession of the U.S. government include:

* Records found in Malacanang Palace after Marcos fled that detail transactions involving his foundations and accounts in Switzerland and Liechtenstein. (Malacanang is the Philippine equivalent of the U.S. White House.)

* 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 … After Marcos fled to Hawaii aboard a U.S. military plane on February 28, 1986, Philippine banker Michael de Guzman thought he could pick up some easy cash. He knew the son of Marcos’ security chief, and so he visited the dictator in Honolulu. As he later described in a 1986 affidavit prepared for the Philippine government, de Guzman offered to move Marcos’ money to de Guzman’s 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 in Switzerland on 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 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 that they were not 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. On April 7, 1986, Philippine government 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 sought information about 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 Corporation. It was not 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.

THE REDOCUMENTING ACCOUNT

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. KPMG fired her a year later, after she testified in an unrelated case involving a former boss, who happened to be good friends with a Credit Suisse director.

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 after Marcos fled the Philippines.

She recounted stories about 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 chair position 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.

In 2001, Koller approached the U.S. Justice Department via Virginia lawyer David Smith, a former associate director of the department’s asset forfeiture office. Smith contacted the Federal Bureau of Investigation on Koller’s behalf.

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

WE REGRET THE REPORT HAS BEEN LEAKED

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 says, 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, he replies.

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.

 

  Marcos Money