-Caveat Lector-
An excerpt from:
The Marcos Dynasty
Sterling Seagrave©1988
Harper & Row, Inc
ISBN 0-06-015815-8
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Seventeen
HEAVY BREATHING
THE OLD FILIPINO GAG "Four centuries in a convent, fifty years in a brothel"
ceased to be a joke under the Marcoses. Behind the facade of maintaining a
puritanical law-and-order regime, Ferdinand was involved with the two main
components of organized crime on the Pacific rim-the Japanese and Chinese
underworld. Gambling, prostitution, narcotics, and money-laundering were
turned over as franchises to international syndicates, sometimes in league
with American, British, and Australian organized crime figures. In the
Philippines, their main interest was slavery.
Control of the media made it possible for Ferdinand to create the impression
of law and order, when in fact organized crime thrived in the islands as
never before. Under martial law, he was as firmly in control in Manila as the
South Korean generals were in Seoul and the Chiang regime in Taipei. An
American official in South Korea once remarked with surprising candor,
"Between the KCIA [Korean CIA], the civil police, and military intelligence,
you've got such a powerful security state here that it's impossible for
organized crime to operate without official sanction. If it exists, it's
state-sponsored or state-sanctioned." The same was true of Taiwan and the
Philippines. The essential difference was ethnic. In Taipei and Seoul,
control was kept firmly in the hands of a single ruling ethnic group, while
in Manila Ferdinand parceled out franchises to Japanese, Koreans, Chinese,
Australians, and Americans according to their specialties. Everybody was
welcome to a piece of the pie.
Manila was the only major Southeast Asian city where the sex trade was run in
partnership with the Japanese, with the enthusiastic cooperation of Chinese
entrepreneurs and Filipino gangsters and procurers.
Ferdinand and Imelda persisted in saying that with their New Society there
was no crime, no drug problem, and no prostitution. All three were officially
illegal, so they did not exist. In truth, prostitution had become world
class. Although Tourism Minister Jose Aspiras would certainly have denied
promoting tourism through prostitution, Manila was competing internationally
with Bangkok as the top destination for sex tours. In each city, it was
modestly estimated that there were one hundred thousand women employed
"legitimately" in what was called the "hospitality industry"—as hostesses,
waitresses, go-go dancers, and massage-parlor attendants. That is, as
prostitutes. These statistics included only those women employed in licensed
establishments, with health permits and regular venereal disease checkups.
The rule of thumb was that at least twice that number-another two hundred
thousand in each metropolitan area-worked freelance, part-time, or in
unlicensed establishments, With a quarter of a million women thus engaged in
each place, the slow incubation of the AIDS virus could produce catastrophic
consequences.
Manila and Bangkok were also rivals for the number of child prostitutes and
young male prostitutes: the estimate for Manila and its satellite towns was
forty thousand child prostitutes against twenty thousand in Bangkok.
Thousands of young boys and girls in each country were sold into slavery each
year, sent off to work without pay in brothels in Japan and South Korea, or
were fed piecemeal to European and Australian gays and pederasts.
A major difference between the sex trade in Thailand and that in the
Philippines was that the one thrived in a country ruled by a succession of
military regimes, making it difficult to identify trends with any one leader
or party, while the other boomed for twenty years under one man-Ferdinand
Marcos.
There were other important differences. In Buddhist Thailand, religious
tolerance and sexual tolerance had been a celebrated part of the culture
since ancient times. There was little stigma attached to the sex trade. When
he was asked about it, the urbane former Prime Minister Kukrit Pramoj
remarked, "I think it is flattering that Westerners find us so physically
attractive." In Thailand, there was no special disgrace attached to working
as a bar girl or in a massage parlor, and after acquiring a wardrobe, a nest
egg, and perhaps a sewing machine, a hardworking bar girl could go back to
her village, marry the son of the headman, and begin life over on a better
footing. In the Catholic Philippines, with its medieval obsessions and its
preoccupation with female virtue, there was no such redemption.
When he was "re-elected" in 1969, President Marcos worked out a partnership
or joint venture in which the sex trade was operated in collaboration with
the big Yakuza gangs such as the Yamaguchi Gumi and the Inagawa Kai.
According to INTERPOL, by the early 1970s more than one hundred thousand
Yakuza were operating in Japan with interests throughout East Asia, making a
profit of well over $5 billion a year running guns, drugs, sex rings,
extortion rackets, and murder syndicates. The most notorious gang was the
Sumiyoshi Rengo based in Tokyo, but the biggest was the Yamaguchi Gumi with
eleven thousand members, headquartered in Kobe. They all had affiliated
travel and entertainment companies. Manila editor Max Soliven said President
Marcos was "in big with the Yamaguchi Gumi.- Korea was the gang's primary
base outside Japan, but the Philippines came second; in 1982, there were
twenty-five ranking members of the gang living in and around Manila. Others
ran similar operations out of Cebu. Soliven said Marcos was "very much in
debt" to the Yakuza, and that their influence was strong at Malacanang Palace.
A 1987 report by the Australian National Crime Authority (NCA) said the
Yakuza had over three hundred Filipino government figures on its payroll,
including former top officials of the National Bureau of Investigation (NBI)
and the Commission on Immigration and Deportation (CID). The NCA report said
that the Yamaguchi Gumi had over four thousand operatives in Metro-Manila of
whom about three thousand were local underworld contacts. The NCA claimed
that the Yakuza controlled 240 businesses in Manila including massage parlors
and nightclubs. Six local travel agencies acted as Yakuza fronts arranging
bribes with government officials.
Prostitution became so entwined in the economic structure of the Philippines
that it created powerful interest groups, especially at the palace. Under
martial law, when everyone else had to get off the streets, massage parlors
and saunas could stay open after midnight curfew, and the girls toiling in
them were exempt. There was collusion between hotels, police, pimps, and
prostitutes. Imelda's overbuilding of luxury hotels for the World Bank
Conference left them desperate for guests and, with a few notable exceptions,
ready to encourage any kind of occupancy. The new Manila Midtown Ramada Hotel
became notorious for kickbacks from prostitution. The Ramada passed out
broadsheets printed in Japanese addressed "To our Japanese guests with
ladies," outlining house rules. The hotel charged a key-club fee of $10 for
the right to take women into a room. According to one source, the Manila
Midtown Ramada's management admitted to making 40 percent of their gross
income from these fees.
The Intercontinental Hotel tried so zealously to prevent prostitution that it
was threatened with a lawsuit when the management mistakenly accosted a guest
with his wife. To avoid trouble, sex tour leaders usually took guests
elsewhere for entertainment, then brought them back to their hotels in the
morning.
The Yakuza bribed their way into lucrative, long-term relationships with many
Manila businessmen, bureaucrats, and palace cronies. Senior members of Yakuza
gangs opened offices in the Makati business district using import-export
firms and travel agencies as fronts, all licensed by Aspiras. The Yakuza's
biggest investments were made in bayfront Ermita, the tourist tenderloin. At
least thirty clubs and restaurants there were run by Yakuza, using Filipino
front men, and trading in women, drugs, and gunrunning.
Occasionally there were crackdowns, as Filipino gangsters and police reminded
the Japanese to share their proceeds. After these crackdowns, immigration
officials and bureaucrats at the Ministry of Tourism usually intervened in
behalf of top-ranking Yakuza to prevent their arrests or deportation. For
about 20,000 pesos (roughly $1,000), immigration men would extend the visa of
an overstaying Yakuza or provide papers for a teenage Filipina on her way to
a Tokyo brothel.
This all came about as a function of simple demographics: Japan provided most
of the tourists arriving in the Philippines, 85 percent of them males. In
their own country, prostitution was banned in 1958, forcing the sex industry
to move to bath houses. For the same reason, there was an explosive growth in
sex tourism providing access to women in the poorer countries of Asia, first
in South Korea and Taiwan, then farther afield as living standards in those
two countries improved. Because Japanese preferred to travel abroad in
groups, male sex tours were easy for the Yakuza to organize, also simplifying
the problem of arranging for women at the destination. With the increasing
strength of the yen in the 1970s, more than a million Japanese men each year
visited Taiwan, Korea, Thailand, and the Philippines exclusively for sex.
The trade also worked in the other direction. Thousands of young girls were
taken to Japan each year on brief tourist visas, and then vanished into bath
houses, bars, and brothels. The process began when Yakuza-backed "employment"
agencies in Manila hired talent scouts to tour villages. Pretty girls in
their early teens were enticed with promises of glamorous jobs. In Manila,
they were taught dancing and singing, and (after passing an audition
conducted by the government twice a month) officially became entertainers.
The girls were then paraded before Japanese promoters. After a girl was
chosen, her picture was filed in a catalogue and shown to customers,
primarily bar managers. A successful promoter purchased about two hundred
women a year, some for export, some for home delivery. After Ferdinand became
president and the Yakuza received the franchise for Manila, the number of
Filipinas shipped off to Japan and South Korea increased sharply. By 1985 it
was estimated that eight thousand to ten thousand young girls were exported
from Southeast Asia to Japan each year as entertainers and prostitutes, the
great majority of them Filipinas. Many of the girls who went as entertainers
found good jobs with decent employers and fair wages, and chose to return
year after year, never being forced into prostitution. But they were the
exception. Under Ferdinand and Imelda, the Philippines became the only
country in the world actively exporting prostitutes. Thailand and South Korea
only gave it unofficial sanction. The growing poverty in the islands under
the Marcoses, especially after 1983, made women desperate to go to Japan even
if it meant prostitution with next to zero earnings.
While Japan was the biggest customer, tour operators from many other
countries promoted sex tours to Manila and Bangkok. The Philippines soon
outdid Thailand because of economics-the standard of living in Thailand was
improving dramatically while it was collapsing in the Philippines. In Ermita,
instant oral sex was available for a dollar from thousands of bar girls, or
from little boys and girls in the streetssome as young as four years old. In
Bangkok, the price was five times higher, and child sex was only to be found
in specialized emporiums.
Tourists cruising Ermita from gay dives to girl-dog shows could observe
children being fondled by foreigners in doorways, alleys, parking lots, and
cars parked at the curbs. Thousands of Europeans, Americans, and Australians
came to Manila to find children, to photograph them performing sexual acts,
or to take them home to pass around. The Yakuza alone was estimated to earn
$1.5 million per day from child sex. This network included Manila hotels as
well as private clubs and child brothels.
In one case that was unusual only because officials actually intervened, the
police raided the basement of an employment agency in Manila and found
fifty-nine boys aged ten to seventeen. They were being kept prisoner so they
could be used sexually by tour groups of homosexuals and pederasts.
There were large child brothels around the U.S. military bases at Subic Bay
and Clark. The naval base fed brothels at Subic and Olongapo, while the
airbase fed Angeles City. By both bases, children as young as fourteen months
were bought, sold, and traded for the gratification of GI pedophiles. Behind
the bar at Marilyn's in Olongapo, American writer P. F. Kluge discovered a
barmaid who liked to show off the talents of her daughter, Valerie. The
one-year-old waved, laughed, and flicked her tongue on cue, when her mother
whispered, "Blow job." U.S. military authorities pointed to one lengthy
court-martial as evidence that America did not condone child prostitution,
but the case involved girls in their late teens and did not in any way
represent the kind of prepubescent extremes typical of Seventh Fleet shore
leave. Observed an Australian military attache in Manila, with typical
'Strine aplomb, "At Subic, you're still a virgin till you've screwed a
two-yearold."
Homosexual tours to Manila rivaled the heterosexual. In keeping with the
First Lady's broad-mindedness and love of beauty, the Ministry of Tourism
cooperated in the organization of a Miss Gay World Beauty Pageant. Pansanjan,
a resort town south of Manila on Laguna de Bay, became the homosexual's
Mecca. Pansanjan had less than twentyseven thousand inhabitants, among them
three thousand young male prostitutes. Their customers were primarily whites
from France, New Zealand, the Netherlands, and Australia.
Many poor children were taken out of the Philippines through foster parent
organizations. At the end of 1983, Australian investigators discovered a
Melbourne-based syndicate called the Australian Pedophile Support Group,
which assisted its members in arranging sexual relations with young Filipino
boys. Nine men were arrested on pornography charges, planning to bring
children to Australia to live with homosexuals. At least two of the men
traveled to Manila to have sex with boys they were sponsoring through the
charity World Vision. A World Vision official said that a task force set up
to investigate the reports had prevented one of the two Australians from
taking a boy out of the country. Officials of the Marcos regime said that the
problem was under control. Child prostitution was illegal, they said, so it
did not occur. In 1982, a European magazine ran a story about child
prostitution in Manila featuring a little girl from Ermita. When Imelda heard
about the story, she had the police track the girl down and bring her to
Malacanang for a lecture. "You are dishonoring the country," the First Lady
told the child. She was then released and returned to her old corner. When
she did not mend her ways, she was beaten by the police and disappeared
altogether.
Child sex package tours of the Philippines were especially popular in the
Netherlands, West Germany, and the United States. In the leading pedophile
magazine, Spartacus, Manila sex tours were advertised and advice was given on
how to find child prostitutes when you arrived, how to negotiate payment, and
how to dodge local laws. To pay travel expenses, pedophiles made videotapes,
which were then sold by subscription through such magazines. The United
States is the biggest importer (and producer) of films and videos portraying
young children in explicit sexual acts and forms of sadomasochism. Annual
turnover of the child pornography industry in America in 1980 was $1 billion.
International trafficking of children was conservatively estimated as a $5
billion a year business. Under the Marcoses, Manila became the world center
for its raw material.
In 1974, Sasakawa's friend and fellow billionaire President Marcos made him
an honorary citizen of the Philippines. This gesture grew out of Sasakawa's
interest in a little island called Lubang, 76 kilometers southwest of Manila.
Lubang hit front pages all over the world in 1971 when Lieutenant Onoda Hiroo
of the Japanese Imperial Army finally surrendered, twenty-six years after the
end of World War 11. Sasakawa gave 1 million yen (slightly more than $3,333)
as a reward to the man who brought Onoda safely to the authorities.
Overnight, Lubang became a popular Japanese tourist destination. Sasakawa
conceived the idea of turning the island into a tourist paradise as part of
his exclusive World Safari Club, which cost business tycoons nearly $2,000 to
join. The club sponsored Arctic polar bear hunts and other adventures at
$30,000 for a three-week expedition. For tycoons with less energy, Sasakawa
wanted to turn Lubang Island into a luxurious nudist colony for Japanese only.
With millions of dollars coming in from the Yakuza partnership in the sex
trade and Manila hotels filled with sex-starved Japanese tour groups,
Ferdinand was more than agreeable. Sasakawa let it be known that he was
developing Lubang for tourism "at the request of Philippine President
Marcos." It was at this bouyant moment that he revealed that he had been
"very close to Marcos long before he became President," and considered
Ferdinand and Imelda among his long-time intimates. During the 1970s,
Sasakawa donated millions of dollars to Imelda's highly publicized "relief"
projects. To pave over some of the residual ill-feeling about World War 11 in
the Philippines, Sasakawa started the Japan-Philippines Friendship Society.
Lubang Island was described in World Safari Club brochures as offering
wonderful opportunities to hunt exotic birds and wild boar, with
after-hunting sports hosted by "private companions"—a gentle Japanese
euphemism for your own personal Third World adolescent, please specify sex.
To create Lubang, Sasakawa paid great sums to Malacanang through the Ministry
of Tourism and spent two years on development, when the whole project
collapsed over what Sasakawa called "some misunderstanding."
It was probably the same kind of misunderstanding that had spoiled President
Johnson's friendship with Ferdinand. The year Ferdinand and Sasakawa had
their little misunderstanding was the year Ferdinand sold all the coral reef
recovery rights in the islands not to the Japanese but to the South Korean
Yakuza gang of Machii Hisayuki. However, neither man let the misunderstanding
interfere with the ongoing fulfillment of Japanese longings in the islands.
While they were busy gratifying the sexual cravings of Australians and
Japanese, Filipinos consumed prodigious quantities of alcohol. The Ayalas and
Sorianos had grown very rich producing good, cheap beer, while the Elizaldes
and others became as rich distilling some of theworld's cheapest rum.
Although marijuana was grown for local consumption, the Philippines was not
thought to be a drug center, or to play any role in the movement of heroin
and morphine from the Golden Triangle to world markets. The islands had the
fewest addicts in Southeast Asia. But such statistics are misleading. Under
the Marcoses, the controlled press reported little drug news, and American
authorities were at pains to play down the awesome quantities of heroin
passing through Clark and Subic on their way from Thailand, Laos, and Vietnam
to the United States. Manila was primarily a transshipment point, a dope
entrepot.
The loss of the Chinese mainland to Mao in 1949 briefly disrupted the heroin
trade, but it was soon up and running again when remnants of Chiang's army
under General Li Mi escaped into Burma and seized control of the
poppy-growing areas of the Golden Triangle, where they were supplied and
supported for over thirty years by the CIA.
>From then on, Chinese syndicates in Thailand and Laos-such as the chiu chao
with its well-established ties to the KMT—controlled the refining and
marketing of hard drugs supplied by General Li Mi's " opium armies" and
delivered these drugs by courier to dealers in Europe and America. These same
Chinese syndicates also controlled the sex trade in Thailand, Hong Kong, and
Taiwan, in symbiosis with government officials.
The Chinese avoided interfering in amphetamines, which were the drugs of
choice in high-strung Japan and Korea, leaving that market entirely to the
Yakuza. The role of the Philippines in the drug trade was to provide couriers
and a transshipment point for Chinese heroin traffickers, and to provide a
secure base for the illicit manufacture and supply of amphetamines and
handguns for the Yakuza in Japan and Korea.
Filipinos served as runners. With their comparatively easy access to the
United States, they provided courier service for syndicates in Taiwan, Hong
Kong, and Thailand.
Some Marcos diplomats were premier drug couriers, protected by diplomatic
immunity. In 1971, a careless Filipino diplomat and a Bangkok merchant were
arrested in New York on charges of smuggling $13 million worth of heroin. A
narcotics agent acting on an informant's tip followed the two men on board a
Pan American flight in Vientiane, Laos, and kept them under surveillance
through Vienna and London to New York. At Kennedy International Airport, the
two suspects were permitted to pass through customs without examination of
their luggage. The men were Domingo S. Canieso, an attache at the Philippine
Embassy in Laos, and Tsien Sin-chou, a Chinese-born Bangkok merchant
traveling on a Taiwan passport. In Manhattan, the two checked into the
Lexington Hotel, where they were arrested in their rooms with more than 34
pounds of Double U-0 Globe brand heroin. Canieso did not have diplomatic
immunity during that particular trip because he was foolishly traveling on a
tourist visa. Other diplomats were more careful, and were free to come and go
without baggage inspection.
Among the busiest couriers were members of a Manila-based chiu chao group
headed by restaurateur Lim Seng, who smuggled half a ton of No. 4 heroin into
the United States during the early 1970s. A loose consortium of chiu chao
businessmen with drug laboratories and warehouses in Thailand smuggled
primarily through Malaysia and the Philippines. Lim Seng was part of their
network.
Chinese of Fukienese descent in Manila were content initially to let the chiu
chao run the heroin racket. But during the Vietnam War the demand from
America sharply increased, and with it the opportunity to sell directly to
GIs in the islands. Several heroin labs were set up in Manila by Fukienese,
producing No. 3 heroin for local consumption. Three were in operation by 1964
when Lim Seng opened his own lab in the islands financed by an overseas
Chinese insurance agency and a leading Filipino textile magnate who was a
friend of President Marcos. Lim Seng brought in a chiu chao chemist from Hong
Kong and began producing small quantities of No. 3. The sudden oversupply
forced his Fukienese competitors out of business, arousing ill-feeling toward
the interloper. In 1969 Lim Seng expanded to manufacturing purer No. 4 heroin
for export to America. He made large buys of morphine base from the Golden
Triangle through the Hoi-Sukree partnership in Malaysia and the Lim Chiong
syndicate in Bangkok. The success of these operations fed Lim Seng's vanity
and he invested his profits in a portfolio of securities, including stock in
Benguet mines, acquired in a shady transaction with several officials of the
Marcos regime. By 1971, Lim Seng was producing more than 100 kilos of No. 4
per month, protected by government officials and police.
He was exploiting Clark Air Base and Manila International Airport to export
90 percent of his annual production of 1.2 tons—10 percent of America's
annual heroin supply therefore was coming from the Philippines. Much more was
on its way. Late in 1971, Lim Seng ordered $1 million worth of morphine base
from the Lim Chiong syndicate and paid to have a Royal Thai Navy gunboat
deliver it to Manila, on the pretext of a goodwill tour. The gunboat docked
at South Harbor and the morphine was handed over to Lim Seng at his suite in
the Manila Hotel. Such ostentatious conduct could only be secured by
elaborate payoffs to officials and security men. Given the closeness with
which he watched lowly shipments of sardines, Ferdinand could hardly have
been ignorant of the Manila Hotel dope transaction.
As part of America's reorganization of the Philippine armed forces
and police, Ferdinand had agreed to create a Constabulary Anti-Nar-cotics
Unit (CANU), with agents trained and equipped by Washington. This was done in
part because the U.S. Congress was trying to block the Nixon administration's
program of training foreign police forces in se-cret police skills. The White
House got around Congress by shifting its training to "narcotics agents" and
funding the program through the Drug Enforcement Agency. One of CANU's
missions was to help U.S. narcotics agents crack down on drug traffic by GI
"horse soldiers" passing through Manila. Only a few weeks after its
organization, CANU operatives arrested two ex-GIs boarding a commercial
flight for Okinawa with 6 ounces of No. 4. In an excess of zeal, CANU did not
stop with the arrests. Based on information painfully extracted from the two
Americans, CANU agents identified all the members of the Lim Seng syndicate
and located two of its laboratories in Manila. The case now had gone too far
for anyone in the Marcos inner circle to cover it up; too many U.S. narcotics
officials knew details. Furthermore, Manila's Fukienese godfathers had been
pressing Ferdinand to close Lim Seng down. Accordingly, the palace decided to
sacrifice him, while in the process picking him clean. On September 28, 1972,
less than a week after declaring martial law, President Marcos gave CANU
permission to arrest Lim Seng and to raid his two laboratories, where they
im- pounded over 50 kilos of No. 4.
Lim Seng offered the arresting agents a bribe of $150,000 cash, but he was
turned down cold. This eagerness to buy his freedom was communicated to
others in the government. When his trial opened, Lim Seng pleaded guilty,
only one witness was called, and before lunch he was given the light sentence
of life imprisonment. Some members of CANU objected that the trial had been
rigged, and guessed that next would come an escape attempt. They posted extra
surveillance. With so much public attention, Ferdinand apparently felt
obliged to distance himself. He went on television to declare that he was
against the very idea of drug smuggling. Whatever inducements were offered by
Lim Seng's wealthy friends in Thailand and Malaysia must have fallen short.
On January 7, 1973, despite the life sentence of the court, Ferdinand ordered
Lim Seng's immediate execution by firing squad.
To the bitter end, Lim Seng seemed supremely confident that the execution
was only a charade. His spirits were high until they put on his blindfold.
Everybody else in Manila was just as surprised.
This highly publicized execution was held up as an example of how President
Marcos dealt harshly with drug merchants. Many people were taken in.
Ferdinand usually made a public display of arresting the most notorious
criminals, then quietly released them-his stick-and-carrot game.
Meanwhile, Manila remained a major transit point for drugs. One of the most
prosperous dealers was an American named Donald Stein. Stein's couriers
regularly passed through Manila with huge quantities of heroin destined for
the American market.
After Ferdinand's regime fell, a U.S. narcotics agent presented the Aquino
government with a list of forty major drug dealers who had been convicted and
jailed. He wanted to locate them in the prison system, interview them, and
put the information into a narcotics data bank. Not one dealer on the list of
forty could be found. They had all been released by Ferdinand after paying
large bribes. Just out of curiosity, a list of forty minor drug offenders was
submitted-men unable to pay big bribes-and all forty were found still in jail.
Gambling also was prohibited in the Philippines until Ferdinand legalized it
in 1975, at Imelda's insistence, but like child prostitution it was always
going on. In the pre-Marcos days, the Lopez clan was credited with having a
large stake in illegal casinos in Manila and Iloilo. Fernando Lopez-vice
president under Garcia and Marcos-ran a chain of gambling joints in Iloilo
City that had such a pernicious effect on citizens that "schools were
abandoned, regular occupations neglected." Lopez was said to have kept his
casinos open during the occupation by sharing his profits with Japanese
officers.
But it was only when American and British casino operators entered the
picture that gambling in the Philippines rose to international standards,
with ties to Las Vegas, Miami, the Bahamas, Macao, and Monaco earning
hundreds of millions of dollars.
The most successful speakeasy casino in Manila in the 1920s was the
Tiro Al Blanco in Santa Mesa, which offered roulette, chemin de fer, dice,
blackjack, and poker. It was protected by wealthy patrons, among them mayors
of Manila such as Miguel Romualdez. By the 1930s,there were three
establishments considered "respectable" —the Club Filipino, the Carambola
Club, and the Philippine Columbian. They posed as dinner clubs, but were
casinos where wealthy Filipinos and foreign guests could lose fortunes at
monte or poker. During the war, the big action was run inside the POW camps
by Ted Lewin. More than six thousand Americans, Britons, and other nationals
including women and children were interned at two large camps at Santo Tomas
University in Manila and at the University of the Philippines College of
Agriculture in rural Los Banos. Both camps were administered by the internees
themselves. Lewin was a King Rat. He organized games and so impressed
Japanese officers with his skill that they asked him to run a casino for
them. With Liberation, Lewin opened a private club in the Manila suburb of
Pasay City, catering to wealthy Filipinos and American soldiers, and
including a bar and casino. Manila was wide open. Harry Stonehill was
hustling U.S. Army trucks, Ferdinand Marcos was selling import permits and
fake war service records, and the atmosphere at the club reeked of Bogart and
Casablanca. Ted Lewin did so well that he moved into the bayfront, starting
the Club Cairo. There were two roulette tables, two crap tables, ten
blackjack tables, and anything else you wanted.
Lewin had mob ties in America and operated under cover of being a sports
promoter, occasionally arranging a prizefight or a visit of the Harlem
Globetrotters. When the daughter-in-law of Fernando Lopez left her husband
and fled to the States with her child, Lewin was said to have arranged to
have the infant kidnapped and returned to Manila. He also ran a string of
crooked Filipinos with PX privileges acquired on the basis of their alleged
guerrilla service during the war, and sold the goods on the black market.
According to Primitivo Mijares, Lewin once gave President Magsaysay a
campaign contribution, then asked for a favor. Magsaysay was slow to realize
there were strings attached. Mijares quoted him as remarking, plaintively,
"But he gave me that money for the cause of good government; how can I now
accede to this request which would lead to bad government? Tell him, 'No.' I
can't do it."
In the 1950s, Lewin had a penthouse in Manila at the Shellburne Hotel across
from the U.S. Embassy. Because he was an American citizen with criminal
connections, the CIA assisted the FBI by bugging Lewin's penthouse. Tapes
were read by the CIA station for leads on backstage political deals that
might be arranged with Lewin's help.
Lewin at this point was having an affair with the wife of a major in the U.S.
Counter-Intelligence Corps. More than sex was involved: Lewin's group was
counterfeiting U.S. military scrip to buy goods from the PX for the black
market. Periodically, the army would cancel old scrip and issue new without
advance notice to catch the counterfeiters. The CIC major's wife kept Lewin
informed of these impending changes in scrip, and not one of his ring was
caught.
Lewin was part of the Marcos and Stonehill network. During the climax of the
Stonehill scandal in 1962, he was among the men deported from the islands by
justice Minister Jose Diokno. When Ferdinand became president in 1965, Lewin
was allowed to come back, picking up where he had left off. Until the early
1970s, Lewin remained the key man in Manila gambling, with the protection of
President Marcos and Ver's NISA. But having an understanding with Ferdinand
sometimes was not enough. One also had to have an understanding with the
First Lady. The happy days of the Club Cairo came to an end when Lewin ran
afoul of Kokoy Romualdez.
Kokoy had been running up large tabs at the club. One night, Lewin had his
bouncers throw him out in the street. Kokoy ran to his sister. The moment
martial law was declared, Romualdez came back to the Club Cairo with a flying
squad of NISA thugs and watched while they beat Lewin's club operators. Even
that was not enough to settle the score, and Romualdez continued to harbor a
grudge. "He has never felt himself fully satisfied," said Mijares. -Kokoy
feels he can never fully avenge himself on Lewin's hirelings.. . . " Shortly
after that Lewin was said to have died of a sudden heart attack.
In competition with Lewin's casinos, several Filipino CIA alumni, among them
Lansdale's friend Terry Adevoso, set up a multi-million-dollar corporation
and in October 1966 bought a luxurious doubledecker ship from a Hong Kong
builder for $700,000. It was described as a floating restaurant, but was
really an offshore casino. Kokoy did just as badly there. In 1975, a second
floating casino appeared on the waterfront, a ship bought for $4 million by
the Peninsula Tourist and Shipping Company, with Alfredo and Benjamin
Romualdez among the owners, fronting for the First Lady. In honor of Imelda's
involvement, Ferdinand decreed that gambling was now legal. Press photos at
the gala opening showed Imelda taking the first roll of dice, while Gina
Lollobrigida looked on with Macao gambling wizard Stanley Ho.
Filipinos thought Stanley Ho was "very mysterious," and perhaps even a bit
sinister. A British citizen, resident in Hong Kong, he was the acknowledged
master of gambling operations in the Far East. His net worth was
conservatively estimated at around U.S. $600 million.
The Ho legend was unusual. His grandfather was a compradore or "fixer" for
the Jardines-Mathieson commercial empire, one of the most powerful and
lucrative jobs a Chinese could have. His grand-uncle was on the Jardines
board, became the wealthiest property owner in Hong Kong, and was knighted by
King George V for his generosity, becoming Sir Robert Hotung. Stanley Ho's
own father, the compradore of one of the other great fortunes of Hong Kong
and Shanghai, the Sassoons, lost his fortune through insider trading in
Jardines shares and was ruined financially in the ensuing scandal. He fled to
Saigon before World War II to escape the effects of the scandal, leaving
Stanley and his mother in Hong Kong to fend for themselves.
For the time being, the scandal made family connections meaningless. Stanley
and his mother were shunned, and life as an outcast was difficult. just
before the Japanese arrived, his grand-uncle Sir Robert Hotung prudently left
for neutral Macao to sit out the war, and a great many other Hong Kong
citizens followed.
At the age of twenty, Stanley Ho was among them, a dropout from college at
the end of his third year. Although still a social outcast in polite society
because of his father, he had inherited phenomenal connections through his
grand-uncle and grandfather that were greatly appreciated by impolite
society. A Chinese friend offered him a job as a junior secretary in a
company set -up to arrange barter deals between the Macao government and the
Japanese military authorities. Huge profits were to be made. Stanley learned
Japanese. He said he also learned it was possible in Macao to make a million
dollars a week.
By the war's end he was himself a millionaire, or close to it, and he started
his own export-import business in Macao and Hong Kong, profiting enormously
on trade during the Korean War. He put his profits into Hong Kong real
estate, and by the late 1950s was one of the wealthiest young men in the
Crown Colony.
While Hong Kong boomed, Macao was dead. Its harbor was unusable because of
tons of Pearl River silt. Its hotels were moldering Portuguese colonial
buildings lacking modern conveniences, and gambling was limited to mah-jongg
and one decrepit casino. It took four hours to get there by slow ferry from
Hong Kong, and the few tourists who came did not want to stay overnight.
Stanley Ho was about to change all that.
The twenty-five-year gambling concession for Macao was up for renewal. The
idea was to wrest it away from its previous holders, the Fu clan. He formed a
group with a number of influential Chinese associates, and made a bid the
Portuguese government could not resist. In addition to building new casinos,
new hotels, and new tourist attractions, they offered to dredge the harbor,
opening Macao to international shipping and to new high-speed tourist
ferries. To clinch the deal, Ho offered to resettle the tens of thousands of
squatters on the Macao waterfront and completely renovate the area. After a
bitter struggle with the Fu clan, owners of Hong Kong's Furama Hotel, Ho and
his partners won the Macao casino operating license.
Ho's new hotels and casinos transformed Macao. Residents of Hong Kong,
unable to gamble legally except on horse racing, began going to Macao for
weekends. To move visitors faster, Ho put together the world's biggest
commercial fleet of jet hydrofoils, delivering twentyone thousand passengers
a day.
By the 1980s Stanley Ho was contributing more than 50 percent of Macao's
entire annual revenue, and began investing in hotel casinos in Australia,
Pakistan, Indonesia, the Philippines, Malaysia, Spain, and Portugal. As one
of the Orient's richest and most powerful men, Ho generally received good
press. He gave a lot of money to charities. But his line of work inevitably
raised eyebrows. He was a frequent visitor to San Francisco and Las Vegas,
where he reportedly had interests in Caesar's Palace. Hong Kong sources
pointed out that there was never any evidence linking Ho personally to
criminal activities of any kind, but this was not the case with his longtime
business partner, Yip Hon.
For years, Yip Hon was the brain behind Ho's gaming tables, a professional
gambler who had previously worked as a croupier for the Fu clan. In 1980, San
Francisco narcotics investigators alleged that Yip Hon was a top official in
the Luen Kung Lok Triad, and was "the source of supply for a major New York
Chinatown heroin dealer." According to an Organized Crime Strike Force, Yip
and his son were among the owners of an eleven-story building on Mott Street
in New York's Chinatown that was considered by the Drug Enforcement Agency to
be "a center for narcotics and gambling operations." However, no charges or
indictments resulted from these allegations.
On one occasion, it is said, Yip wrote Caesar's Palace a check for $800,000.
This drew the attention of the U.S. Customs Service currency investigations
division. They knew that Yip was a close associate of Hong Kong millionaire
Lee Wai-man, a target of U.S. criminal investigators because of allegations
that he was involved in the transfer of large amounts of currency between the
United States and the Far East narcotic and gambling empires. However, again,
no charges or indictments resulted.
After two decades of close collaboration, relations between Stanley Ho and
Yip Hon soured, and he bought Yip out. Twenty years of running Macao's
casinos had made all the partners billionaires, but not impervious to triad
rivalries. In the summer of 1987, Thomas Chung, Ho's right-hand man, was
fatally stabbed in Macao's Victoria Park as he walked to his car after a game
of tennis.
In February 1988, the U.S. justice Department published a Report on Asian
Organized Crime in which both Yip Hon and Stanley Ho were featured, but the
entire section on Ho was deleted just prior to printing. Embarrassingly, they
neglected to remove his name from the glossary at the back.
When gambling was legalized in the Philippines, Stanley Ho got the franchise.
Imelda's gambling ship was crewed by Roberto Benedicto's company, Northern
Lines, but Ho's men ran the tables. Profits were undisclosed, but Malacanang
was guaranteed two thirds of the net take, with one third going to the
owners-which meant that Ferdinand took two thirds and Imelda and her brothers
one third. Operating costs included paying a hefty fee to Stanley Ho.
>From gambling revenues, some 1.2 billion pesos were said to have been
siphoned off by Imelda's family. The Ministry of Finance disputed this,
claiming that the money was spent on the First Lady's new Kidney Center and
construction of Imelda's new University of Life.
The floating casino, originally known as Manila Bay Enterprises, was always
considered a Romualdez operation. One of Kokoy's most trusted subordinates
sat on the board, the volume for the day was always turned over to him, and
Kokoy would divvy it out. Alfredo "Bejo" Romualdez, Imelda's younger brother
and former navy reserve commander, commanded the floating casino as his
rubber duck. In one of the periodic trade-offs between the president and the
First Lady, Ferdinand gave Alfredo control over all organized casino gambling
in the Philippines. Alfredo wasted no time opening casinos throughout the
islands.
A tug-of-war continued over who got to keep the profits, Ferdinand or Imelda.
In 1977, Ferdinand set up the Philippine Amusement and Gaming Corporation
(PAGCOR). This shifted control of gambling back into his hands. He made it
all sound rather grand. PAGCOR was exempt from income taxes, import duties,
and audit. It would centralize and integrate the operation of all games into
one corporate entity. All profits would be used for civic and social projects
to promote welfare. This would boost tourism and eliminate corruption in the
operation of gambling, he said, without the direct involvement of the
government. But this was just soft soap.
PAGCOR was 60 percent government-owned (with the voting power vested in
Ferdinand) and 40 percent private (in Romualdez hands). This allowed
Ferdinand to determine the disposition of the casino funds personally,
instead of leaving that to Imelda's brothers. As it was exempt from public
audit, there was no way to determine how much was earned, but a Marcos decree
of December 1982 revealed that PAGCOR by then had generated nearly 1.7
billion pesos in revenues and passed on nearly 1 billion of it to the
government. This "public" share of the earnings was deposited in Roberto
Benedicto's Traders Royal Bank. Once in the bank, it vanished.
By February 1978, the Romualdez family's floating casino had forced the CIA's
floating casino out of business. There was only one left on the bayfront. But
the following year, Imelda's ship was torched by the Light-a-Fire Movement.
Gambling operations had to be moved to the handsome Philippine Village Hotel
next to the airport. Stanley Ho was said to have put up his own money to get
the airport casino running, in return for 30 percent of the take. Edward
Marcelo (who had wanted the rights to salvage the Nachi) was the chairman and
president of PAGCOR, fronting for Imelda, and the casino paid him rent at six
times the going commercial rate. Ho had equal say with Marcelo in all
decisions on how the casinos were run, and Ho's boys directly supervised
every detail of operations. But Filipino gambling sources said Marcos
routinely double-crossed Ho, so that Ho never got his fair share of profits.
Ferdinand's ties to the American Mafia traced back to two of his old friends,
Harry Stonehill and Ted Lewin. A native of Chicago, Stonehill was said to
have gotten his start in the postwar Philippines with the help of Chicago
Mafia godfather Tony Accardo. It was Accardo—a former bodyguard and enforcer
for Al Capone-who took over the Capone mob and outlasted rival Sam Giancana
to become the elder statesman of organized crime from Chicago to the West
Coast. Accardo is said to have arranged for Stonehill to acquire his original
cigarette manufacturing machines and packaging for a brand called "Puppies,"
which had failed in America, and the Mafia don was then the major source of
the stolen American cigarettes smuggled into the Philippines by the
Marcos-Ver-Crisologo syndicate. Ferdinand did make a number of unexplained
trips to Chicago in the 1950s, and to Miami, and the Bahamas, where he became
involved in business deals with millionaire exconvict Wallace Groves and
gambling and black-money interests tied to Meyer Lansky. Sources at the U.S.
justice Department said Ferdinand apparently was able to get favors from
Accardo over the years, including Mafia assistance for Ver's NISA agents when
they wanted to make trouble for Filipino exiles. Ver kept a resident agent in
Chicago, one of whose missions was said to be maintaining a liaison with the
mob.
Cigarette smuggling in the Philippines was worth millions to the Mafia over
the years, but it was only part of the cake. Lim Seng was providing one-tenth
of the heroin supplied to the United States, and his American customers were
a mixture of Mafia families and Chinese tongs. The development of world-class
gambling casinos in the islands provided another outlet for money-laundering
and the movement of black money. One way black money moved between America
and the Far East was for Asian gamblers to visit Las Vegas, Reno, and Lake
Tahoe, where they spent a few nights at the tables and signed IOUs to cover
their "losses." These IOUs were then sold to West Coast banks that redeemed
them through banks in Hong Kong. Everyone involved made money through
commissions, and in the process large sums were transferred across the
Pacific that experts in organized crime insist were in payment of narcotics
shipments and other illegal transactions. The money that was repatriated
moved around the world in the form of computer bytes and pixels in "tested
telex" transfers through the international banking system, laundering the
funds electronically. So much money was to be made in this sort of currency
exchange that separate bids were made to acquire that franchise in every
casino.*[*In 1987, the Aquino government was shaken by an allegation that
Ting-Ting Cojuangco, President Aquino's sister-in-law, had accepted a
million-dollar bribe from an Australian to assure him of the money-exchange
franchise in Philippine casinos.]
During the years of the Marcos regime, a number of Mafia figures and people
with ties to the Mafia visited the islands to gamble, vacation, and do
business.
In the 1970s, millionaire ex-convict Wallace Groves visited the Philippines.
Groves had gained ownership of Grand Bahama Island 60 miles across the Gulf
Stream from Palm Beach through an elaborate conspiracy with Nassau's Bay
Street Boys, ending in a scandal that toppled the white government of the
Bahamas. His casinos in Nassau and Freeport, Grand Bahama, had been run for
him by people who had associations with the Mafia's Meyer Lansky, and Groves
himself was busy at the time laundering millions of dollars for the CIA
through banks and casinos in the Bahamas.
One of the three principle owners of Groves's Grand Bahama Port Authority was
the Wall Street house, Allen & Co., run by Charlie Allen and his brother
Herbert. The Allens also owned a big chunk of Benguet mine's in the
Philippines and Herbert was a golfing partner of President Marcos. One of the
Allens once said, "We trade every day with hustlers, deal makers, shysters,
con men.... That's the way businesses get started. That's the way this
country was built."
Groves must have realized what an asset it would be for him to own a piece of
a major gold mine on the opposite side of the planet, especially one being
traded on the New York Stock Exchange. In the casino business there was
always the need for a lucrative legitimate enterprise through which profits
could be laundered.
In a complex deal, Groves and the Allens were able to parlay their Grand
Bahama holdings into nearly complete control of Benguet mines. President
Marcos allowed the deal to go through, but only after he personally
"investigated" its "legal proprieties"—a well-publicized procedure that
caused Benguet stock to go up and down in wild swings, earning Marcos cronies
huge profits through insider trading. Ferdinand Marcos, Wallace Groves, and
the Allens thus all had an interest in the Benguet mines and Grand Bahama
Island. This lasted until 1973, when the deadline was approaching for all
foreign-owned businesses to turn over at least 60 percent ownership to
Filipinos. Ferdinand used this to exert pressure on Groves and the Allens to
cut a new deal, in which he became the majority owner of Benguet. As their
part in the deal, the Allens continued to control the management of the
mines, and they and Groves kept Benguet's foreign operations and took back
Marcos's interest in Grand Bahama. Like a Monopoly game.
Although Ferdinand had planned to keep his part of Benguet all to himself,
the Dovie Beams scandal gave Imelda the upper hand, and she insisted that he
turn over the company to her. Ferdinand dutifully arranged for the shares to
be transferred to one of Kokoy's front men.
The idea of owning a big private island seemed to be very popular among
underworld figures. New York Mafia boss Joey Gallo was an occasional guest at
Malacanang Palace and was taken to the Marcos retreat on Fuga Island, the
smuggling stronghold off the northern tip of Luzon. Fuga was easily
accessible from Taiwan, Hong Kong, and Macao, and had been used by Ferdinand
for years as a private hideaway. According to a former member of Ver's
Presidential Security Command, Gallo came back to Manila later to make
Ferdinand a business deal. The Mafia had decided to take over Fuga Island to
create their own version of Macao, with gambling, resort hotels,
money-laundering, and drugs, a development plan reminiscent of that proposed
by Sasakawa for Lubang. He said Gallo delivered two cashier's checks in
partial payment for three islands, including Fuga and neighboring Barit and
Mabay. But when Gallo got back to New York, he was gunned down by rivals. The
palace security man said, "President Marcos naturally kept the money."
pp.317-337
-----
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris
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