The early years of SGV: How Wash SyCip conned Fred Velayo (not just once but twice)

This year, SGV & Co. celebrated its anniversary as close as it could to the birthday of its founder, Washington SyCip, who turned 80 last Saturday.

SGV was put up 55 years ago, right after World War II. SyCip, then close to turning 25 and armed with a Ph.D. from Columbia University in New York, met up with his best friend since the first grade, Alfredo Velayo, in California. He was on his way home to the Philippines and Fred Velayo was on his way to boot camp, the price he had to pay for accompanying his repatriated American wife and her family.

"He told me then of his plan to start an accounting practice and he was hoping that I could join him from the very beginning," Velayo said. "We’ve always done everything together. We’ve gone to the same schools until college. He finished one year ahead of me at the University of Sto. Tomas at 17; I finished at 18."

Velayo turned down SyCip’s offer. After his military draft, he wanted to complete his graduate program at the University of Southern California.

The two best friends, however, continued to stay in touch. Each would immediately write back the other upon receipt of a letter.

The first con job

In Dec. 16 of the same year, SyCip wrote Velayo, using the letterhead of W. SyCip, certified public accountant.

"You should try to return as soon as possible as the opportunities here are excellent – the earlier you start the better," SyCip wrote. "Master’s degree doesn’t mean much – ninety percent of the FEU (Far Eastern University) accounting faculty do not have anything more than a bachelor’s degree – including some of the highest paid ones. But now is the time to get started as I believe that the more you put it off, the greater will be the competition when you do get settled. There’s a lot of accounting work – and you can combine this with teaching and importing – the returns are much greater here than in the States and the competition for a capable person is much less."

In his office at the William J. Shaw Foundation, Inc., Velayo laughs at the recruitment letter. "Wash made such a good sales pitch. But he didn’t mention in the letter the main reason why he wanted me to join him as soon as possible."

Velayo found out the real reason a few weeks after his army discharge in January 1947 and his subsequent joining the SyCip auditing firm the next month. "Wash told me he was leaving for the States and I was in charge. I told him he couldn’t do that–the first four months of the year were our busiest time of the year. That was when he told me he had to spend at least a year in continental US to keep his US citizenship, which he had taken when he joined the US Army and served in the China-India-Burma front."

Before SyCip left for the US, the company’s name was changed to SyCip Velayo Jose & Co.

Velayo ran the company for 15 months. It was a four-man operation. There was Vicente Jose, a tax expert whom SyCip hired before Velayo; Jose Quintos, a junior auditor who later became the company’s point man in Cebu, the company’s first branch; and a man Friday who answered the telephone, did the typing and whatever else was needed.

The office of SVJ & Co. was also the office of David SyCip, the importer/exporter, and Alex SyCip, the lawyer. "When you entered, you had the law office. At the back was the auditing company. Wash occupied a private room with David. Everybody else had desks outside. During Wash’s absence, I moved into the room with David," Velayo said.

Lots of work

Shortly after his return, SyCip walked to Velayo’s table and announced that, from that day, Velayo would be getting the same salary and perks as he did.

"I looked at him and told him that it was about time. Wash then smiled that mischievous smile of his and said, ‘Even if you get the same pay, Fred, you’ll always be my junior’. I got angry. I asked him how I could be his junior in rank when we did the same work and had the same working week, which was seven days a week. I told him I even had seniority, when his 15 months in the US, was added to the equation. Wash walked away while I was still ranting and then he turned around and simply reminded me that I will always be 57 days younger than him."

SyCip reported for work at exactly 7:30 a.m. Velayo came in thirty minutes later. At exactly 5:30 p.m., the two friends left for the University of the East, a new university put up by Francisco Dalupan, the second-in-command of Nicanor Reyes at FEU. They taught for three hours, six days a week.

"We each got about P500 a month for teaching. My teaching money went to what I called the D.A.W. Co. or the three SyCip brothers who lent me P17,000 to buy a 600 square meter house in Quezon City for my family," Velayo said.

New partner

By 1953, SVJ& Co. had about 150 employees. Competition was heating up with the return of foreign auditing companies. One of them was Henry Hunter Bayne & Co., a Scottish chartered accountants firm put up in 1904. Although SVJ & Co. was twice the size of Henry Hunter Bayne, the foreign company serviced many foreign-owned companies, including Ayala y Cia.

"One day, Wash told me the foreign partner of Henry Hunter Bayne, Thomas Farnell, was retiring and was leaving the company to his local partner, Ramon Gorres," Velayo recalls. "Wash asked me to call Gorres and invite him out to lunch. I told Wash to call Gorres himself. Wash then told me he couldn’t do that because he heard the news from his father, Albino, who sat with Farnell on the board of Lepanto Mining. Farnell announced his retirement from the Lepanto board the day before."

In the coffee table book released during SGV’s 50th anniversary, Gorres recalled that he knew that a possible merger was going to be discussed during that lunch with SyCip and Velayo. "If I didn’t agree with the two of you now, I am sure most of my good clients will go to you anyway," the book quoted Gorres as telling the two partners.

It was during that lunch that SyCip and Velayo proposed to drop the name of Jose from the company’s name and put in the name of Gorres. To sweeten the pot, the two partners also proposed to put the name of Gorres after that of SyCip and before that of Velayo.

"After lunch, Gorres ran after me and insisted that he didn’t mind the company being called SyCip Velayo Gorres or SVG," Velayo said. "I turned around and told him, ‘You innocent man. You really don’t know, do you? I can’t accept that because SyCip will start telling everybody that SVG stands for SyCip Very Good’. Wash, who was several steps behind, heard that and shouted, ‘That’s not true. That’s not true’."

The second con job

Velayo retired from SGV in 1970, eight years after he first told SyCip he wanted to resign. "I couldn’t sleep the night before because I just found out there was an accounting error that I didn’t see and which was carried by the client for the past two years. I felt it was time to get out," Velayo recalled.

Velayo reported for work 30 minutes earlier than SyCip. He told the guard to tell him the moment SyCip came in.

"I was prepared. I had all the answers for any argument Wash could come up with. Wash rushed in and asked me why I was in earlier than usual. I told him and he listened. Than he asked me to name the date when my resignation would take effect. I told him I wasn’t resigning right away. He pressed for a date. I was exasperated and said, ‘Six months from now, what does it matter?’ Wash answered, ‘because that’s the day I’m also resigning’."

At that time, SGV had about 4,000 employees. "We were already a big company with offices outside the Philippines but the resignation of SyCip and Velayo on the same day would have killed the company," said Velayo. "I couldn’t do that and Wash knew that."

As always, SyCip had the last say. – MJGrey