Estrada to Pardo: Don't spare my friends in BW probe

President Estrada has given probers specific orders to make sure that there will be no whitewash in the investigation of those implicated in Best World Resources (BW) stock manipulation case, even if they involved presidential friends.

This was revealed by Finance Secretary Jose Pardo, who has been given the task of reviewing the initial probe findings by the Philippine Stock Exchange (PSE) and submitting recommendations based on the Exchange's final report.

"There will be no whitewash, the guilty will have to be punished, even if he is a friend of mine," Pardo quoted the President as saying.

Dante Tan, major stockholder of BW and known ally of Mr. Estrada, has been implicated in the stock manipulation scheme that involved "wash sales" and the use of "dummy accounts."

In a 69-page report, the PSE's Compliance and Surveillance Group (CSG) outlined the history of BW, a gaming firm associated with Macau casino mogul Stanley Ho. The price of the company's stocks zoomed dramatically to P107 a share when Ho visited the country last October but plummeted shortly after he left. The sudden drop was blamed on manipulation by Tan, his associates and other member-brokers.

Pardo said his own review would include a probe into the possible involvement of government financial institutions Land Bank of the Philippines (Landbank) and the Social Security System (SSS) in the trading of BW stocks.

"There had been rumors circulating that Landbank bought BW shares, but I later found out that this was not true. I presume that the SSS likewise did not buy shares. But since these institutions are under my supervision, I will still have to check," the finance secretary said.

The investigation, Pardo pointed out, would have to be conducted quickly before Securities and Exchange Commission (SEC) chairman Perfecto Yasay vacates his post in March.

A revamp of the SEC board is expected once Yasay steps down. Among the candidates for SEC chairman are former Trade Undersecretary Lilia Bautista, Asset Privatization Trust chairman Rene Valdecantos and Ateneo de Manila University dean Cynthia del Castillo.

Meanwhile, Bangko Sentral ng Pilipinas (BSP) Gov. Rafael Buenaventura admitted that there has been an outflow of dollars from the financial system as a result of the foreign fund managers temporarily leaving the local stock market.

Last week, share prices dropped 2.2 percent to a 10-week low as foreign fund managers fled the PSE in the wake of the report implicating Tan and member-brokers in insider trading and price manipulation.

"Sure, there has been an outflow, but this is only temporary. The investors are simply watching how we deal with BW," Buenaventura said.

The PSE's Business Conduct and Ethics Committee (BCEC) will be focusing its inquiry on the eight member-brokers named in the BW fiasco, although three more firms could also be summoned.

The BCEC is currently reviewing the findings of the CSG which had identified eight brokers as liable for complicity with Tan in the alleged manipulative scheme, namely: Angping; Armstrong; Asiatec; A.T. De Castro; Guild; PCCI; Quality; and Securities 2000.

PSE chairman Trinidad Kalaw, who heads the BCEC, said three more brokers, which she refused to identify, could be asked to explain their heavy accumulation of BW shares during the stock's dizzying run.

Kalaw explained that while there is nothing wrong with large volume purchases, the brokers had put at stake their net capital position, or their ability to cover their stockholdings, which is considered both risky and suspicious.

A total 51 stock brokerage companies traded shares of BW during the course of its spectacular rise and fall last year, but the PSE report named only eight.

PSE vice president and CSG head Ruben Almadro said there was never any intention on the part of the committee to omit any significant information uncovered during the probe.

"We never singled out any broker for persecution, nor left any broker out of the investigation," he said.

Earlier, a Senate panel questioned the PSE for not including several brokers in the list, including Wealth Securities, which was involved in heavy transactions.

"The CSG extensively investigated Wealth, Abacus and Solar but uncovered nothing significant to connect them to the manipulation scheme," Almadro said. -- With Conrado Diaz