Lopez Holdings


An open letter to Juan Ponce Enrile
Dear Johnny,
I am addressing this open letter to you in answer to some of the questions you posed to me the past week. But frankly, my real audience is not so much you but the public who are not aware of what happened to Meralco and the Lopezes during martial law.

Most of what I say here is probably "old hat" to you, Johnny, since you were one of its main architects and main implementor of martial law.

It has been a painful process having to recollect and reconstruct the events that happened 30 years ago, but I had to do it in order to answer your accusations that my family willingly and voluntarily sold Meralco to the Meralco Foundation without coercion or duress. It may seem that way when you examine just the documents of the transaction. But those legal documents do not reflect the harsh reality that confronted the Lopezes during the martial law period. You must look at the totality of the situation in order to understand what really happened to the Lopezes during martial law.

I shall start my account of this period when my father, Eugenio Lopez, organized a group of Filipino investors into the Meralco Securities Corporation (MSC) to purchase Meralco from its American owners, General Public Utilities in 1961, in probably the first major exercise of a leveraged buyout in this country. At the time, there was a fair amount of skepticism about the ability of Filipinos to manage and operate one of the largest businesses in the country. But these fears proved to be totally unfounded and the decade of the 1960s turned out to be a golden age for Meralco.


Those ten odd years represent a springtime of great achievements, innovative management, enthusiasm and hard work. The new Meralco attracted a lot of young, bright and highly motivated Filipino managers, such as Vicente Paterno, a Harvard Business graduate, who later on became the founder of the 7-11 chain of stores in the country as well as a Philippine Senator; Antonio Ozaeta another Harvard Business School graduate who became Chairman of PCIBank; Oscar Reyes who became President of Shell Philippines; Christian S. Monsod, who had worked for the International Finance Corporation (IFC) and also became a member of the Constitutional Commission in 1987 and Chairman of the Commission on Elections; Camilo Quiason, who became Justice of the Supreme Court of the Philippines. There were also a sprinkling of elder statesmen as well as hardboiled businessmen such as Ambassador Emilio Abello and Alfredo Montelibano. I was proud to be part of this dynamic group as Vice President for Economic Research and Development in MSC for seven years prior to its being taken over by Marcos in 1973.

Once Meralco was in Filipino hands, it went on to expand its power generation capacity by an incredible five times in these 10-year period from 300,000 kw to 1,500,000 kw. In 1961, Meralco was greatly dependent on Napocor for 35% of its power requirements. But because Napocor was always delayed in bringing its hydroelectric power plants on line, Meralco frequently during the late 1950s had to resort to a system of rotating brownout in Metro Manila.

When the Filipino group took over in 1961, it decided to remedy this power deficit situation by putting up one oil-fired power plant every 18 months, so that by 1972, after a decade of continuous expansion, Meralco was practically self-sufficient in power supply.

What was equally impressive was that all this growth was financed without reliance on government guarantees, but solely on Meralco's superior credit standing in both domestic and foreign bond markets.


By 1966, Meralco had become the largest private corporation in the country in terms of assets. Furthermore, due to its economies of scale and efficiency in operation a United Press International survey in 1971 showed that Meralco rates were among the lowest in the Far East. And this was a favorite theme my father would return to time and again. At the inauguration of the 330 mw Snyder II Station in Sucat in May 1972, he said "We pride ourselves in saying that we have one of the lowest rates in the world. In Southeast Asia, we have the lowest rates, with the exception of Taiwan, where the utility is subsidized by the government. We have lower rates than those in Japan, Korea, Hongkong, Thailand, Singapore and Malaysia."

In another speech, he said, "Meralco rates are among the lowest rates in the world. Compared to the 50 states in the U.S., Meralco is the lowest except in seven States."

It is difficult for us today who are paying more than P5/kwh to realize that in the 1960s, the Meralco customers were only paying an average of less than 6 centavos/kwh for their electricity. Those were really the good old days for the Meralco customers!

My father was also a firm believer in sharing the new wealth being created by the MSC group with as wide an ownership base as possible. Thus from the original 600 stockholders in 1961, the ownership base increased to 12,000 by 1972.

Unfortunately, this golden age came to an abrupt end when Martial Law was declared in 1972. The Lopez family was subjected to a long period of persecution during the next 14 years primarily because my father dared, through the pages of the Manila Chronicle, to be openly critical of the graft and corruption of the Marcoses. This criticism climaxed in a series of front page editorials and cartoons in January and February of 1971, which exposed the issue of the hidden wealth of the Marcoses long before the general public became fully aware of the extent of the rapacity and greed of that "conjugal dictatorship".

Deeply hurt by the media attacks against him and his wife, President Marcos launched a campaign against the "oligarchs" i.e. the Lopezes. Time and again during those days, he would say that this was a fight to the finish and that the "oppressive oligarchs" must go. Obviously, Marcos considered the Lopezes as the biggest stumbling block in his quest for absolute power.

Hence, when Martial Law was declared on September 21, 1972, the Manila Chronicle was shut down, ABS-CBN was seized and used by Marcos and his cronies without compensation. My uncle, Fernando Lopez was unceremoniously stripped of his position as Vice President of the Philippines; my elder brother, Geny, together with Senator Serge Osmeña were made to rot in a military prison for five long years until they made their spectacular escape to the U.S. in 1977. And my father was forced to live and die in exile the U.S. because he refused to come to terms with the Marcos dictatorship.

But Marcos, being a shrewd politician, always measured his punches and calibrated his attacks against the Lopez businesses in accordance with the nature of those businesses. Thus in the case of Meralco Securities Corporation (MSC), the holding company of Meralco, Marcos knew it would be scandalous to use the same crude methods he employed with the Chronicle and ABS-CBN, primarily because MSC was a public corporation with more than 12,000 stockholders, including many foreign creditors and prestigious financial organizations in the MSC group of companies, such as International Finance Corporation and Private Investment Company of Asia.


The subtler methods nothwithstanding, the objective of Marcos remained the same: the elimination of the Lopezes from management and control of the MSC group of companies.

I was a witness to the conspiracy and systematic campaign of the Marcos group to wrest control of the Benpres and MSC groups of companies from the Lopez family. In view of the refusal of my father to return to the Philippines after his visit in June-July 1974, the incarceration of my brother from 1972, and the unfamiliarity of my uncle Fernando Lopez with the complexities of problems in the Lopez group of companies, I became in effect, during martial law, the senior Lopez executive whose responsibilities included MSC, Benpres Corporation, ABS-CBN and the Manila Chronicle. I was in the midst of all the negotiations regarding these companies.

The following series of events will prove that there was a real conspiracy to force the Lopezes out of MSC groups of companies:

In 1971, the late Antonio Ayala, who up to that time was with the government Board of Investments, decided to apply for a job at Meralco. My father took a liking to Ayala and he was made a Special Assistant to the President with the rank of Vice-President. Ayala was an important factor in the eventual turnover of the Benpres and MSC groups of companies to the Marcos-Benedicto-Kokoy Romualdez trio because he came to know the inner workings of the MSC group, and what is more important, he earned the trust of my father. But at the same time, Ayala owed his real loyalty to Kokoy Romualdez, who might be termed as the Marcos "account executive" in charge of Meralco. Ayala admitted to me his loyalty to Kokoy shortly after the declaration of martial law. Since he was actively serving as a go-between for the government and Kokoy on the one hand, and my father and Meralco on the other, I asked him in case there was conflict of interest, where would his loyalty be. He was candid enough to say that if he had to choose, he would have to side with Kokoy because of his association with Kokoy Romualdez since 1967, when he worked as Economic Attache and Special Assistant in the Philippine Embassy in Washington, D.C. when Kokoy was our Ambassador to the U.S.

In May 1972, shortly before the imposition of martial law, Meralco was given a 36.5% rate increase by the Public Service Commission (PSC) due to the extraordinary increase in oil prices, as well as the deterioration in the value of the peso. But upon the declaration of Martial Law, the PSC was abolished and replaced by a Board of Power, which could decide on rates without public hearings. This board initiated a squeeze on Meralco's financial situation by reducing the 36.5% rate increase given by the PSC down to 20.9% early in 1973. This rate reduction had a domino-like effect on the finances of Meralco, MSC and Benpres. All three institutions either had to postpone or default on maturing debt payments.

But the more far reaching action taken by the Marcos dictatorship against Meralco and private power in general was the promulgation on November 7, 1972 of P.D. No. 40 which gave Napocor the monopoly in generation and transmission.

Shortly before the declaration of Martial Law, President Marcos had already sent teams of Bureau of Internal Revenue examiners to scrutinize the books of Meralco.

On November 27, 1972, my brother Eugenio, Jr. or Geny, was arrested and placed in a military prison for the next five years. His imprisonment must be viewed in relation to the Marcos objective toward the Lopezes, which was to offer Geny's freedom as the ultimate prize for accomplishing everything the Marcoses wanted from my father.

My father was asked to return to the Philippines by Kokoy Romualdez, as a gesture of goodwill and manifestation that he is not in exile organizing an opposition to the Marcos government. President Marcos himself said that Geny's case can be settled only by my father who should return to the Philippines for this purpose. My father complied and returned to Manila in June 1974, but he left the following month a very disappointed man, as no progress was made with respect to the release of my brother. The following year on July 6, 1975, he died of cancer in San Francisco without seeing the release of his son from prison.

Another martial law agency President Marcos created was the Power Development Council under Alejandro Melchor. On March 28, 1973, this Council required that as conditions precedent to granting Meralco any of the loan guarantees to restore Meralco's financial viability: a) Meralco and MSC should come up with a plan for the disposition or divestment of Meralco shares held by MSC; b) that there be two government representatives on the board of Meralco; c) two government representatives should sit in the Meralco operating committees, namely management, purchasing and personnel; d) a cost-cutting program. All these conditions were complied with.

At the same time, an Inter-Agency Team, composed of representatives of different government offices having to do with the regulation of electric utilities, was sent to Meralco. This Team, also under Melchor, inquired into all facets and operations not only of Meralco, but also of all the other MSC companies. Major decisions in Meralco, including the hiring and firing of supervisory personnel and employees compensation were "cleared" first with the Inter-Agency Team.

Central Bank Governor Gregorio Licaros was also asked by the President to make a study of the financial problems of Meralco. In his memorandum to the President dated August 30, 1973, Licaros recommended, among other things, that if Meralco had a cash deficiency of 53 million, this should be injected in by MSC as additional equity to Meralco; also that if Meralco creditors require a DBP guarantee, the DBP collateral should consist of conditional sale, not pledge of all MSC holdings of unencumbered common shares of Meralco, including all MSC-held shares in MSIC, PECCO, PHILEC and PPC.

On September 5, 1973, Governor Licaros wrote another memorandum to Marcos, informing him that he, Licaros, had met with the principal creditors of Meralco and MSC, namely Mr. Samuel Eastabrooks of FNCB, Mr. Ryozo Murofushi of Marubeni and Mr. Sixto Roxas of BANCOM, and that these creditors were informed of the observations of the President on the Licaros Memorandum dated August 30, 1973, which were as follows: Neither the government, the DBP nor any other institution of the government may properly issue guarantees in favor of creditors of Meralco or MSC in view of Quo Warranto proceedings being instituted by the Solicitor General over the validity of the franchise of Meralco; and subsequent tax assessment of the Commissioner of Internal Revenue over Meralco;

Action of government on Meralco proposal for guarantee has to await the final decision of the courts on the above cases, and a clear and positive act of Mr. Eugenio Lopez, together with other stockholders of Meralco and MSC on their proposals;

The creditors should not be interfered with by government in the exercise of their rights to foreclose on defaults of Meralco and MSC."

But the final insult was dealt at the annual stockholders' meeting of MSC on October 15, 1973. My father and his entire group of about 30 trusted officers were required to resign from MSC and its subsidiaries. This resignation en masse was an ignominious symbol of total capitulation to Marcos.

I shall never forget the words uttered by Kokoy Romualdez shortly after this occasion. He said, "It was a good fight between the President and your father but in the end the President had to win because he is the younger man, while your father is old and sick."

As a result of all these pressure points as orchestrated by the Marcos-Kokoy team, my father had no choice but to sign that infamous "Stock Purchase Agreement" between Benpres and the Meralco Foundation on November 29, 1973, which involved the sale of a 5.9 million shares or 27% of MSC to the Meralco Foundation for P150 million over a 10-year period. But payment under this plan was made subject to availability of cash flow.

The Marcos-Kokoy Romualdez Group was, however, very careful to preserve the appearance and the fiction, that this was an agreement freely entered into by both parties, and that it was really my father who initiated all the moves for the sale of the family interest in the MSC Group of Companies.

Between February and November 1973, five letters were sent to President Marcos, mostly composed by Ayala and then signed by my father, all of which talked about the "opportunity to participate in your program to democratize wealth and property for the greater good of our people."

In view of the continued imprisonment of my brother Geny and the hope that the MSC agreement between Benpres and Meralco Foundation would lead to his freedom, my father went along with this whole charade until the end of 1974. Besides, he was helpless to control the course of events as these events were actually being dictated by the Martial Law government of Mr. Marcos.

On November 18, 1974, apparently losing hope that he would be freed from prison, Geny and Serge went on a 10-day hunger strike to protest their continued imprisonment as well as to focus attention on the plight of all political prisoners in the country. After the termination of their hunger strike and recuperation, instead of being released as you Johnny as martial law administrator promised, Geny and Serge were informed that they would be charged with conspiracy to assassinate Marcos and were returned to prison.

After it became clear your personal promise as martial law administrator of Geny's release from prison was hoax, despite the transfer of ABS-CBN, MSC Group of Companies and other Benpres assets to cronies and entities associated with the Marcos regime, my father decided to break his long silence on this whole affair. He gave two lengthy interviews to Mr. Nick Benoza in the Philippine News on December 31, 1974 and January 22, 1975 wherein he stated that "our properties were given to the Marcos family through its front men in exchange for the release of my son and for the safety of our family --¦ until now, I could not disregard the danger to my son's life while he is held hostage by President Marcos. But it is my son who decided to risk his life for justice to all the Filipino people. I cannot hurt my son any longer and I have never worried about the danger to my life."

MR. BENOZA : Mr. Marcos's government is obviously claiming that the takeover by Marcos of "industries vital to the country" will democratize property and disperse property ownership in the Philippines, thus resulting in the wider distribution of wealth. Is this principle working and is this goal being achieved?

MR. LOPEZ: That is all propaganda. The truth is Mr. & Mrs. Marcos now virtually own the Philippines, lock, stock and barrel. About this noble objective of wealth dispersal--¦ what is happening is exactly the opposite. To me, this dispersal of ownership, martial law style, is economic banditry.


It is quite significant that after the signing of the Benpres-Foundation Stock Purchase Agreement, the government suddenly gave its full support to Meralco. Both DBP and PNB gave their guarantees for the restructuring and refinancing of the Meralco loans. And the Board of Power gave Meralco in 1974 a whopping 135% rate increase with automatic escalation clauses for fuel price and exchange rate increases. In addition, P.D. No. 551 in September 1974 lowered the franchise tax on revenues of electric utilities from 5% to 2% as well as the tariff on oil importation of electric utilities from 20% to 10%.

The forced sale of the MSC shares by Benpres to the Meralco Foundation was therefore, inequitous and oppressive. Under normal circumstances, if there was no design to dismantle the business holdings of my father, there would be no reason or logic to sell the shares of MSC, which ranked among the top corporations in the Philippines.

The evidence shows that on November 6, 1973 Meralco Foundation (MFI) was incorporated for the purpose of acquiring the shares of the Lopez group (27%) as well as other large stockholders in MSC until MFI had acquired 45% of MSC (now called First Philippine Holdings Corporation or FPHC). Realizing that further acquisition of MSC shares could prove costly, MFI decided to acquire Meralco directly from MSC. This was in line with the pronounced policy of the Marcos government to democratize wealth by mutualizing the ownership of Meralco to the hundreds of thousands of Meralco customers. But this grandiose plan was never implemented, partly because it was impractical and more importantly because there never was any honest intention to carry out this plan. The real objective of the Marcos-Romualdez group was to divest the Lopezes of control and ownership of MSC and Meralco, nothing more.

So, Johnny, I hope this recitation of historical facts surrounding the Meralco takeover by the Marcos Martial Law regime will refresh your memory on the circumstances behind the so-called deal. It is clear that it was less than voluntary on our part. Also, that contrary to your pronouncement, you arrested and detained my brother Geny as early as November 27, 1972, before you started formal negotiations on Meralco. The series of events proved the takeover was a premeditated move of Mr. Marcos acting through Kokoy Romualdez and his team. What surprises me however is, how you, as the martial law administrator, could even suggest a takeover as lopsided as that one, was undertaken as a free expression of our rights as owners of Meralco. It was clearly one undertaken in duress.

What I cannot understand is why you are desperately trying to revise history by deodorizing something that is undeniably an asset grab? Anyone with any sense of fairness and justice and cognizant of the abuses of martial law powers cannot see the Meralco case in any other way. Besides, all the matters you brought out have been taken into account in arbitration proceedings and the Supreme Court before a much reduced portion of Meralco shares were returned to us.

I thought all along that because of Edsa 1 and your public repudiation of the Martial Law regime, you of all people know from a first hand perspective just how Mr. Marcos and his cronies used Martial Law for their undue advantage all cloaked under the guise of public interest. I should have known that as an active participant, there was no way you could liberate yourself from the clutches of those dark days. If in your twilight years you feel the need to quiet your conscience from your key participation in Mr. Marcos's martial law regime, please don't do it by trying to make one of its darkest deeds seem like a benevolent act, which it obviously isn't.

Oscar M. Lopez

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Lopez Holdings Corporation 
16/F North Tower, Rockwell Business Center Sheridan, Sheridan St. corner United St., 1550 Bgy. Highway Hills, Mandaluyong City, Philippines

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