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Billionaire Zobel, secretive investors in anomalous P38B passport deal

Fifth of a series
IÑIGO Zobel, the country’s 11th richest billionaire, together with his secretive partners, own at least 40 percent of the company United Graphic Expressions Corp. (UGEC).

The Aquino regime handed over to UGEC secretly and without any bidding the anomalous, but extremely lucrative P38-billion, 10-year contract to print the country’s new electronic passports. Zobel is a cousin of the property and telecom tycoons Ayala brothers, Jaime and Fernando, the former ranked by Forbes magazine as the fourth richest man in the country.

In just three years of the UGEC’s arrangement with government, it generated P3 billion in income, more than five times its P193 million investment in the enterprise. It would be making P11 billion in its 10-year contract with government.

Zobel, through his family’s holding firm E. Zobel Inc. and his shadowy partners, invested in the formerly Malabon-based UGEC printer only in July 2012, right before or after the secretary of the foreign affairs department, Alberto del Rosario, cancelled — unknown at the time to the public — its contract with the Bangko Sentral ng Pilipinas and its French sub-contractor Oberthur Technologies to print the passports, after a barrage of bad publicity that that there were major delays in the delivery of that vital document.

UGEC, which for two decades had been a small printing shop owned by one Henry Cureg and his Chinese-Filipino wife Edna Yee, reported in August 2012 to the Securities and Exchange Commission (SEC) that in the previous month it had increased its authorized capital stock from P80 million to P500 million, and took in new investors.

Left, Zobel doing what he likes best, playing polo; right, Mauritius’ financial district where his partners incorporated their firm.

E. Zobel Inc. — the holding firm of Iñigo and his family, and represented by his son Jacobo — put in P31 million, or 30 percent of UGEC’s subscribed capital, while a “Haldane Investments NV” invested P10.2 million or 10 percent.

The firm’s corporate filings with the SEC showed Haldane’s nationality as “Mauritius” (not Vanuatu as I previously reported). This island nation is not only a tax haven but one where rich individuals set up their companies in order to conceal their identities. This is possible because of Mauritius’ strict laws that make it impossible to identify the owners of a company registered there.

UGEC’s original owners Cureg and his wife’s Yee family were reported in that 2012 filing as owning 24 percent of the firm. A new investor, however, United Heptagon Corp., became the single biggest stockholder, holding 36 percent of UGEC.

While this firm is represented by the original owner Henry Cureg, its shareholders haven’t been disclosed. I wouldn’t be surprised if those government officials who had planned, executed, and would profit from this colossally anomalous deal had lodged their payback-schemes in this company.

UGEC since 2012 has gradually increased its subscribed capital, from P102 million in 2012 to P301 million by November 2017. The same ownership distribution though was maintained, with Zobel and Haldane together owning 40 percent.

Source: UGEC

The UGEC contract to print the 45 million passports was concealed by the Aquino government through the setting up in November 2014 of a dubious “joint venture” between the government firm APO Printing Unit (APU) and UGEC, purportedly for the latter to assist the state entity to set up a high-security printing plant. The JV though was a farce, as APU owned only 10 percent of it while UGEC had 90 percent. APU also got only 10 to 30 percent of the outfit’s profits, while UGEC got 70 to 90 percent.

When then Foreign Affairs Secretary del Rosario ended the BSP’s contract to print the passports, he awarded this to the APU in October 2015. APU though turned over the job to the JV, violating the order of the Government Procurement Policy Board for it to directly print the passports. As the Commission on Audit disclosed: “While the printing contract were between APO and DFA, the actual printing and account of income generated…are performed and lodged with the JV.”

The passport-printing business is a monopoly, UGEC being the only company that prints the Philippine passports sold to one customer, the foreign affairs department. It therefore generated monopoly profits, with the private firm UGEC getting more than 70 percent of the JV’s income as well as rentals of P670 million annually for the JV’s use of its printing machines.

UGEC would be the most profitable venture ever of Zobel, who is not known to be an aggressive businessman since he really doesn’t have to, what with his dividends from his late father Enrique’s huge number of shares in San Miguel Corp. and in Ayala Corp; reportedly amounting to P500 million yearly. Zobel in fact is known in the country’s elite circles to allegedly spend more time playing his sport polo as well as enjoying midnight-to-dusk parties than working in the office. Why on earth would he go into the printing business, which would now turn out to taint his clan’s name?

The UGEC contract is an open-and-shut case of corruption, and those who executed it had the gall to do it in the belief that they will get away with it as they would still be in power after the 2016 elections.

The state-owned APU’s contract to enter into a JV with UGEC as well as the lucrative job given to it to print the 45 million passports was not bid out. This was in blatant disregard of the mandatory practice for bidding to get the best price. The BSP for instance in 2010 sought bids from 18 firms for the subcontract to produce the passports.

What the APO Production Unit did was a blatant violation of the Anti-Graft and Corrupt Practices Acts.

The law declared as corrupt practices the “giving [to] any private party any unwarranted benefits, advantage or preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence”.

But not only that, the law declared as a case of corruption the “entering, on behalf of the government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited or will profit thereby.” That means that even if the two officials who executed the deal — APU chair Milagros Alora and her immediate boss, then Presidential Communications Operations Office head Herminio Coloma, Jr. — did not receive any bribe from UGEC, they are still are liable for corruption.

Coloma in a letter to Foreign Secretary del Rosario early in 2015 asking him to give the passport-printing contract to APU, reportedly said it would be the biggest legacy of the Aquino administration

In the way that he didn’t mean it, it certainly will.

I have strived directly and through intermediaries to get the side of Coloma, Alora and Zobel in the writing of this series of articles. They have not done so.



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