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Marcos Crony Agrees to Surrender L.A. Bank : Philippines: In return, the U.S. will drop charges. Prosecutors say firm was created to launder money.

April 22, 1990|HENRY WEINSTEIN and WILLIAM C. REMPEL | TIMES STAFF WRITERS

NEW YORK — In order to avoid federal prosecution, the closest friend and confidant of former dictator Ferdinand E. Marcos has agreed to turn over to the Philippines a Los Angeles bank that federal prosecutors say he created to launder funds for the late Philippine leader, The Times has learned.

According to previously undisclosed terms of the unusual settlement deal, ownership of California Overseas Bank will be transferred to the Philippine government in exchange for the United States dropping racketeering and conspiracy charges against fugitive bank chairman Roberto S. (Bobby) Benedicto.

The bank, with assets of nearly $150 million, has an estimated market value of more than $30 million. Sources close to the Philippine government said the government plans to operate it for a time and then sell the bank.

The criminal settlement was reached after complex negotiations on three continents among U.S. prosecutors, Philippine officials and lawyers for the bank and Benedicto.

He was indicted in 1988 along with Ferdinand and Imelda Marcos on charges of fraud, racketeering and conspiracy. Benedicto, 73, has avoided arrest, sources said, by using fictitious names and multiple passports to shuttle clandestinely among such places as Hong Kong, Spain and Venezuela, where he has extensive investments.

"He's an old man. He's tired of feeling hunted," said a Philippine official close to the negotiations.

The most controversial element of the agreement will spare Benedicto from testifying against Mrs. Marcos, who is standing trial in federal court here.

The fugitive banker had adamantly refused to be a witness against the widow of his longtime friend, a condition that Benedicto's attorney said had been a primary stumbling block to consummation of the deal. While Benedicto is not close to Mrs. Marcos, he is a godfather of the Marcoses' son, Ferdinand Jr.

"There's certainly no love lost between my client and Imelda, but he wouldn't put himself in a position to hurt Marcos' children," said attorney Wayne W. Smith in Los Angeles.

U.S. officials defended what was called a "rational and reasonable agreement" that will return millions of dollars to the troubled economy of the Philippines. Prosecutors would not discuss the settlement deal.

Legal experts said this is the first time in U.S. history that a bank has changed ownership as a result of a criminal case.

The Benedicto deal represents perhaps the clearest indication yet of the linkage between the New York criminal case--which could send Imelda Marcos to prison--and a federal civil suit in Los Angeles which seeks to strip the former first lady of a sizable share of the $5 billion the Marcoses and their friends allegedly stole from the Philippines.

California Overseas Bank was a prominent instrument in what prosecutors call "the looting of the Philippines." And bank officials have acknowledged in court that phony accounts were set up to funnel money out of the Philippines.

Formal announcement of the settlement, expected by early May, will come in federal court when California Overseas is sentenced on wire fraud charges. The bank pleaded guilty to those charges on March 16.

Terms of the unique settlement were determined in large measure by a U.S. prosecutor who insisted on negotiating a deal that apparently was more favorable to the Philippine government than to his own case.

Assistant U.S. Atty. Charles G. LaBella, leading the prosecution of Mrs. Marcos and co-defendant Adnan Khashoggi, refused repeated Benedicto offers to turn over only 25% of his bank interests. In the end, Benedicto agreed to surrender all of his shares, but the terms reviewed by The Times included no requirements that he cooperate with LaBella in any way.

The story behind the deal provides a new and compelling glimpse of the sophisticated schemes that the Marcoses are accused of using to drain billions of dollars from their national treasury.

It is a story that begins more than 50 years ago in a University of the Philippines fraternity where Benedicto and the future president of the Philippines were frat brothers in law school.

After World War II Benedicto went on to a career of modest success in the shipping, warehouse and sugar business. In 1970 Marcos appointed him ambassador to Japan, and his friends still refer to him as "The Ambassador."

However, it was after Marcos declared martial law and established dictatorial control in 1972 that Benedicto's fortunes soared, along with those of other Marcos cronies.

Marcos nationalized the Philippine sugar industry and put Benedicto in charge of two government agencies that regulated both production and marketing of sugar.

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