KPMG and the Marcos Money Trail. (Economics)
Komisar, Lucy, Multinational Monitor
AT A TIME WHEN THE INTEGRITY of global accounting firms is being questioned, the U.S. Securities and Exchange Commission (SEC) and Justice Department are looking into charges that KPMG Zurich, a division of the international audit company, helped Credit Suisse hide hundreds of millions of dollars looted by the late Philippine dictator Ferdinand Marcos.
A KPMG spokesperson confirmed the investigation.
Dan Burton, a conservative Republican Member of Congress, wrote the SEC in August 2002 that he had been informed that the agency has been "presented with evidence against KMPG concerning money-laundering and subversion of a joint Philippine and Swiss freeze order for a series of accounts containing millions of U.S. dollars." Burton requested "prompt action" by the SEC "in seeking out the truth." The SEC passed on its information to the Justice Department.
The freeze order had been issued by the Swiss Banking Commission in March 1986, after Marcos was ousted. Documents supplied to the SEC purport to show that the funds were moved to Liechtenstein foundations controlled by KPMG Zurich and Credit Suisse, both in Zurich. KPMG -- then known as Fides -- had been a Credit Suisse subsidiary until a few years before.
KPMG Zurich is a member of KPMG International, headquartered in Amsterdam, which includes the giant U.S. audit firm of the same name. Credit Suisse is part of the Zurich-based Credit Suisse Group, the world's third-largest private banking group, which owns Credit Suisse First Boston and Credit Suisse Asset Management in London.
Credit Suisse spokespersons in Zurich and New York declined to speak about the investigation.
KPMG spokesperson Kate Maybank in London acknowledged the investigation, but declined to comment on any of the allegations against the firm. "We are aware of it," she said, "but it isn't something we would make any comment on."
The key documents in possession of the U.S. government include:
* Records found in Malacanang Palace after Marcos fled that detail transactions involving his "foundations" and accounts in Switzerland and Liechtenstein. (Malacanang is the Philippine equivalent of the U.S. White House.)
* An affidavit from a Philippine banker who said that in March 1986 he was given power of attorney by Marcos to move his money out of Switzerland. The banker, Michael de Guzman, said a Credit Suisse official in Zurich told him the transfer order was unnecessary because Marcos' foundations and account names had been changed to ensure that neither the Philippine government nor Swiss authorities would get the Marcos deposits and investments.
* The testimony of Marie-Gabrielle Koller, a former lawyer for KPMG in Zurich, who told a French parliamentary committee, and attempted to interest the U.S. Justice Department in, her account of how officials of Fides moved the Marcos money. She said she learned from colleagues in 1997 how their predecessors had worked to hide the accounts to beat an expected freeze order.
ESCAPING THE FREEZE
During his 20 years in power, Ferdinand Marcos routinely siphoned off cash from the treasury, pocketed bribes and stole money from International Monetary Fund and World Bank loans and U.S. foreign aid. The Central Intelligence Agency calculated that the dictator had stashed $5 billion outside the country. His favorite bankers were the Swiss, and among them Credit Suisse.
From 1928, Credit Suisse had an accounting subsidiary called Fides Trust. Fides would split several times, yielding the present Credit Suisse Trust (Vaduz) and KPMG Fides (Zurich). KPMG Fides continued to provide audit and tax advice to Credit Suisse. In its annual report, KPMG lists as an affiliate Limag AG, which happens to be located in the same building as Credit Suisse Trust in Vaduz, the capital of Liechtenstein.
Limag is a fiduciary, or asset manager. Documents found at the presidential Malacanang Palace showed that Limag had set up Marcos foundations on whose boards Limag President Ivo Beck and Vice President Ulrich Siegfried served. …