The Fight for Ferdinand Marcos’s Cash


In 1971, Philippine president Ferdinand Marcos deposited $2 million into the Merrill Lynch account of Arelma Inc., a Panamanian dummy corporation he created.

Over the next 15 years he would rule his country as a dictator. He stole $10 billion from public funds. His regime executed between 1,500 and 3,300 political opponents, tortured tens of thousands, and arbitrarily detained more than 100,000 people.

The horror was endless and repetitive. Military officials unleashed machine gun fire on a unit of Muslim recruits after the young men signed a petition protesting a three-month delay in pay. A priest named Edward Gerlock was sent to a prison camp for defending farmers from American fruit companies trying to acquire their land. A teacher named Hilda Narciso was arrested without charge and then “handcuffed, blindfolded, and gang raped for two days by hooting and jeering military men,” as she later recalled to reporters. Federal agents detained a labor leader named Romy Castillo and beat him, electrocuted him, held his head underwater, and suffocated him with a plastic bag over the course of nine days. Other men were tied to coconut trees and shot dead. Less fortunate ones were buried alive.

Through it all, the United States remained a strong ally to Marcos, fueling his regime with $2.5 billion in aid every year. In return, the strongman offered up his land to American military and business interests, allowing the Philippines to serve as a U.S. beachhead against communism in the South Pacific.

Finally, in 1986, 21 years after Marcos first took office, the democratic and bloodless People Power revolution sent the dictator into exile. The Reagan administration granted him a haven in Hawaii, where he would spend the rest of his days before dying in 1989.

But his stash of stolen money would live on. After years of interest and inflation, the Arelma account, held by Merrill Lynch in New York City, has grown to $35 million. And it is now at the center of a legally ambiguous, morally complex question: Who has the right to a dictator’s assets—the government he stole from or the victims he brutalized?

The answer may lie with New York’s highest court.

The Republic of the Philippines and a group of 10,000 Filipinos who suffered human rights violations have made competing claims for the money.

In June, Robert Swift, a lawyer representing the victims, petitioned the state’s Court of Appeals to grant the funds to his clients. It was the latest strike in an unprecedented legal battle.

“Human rights victims have a very tough road to be able to obtain compensation,” says Swift. “This is a struggle to establish precedent for the recovery of compensation.”

The conflict traces back to almost immediately after Marcos left office. On February 28, 1986, three days after the president’s exile, new president Corazon Aquino issued the first act of the post-revolution government, establishing the Presidential Commission on Good Government (PCGG) and charging it with recovering the money Marcos stole.

Around this time, Swift arrived in the Philippines. An accomplished human rights lawyer who had previously represented Holocaust victims, he sought to build a class-action suit against Marcos. Thousands of people signed on—victims or relatives of the people who were tortured, abducted, or executed. They sued Marcos in federal court in Hawaii. The suit listed the Arelma account among his assets, and the Philippine government filed a brief supporting the victims’ cause.

In 1996, the court awarded Swift’s clients a $1.9 billion judgment. But by 2000, the government in Manila had a change of heart, asking Merrill Lynch to turn over the Arelma account to the Philippine National Bank. So began the long battle for the dictator’s cash.

From the start, Merrill Lynch wanted no part of the dispute. The bank preferred that victims and the government duke it out in court. But the Philippines refused to participate in the proceedings, citing sovereign immunity, a provision of the 11th Amendment that allows a nation to avoid a lawsuit against it.

After eight years of jousting, the U.S. Supreme Court confirmed the Philippines’ right to stay out of the proceedings. But if the country wanted the money, it would have to return to court to get a judgment.

Meanwhile, Merrill Lynch, eager to avoid any liability, transferred the money to New York City’s Department of Finance.

A year after the Supreme Court’s pronouncement, in April 2009, a Philippine court ruled the Arelma money belonged to the republic, noting that money stolen from the government remained the government’s property, and not part of Marcos’s estate.

Swift countered that same day, petitioning New York to rule that the Arelma money was part of Marcos’s estate, and that the account should be turned over to the victims.

Once again, the case worked its way through the courts. And once again, it reached a stalemate. In June 2012, the New York State Court of Appeals ruled that the legal proceedings could not move forward without the Philippine government’s participation, since Manila would not relinquish sovereign immunity.

But the court reiterated that the Philippines would have to engage New York’s courts at some point if it wanted to claim the money. The ruling left the door open for the victims to try again.

“If the Republic fails to seek enforcement of its judgment or some other avenue of recourse, the time may come when the [class of victims] could again ask a New York court to reconsider the enforcement of its judgment,” the decision stated.

The Philippines would not attempt to make a U.S. legal claim over the next year. To Swift, the time had come. In June, he filed a new petition, arguing that the Philippines was doing nothing more than blocking his clients. Besides, the victims had laid claim to the Arelma account years before the government had.

Now the court must decide whether the Philippines has waited too long to seek the money.

“If a government can succeed in that claim, that all of a former dictator’s assets belong to a government, human rights victims would never be able to get compensation,” says Swift.

President Benigno Aquino III’s office did not respond to interview requests. Araceli Manaloto, manager of the Philippine National Bank in New York, says she is “not familiar with the case.” But the government has made its perspective clear over the years: “These assets were improperly obtained by Marcos through gross misuse of public office and in grave betrayal of the public trust and therefore forfeited from the moment of misappropriation,” PCGG chairman Andres Bautista said in 2009. In February, the Philippine Congress passed a bill that allocated $246 million to compensate victims of Marcos’s human rights violations—a little more than 10 percent of the Hawaii judgment.

The Arelma dispute is fueled by basic math: Marcos’s estate has not provided enough assets to cover the scope of the regime’s wrongdoing. Over nearly three decades, the PCGG has recouped $4 billion, less than half of what the administration stole. In the 18 years since the Hawaii decision, the 10,000 plaintiffs have collectively taken home just $22 million, around 1 percent of the judgment.

Meanwhile, as the legal battle in New York between Filipino taxpayers and human rights victims rages on, the head of the Marcos estate has sought to resurrect the family’s power.

In 2010, Marcos’s widow, Imelda, was elected to the Philippine House of Representatives. Public records showed that she had a net worth of $22 million, making her the second-richest member of Congress, behind boxer Manny Pacquiao.