Manila suffers setback in fight against tycoon Tan

MANILA, Mar 10 (Reuters) Philippine airlines-to-tobacco tycoon Lucio Tan has vowed revenge on the government after its high-profile attempt to punish him for his allegedly lucrative links to late dictator Ferdinand Marcos suffered a major setback.

Tan said he would seek compensation after the anti-graft court said on Wednesday the agency chasing the Marcos wealth, the Presidential Commission on Good Government (PCGG), failed to show a legal basis for the seizure of four of Tan's companies in 1986.

Earlier this year, the Supreme Court cleared Tan of graft charges over his purchase of shares in a resort company in 1985, the year before the two-decade Marcos era was ended by a ''people power'' uprising and the dictator fled into exile in Hawaii.

''We will claim our 20-year loss from the PCGG,'' Tan, a reclusive industrialist who built his fortune on cigarettes and beer in the 1970s and 1980s, told the Philippine Star newspaper.

''To those people who are still living, they need to pay us.

And for those who passed away already, we will run after their estates for our losses.'' The presidential commission said its mandate protected its officials from lawsuits and it planned to appeal against the anti-graft court's decision.

''The final arbiter is with the Supreme Court,'' PCGG Chairman Camilo Sabio told reporters yesterday.

Tan, the country's second-richest person after shopping mall magnate Henry Sy with a worth estimated by Forbes magazine at 1.7 billion dollar, has repeatedly denied he was a crony of Marcos and that he acquired control of several firms at preferential prices.

The anti-graft court told the government to relinquish shares that had been seized from Tan in Allied Banking Corp., Fortune Tobacco Corp., Foremost Farms and Shareholdings Inc.

Tan also owns majority stakes in Philippine Airlines and domestic carrier Air Philippines, Philippine National Bank, the country's fourth-largest private lender, and several hotels and property firms.

A BIG TARGET The government, trying to raise revenues and cut debt of nearly 76 billion dollar, has ongoing cases against Tan and 69 others for alleged tax evasion of 25 billion pesos (485 million dollar).

President Gloria Macapagal Arroyo, who survived a crisis last year over allegations of vote-rigging and graft, has vowed to crack down on tax cheats, with few successes so far.

The PCGG, trying to recover up to 10 billion dollar that Marcos and his associates are accused of plundering from the country, had made Tan a major target of its campaign.

Analysts said the PCGG's setback underscored the difficulty in rooting out corruption in the Philippines, where a few hundred families traditionally control power in business and politics.

''The Philippines is perceived as having a major problem in terms of its institutional and political structure which favours the wealthy and the elite,'' said a Singapore-based analyst, who declined to be named.

''Any court decision which appears to favour them shows up that chronic institutional weakness.'' The government loses about 300 billion pesos each year from tax leaks, including evasion and underdeclaration of assets.

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