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Learning from Halliburton

By Abdel Aziz Dimapunong Founding chairman, Amanah Islamic Bank Chancellor, Islamic Banking Institute In its website, Halliburton highlights its name with the word sustainability, indicating that it intends to strengthen, prolong and maintain itself as a corporate dinosaur. It could also mean that it proclaims itself not merely as a surviving entity but a kind that does not belong to any endangered specie. The highlight is Halliburton’s brand of facing adversity – even in the midst of an actual war. Halliburton is presently doing business in Iraq. Halliburton does business where others dare not go. There is money where people are running away from. Halliburton is not merely a corporate entity. It is a suzerain in many ways, a roving planet on earth, and a corporate dinosaur. There are many lessons from this company.

Since 1919 when it was founded, Halliburton has continued to earn the respect of everyone in business and even in politics. It provides services through the delivery of innovative technology. It claims to have the expertise and outstanding service quality. No matter how challenging the technology may be, Halliburton finds a way to fulfill its promise to deliver. Halliburton has rated its performance with a century of excellence. Its latest performance is now showing in Iraq, Nigeria and Kuwait. It renders energy related services, engineering and managing logistics for military operations. According to Whitley Strieber, there were allegations that Halliburton had improper dealings in these areas. Consequently, it is under investigation by the United States Justice Department and the Securities and Exchange Commission. I have no concern about the issues. I believe that allegations could just be politically motivated (Dick Cheney, Vice President of USA was formerly with Halliburton) and they are often related to competition. As a student of the case method, I only wish to learn from the way Halliburton deals with legal controversies. How should a corporate entity deal with an investigation by a Justice Department? This is a question that is common to a famous Halliburton and a virtually unknown bank known as the Amanah Islamic Bank of the Philippines. There is no sensible comparison between Halliburton and the Amanah Islamic Bank - except maybe as between a mountain and a mole or as between a dinosaur and a cockroach. That is the condition today for the Islamic Bank. But that could change overnight if certain things could come to conclusions.

Actually, the Amanah Islamic Bank has been dubbed by the Philippine Daily Inquirer (PDI), a major daily in the Philippines, as a cockroach bank and its officers as cockroach bankers. I made no reaction to the popular column known as Cocktails. Later on, in a subsequent article by the columnist, he defines a cockroach bank as something that is hard to eradicate. I would interpret that to mean that the Islamic Bank also wears the shield of sustainability. There is then a comparison on how this giant company and this cockroach bank dealt with investigations by a Justice Department. Faced with an investigation, Halliburton announced last March 12, 2007, that it would open a corporate headquarters in the United Arab Emirates, in the city of Dubai. It would move its chairman and chief executive there. A company that was originally registered in Delaware, Halliburton will remain a US company subject to US laws. Dubai has no extradition agreement with the United States. This means that Halliburton’s executives could not be compelled to return to the US to testify and stand trial on issues related to any Halliburton activities under investigation. The company will also maintain its existing corporate office in Houston, Texas, as well as its legal incorporation in the United States. It will still be subject to domestic laws and regulations. Those are the lessons that the Amanah Islamic Bank wishes to learn from Halliburton.

The city of Dubai The Islamic Bank had already the experience on dealing with investigations. When faced by an investigation (on account of malicious allegations) by the Philippines’ Justice Department in year 2001, the Amanah Islamic Bank moved its international business office from Manila to Hong Kong. It also permanently moved its then president from Makati, Philippines to a permanent residence in Hong Kong. This time the cockroach bank is moving from Hong Kong to Dubai, the city of falconry, to transform itself from a cockroach to perhaps a falcon. Yesterday, I was invited to a dinner meeting by the Amanah Islamic Bank to cover a negotiation between itself and a group of investment bankers based in Dubai. I was invited to provide a background on how the Islamic Bank was organized and eventually privatized. Dubai is a city of falconry Dubai is a nice place. It is known to the world with its records from 1799. In 1833, the Bani Yas tribe of Abu Dhabi took over the town of Dubai. In 1835, Dubai and other States signed a maritime truce with Britain. Then Dubai came under the protection of the United Kingdom. The rulers of Dubai fostered trade and commerce and developed it into an important port of call. Until the 1930s, the town was known for its pearl exports. In 1971 Dubai and other emirates formed the United Arab Emirates.

Culture in Dubai is rooted in Islamic traditions. However, it allows foreigners to practice their own religion. The official language of the country is Arabic but business may be communicated in English. There are so many different nationalities in Dubai and English finds common ground. The population of the UAE as of 2001 was estimated to be 3,290,000, a mix of UAE nationals, other Arab nationals, Asians and Europeans. The population of Dubai was estimated to be 971,000. By moving to Hong Kong and then Dubai, is the Islamic Bank running away from investigations? No. The investigations have all been resolved. They were all discovered to be malicious. The following is the results of the investigations of the Department of Justice on a complaint that it received docketed as I.S. No. 99-1806. As the I.S. number indicates, this pertains to a complaint in 1999, or seven years ago. The complaint was filed by certain former lawyers of the Bangko Sentral ng Pilipinas (BSP), Atty. Rolando A.Q Agustin and Atty. Rosalina P Ojascastro as allegedly representing the Monetary Board. The filing of the complaint was based on the original complaint by a certain Farouk Carpizo. The BSP lawyers just did their job upon receipt of an original complaint that was maliciously filed with the Central Bank by Carpizo. Upon my research, I found that the lawyers of the Bangko Sentral filed the case wrongfully. They filed the case in the name of the Monetary Board but without the consent of the latter. They had no authority to represent the Bangko Sentral ng Pilipinas on legal matters. Under Section 18, par (c) of the new Central Bank Act, R, A. 7653, it is the Governor of the Bangko Sentral ng Pilipinas who is authorized to represent the Bangko Sentral in any legal proceedings, action or specialized legal studies. On their affidavits, the BSP lawyers had to confess that they were not authorized by the Monetary Board. They were only acting on their own. That was a fatal mistake because they misrepresented the Monetary Board and the Bangko Sentral. Not having been authorized, the case cannot bind the Monetary Board and the Bangko Sentral. The Islamic Banking Research Institute of which I am the chairman has complete files related to the investigations of the Department of Justice on this case. The Institute is being updated by the incumbent chairman of the Amanah Islamic Bank, Mr. Grande M. Dianaton, original stockholder of the old Philippine Amanah Bank and one of the founding stockholders of the Al Amanah Islamic Investment Bank of the Philippines. First, who was Farouk Carpizo? Who was this man who posted malicious statements on the Internet? I shall not speak about him except that he died some years ago. I knew this because he was my neighbor. The fact the he died already is a good reason not to perpetuate his complaint. But somebody is still hosting his malicious postings on the Internet. I shall limit myself to what official records have to show about Engr. Farouk Carpizo. The following is the legal story based on the files of the Amanah Islamic Bank and the Department of Justice of the Philippines.

Seven years after we had formally organized the Islamic Bank in accordance with its charter, R.A. 6848, the Supervision and Examination Department of the Bangko Sentral ng Pilipinas (BSP) was misinformed by one Engr. Farouk Carpizo. Sometime in 1999, he represented himself to the BSP as a government representative. In truth, as the records show he was president of the old abolished Philippine Amanah Bank (PAB) – not the new Al Amanah Islamic Investment Bank of the Philippines. He claimed that the Islamic Bank is a government bank of which he is the president, representing the government. And he further charged Grande Dianaton, Ashroff Gaffoor and some of the directors of the private Islamic Bank as bogus! Daud Mangompia, Islamic Bank chairman, 1999-2001 Based on hearsay, the BSP lawyers filed a formal complaint allegedly in the name of the Monetary Board against Daud Mangompia, Grande Dianaton, Ashroff Gaffoor and some directors and officers of the original Islamic Bank. Bad publicity in the press and the Internet was made, and investigation was conducted by the Department of Justice. What a waste of time! All the charges were maliciously manufactured. These false charges are the ones that were posted on the Internet. The complainant charges those innocent officers as bogus – but actually it was he and his group who were the real bogus. At this point, it bears relevance to introduce the complainant, Engr. Farouk Carpizo based on records of no less than the Hon. Supreme Court of the Philippines. As I have said, I shall not personally comment on the person of Farouk Carpizo who is already dead but whose postings are still live on the Internet (a bogus website of the Islamic Bank at www.islamicbank.com. I will only quote the Honorable SUPREME COURT of the Philippines from a DECISION involving one Engr. Farouk Carpizo. BEGIN QUOTE FROM SUPREME COURT (In this case, the Supreme Court speaks through the Hon. Justice of the Supreme Court, Justice Hilarion Davide, Jr. who penned the following Supreme Court Decision about the same Engr. Farouk Carpizo as being “bogus”, who represented a “fake Board”) “It must be pointed out that two groups had earlier vied for control of the IDP, namely, (1) the Carpizo group headed by Engr. Farouk Carpizo [Underscoring supplied]…Nevertheless, on 20 April 1989, the Carpizo group caused the signing of an alleged Board Resolution authorizing the sale of the two parcels of land mentioned above to private respondent Iglesia ni Cristo (hereafter INC).

Supreme Court: Farouk Carpizo Group is the bogus group “If the SEC can declare who is the legitimate IDP Board, then by parity of reasoning, it can also declare who is not the legitimate IDP Board. This is precisely what the SEC did in SEC Case No.

4012 when it adjudged the election of the Carpizo Group to the IDP Board of Trustees to be null and void. By this ruling, the SEC in effect made the unequivocal finding that the IDP-Carpizo Group is a bogus Board of Trustees. [Underscoring supplied] Consequently, the Carpizo Group is bereft of any authority whatsoever to bind IDP in any kind of transaction including the sale or disposition of IDP property. xxx xxx xxx “. . . Nothing thus becomes more settled than that the IDP-Carpizo Group with whom private respondent INC contracted is a fake Board. [Underscoring supplied] xxx xxx xxx “… For the sale to be valid, the majority vote of the legitimate Board of Trustees, concurred in by the vote of at least 2/3 of the bona fide members of the corporation should have been obtained. These twin requirements were not met as the Carpizo Group which voted to sell the Tandang Sora property was a fake Board of Trustees [Underscoring supplied], and those whose names and signatures were affixed by the Carpizo group together with the sham Board Resolution authorizing the negotiation for the sale were, from all indications, not bona fide members of the IDP as they were made to appear to be. . . . All told, the disputed Deed of Absolute Sale executed by the fake Carpizo Board [Underscoring supplied] and private respondent INC was intrinsically void ab initio. [G.R. No. 127683 August 7, 1998, LETICIA P. LIGON, petitioner, vs. COURT OF APPEALS and IGLESIA NI CRISTO, respondents.] UNQUOTE Going back to the case, the following surfaced: 1. Owing to its fiscal crisis that closely approaches the Nicaraguan syndrome, the Philippine government has never subscribed to the capital stock of the new Amanah Islamic Bank. 2. The two BSP lawyers who filed the case had to confess upon investigation that they had no authority to file the case from the Monetary Board. That was an act of misrepresentation. 3. The two BSP lawyers did not know also that there was already an earlier Resolution by the Honorable Supreme Court of the Philippines on the same case complained about. 4. They charged Dianaton, Gaffoor and Mangompia for violation of Republic Act No. 337 - not knowing that this was a non-existing law at the time of the filing of the case. That was the old Central Bank Act which was enacted in 1948! In summary the complaint was based on hearsay that was loaded with errors and falsity.

This story is not a fiction. The statements are facts of a malicious and baseless complaint (Department of Justice, I.S. No. 99-1806) filed by two misinformed BSP lawyers against innocent officers of the new Amanah Islamic Bank. They not only misrepresented the Monetary Board but they also misrepresented the Office of the President of the Philippines. And worst, they are misleading the general public. The following are the facts that were considered by the Department of Justice (DOJ) in its Resolution on the complaint of the Central Bank BEGIN QUOTING THE DOJ RESOLUTION. The respondents , “as summarized, jointly alleges that the complaint-affidavit of the BSP against the respondents for violation of Section 6 of RA 337 in relation to Section 36 of RA 7653, has no basis in fact and in law, based on the following: a) that we are all stockholders and organic directors and officers of the Islamic Bank, a corporation created by RA 6848, and duly organized by most of us with present business development address at No. 3, Block 11, Marawi Avenue, Maharlika Village, Taguig, Metro Manila; b) that respondents Mangompia, Badio, Pangcoga, and Rasuman, were among those present as organizers in the organizational shareholders meeting of the Islamic Bank on April 28, 1992 at the Army and Navy Club, Manila, of which the original and authentic Islamic Bank was officially organized in the manner prescribed by law under R.A. 6848; c) that their decision to subscribe to Series “B” shares and Series “C” shares in the capital of the Islamic Bank was based on their knowledge of this legal processes which was sanctioned by the confirmation letter of the SEC which issued a confirmation letter, dated July 29, 1993, that the Islamic Bank is deemed registered and authorized to operate as of the date of approval of RA 6848, and this was further boosted by another confirmation letter, dated September 8, 1993, that the Islamic Bank is exempted from the Revised Securities Act; d) that the legality of their being stockholders of the Islamic Bank is even supported by the Hon. Court of Appeals in its Decision on Civil Case No. CA GR No. 28445 entitled Abdel Aziz Dimapunong v. Hon. Zosimo Z. Angeles where on page 6, par. 2 the Hon. Court states that “ there is no question that the other petitioners, Abbas, Dianaton, and Malambut, are stockholders of the bank”. Abbas and Malambut were among their predecessor directors while Dianaton is still a director; e) that the legality of their being stockholders of the Islamic Bank is also supported by the Office of the Solicitor General in its Motion and Manifestation dated September 22, 1992; f) that a careful reading of the complaint of the Monetary Board clearly shows that it is a recycled complaint, the original “Complaint For Injunction with Damages” having been filed by then Finance Secretary Roberto De Ocampo and Farouk Carpizo. This is the same complaint by the BSP officials in the instant case; g) that the complaint alleges without basis that “the legitimate government owned Islamic Bank, which is duly recognized by the Bangko Sentral, is the Al Amanah Islamic Investment Bank of the Philippines (AIIBP) which was created and existing pursuant to the provisions of R.A. 6848, and the majority shares of which are held by the National Government, Social Security System (SSS), Government Service Insurance System (GSIS), Development Bank of the Philippines (DBP), and the Asset Privatization Trust (APT)” In response, we state that this is totally wrong because the shareholdings of the National Government, SSS, GSIS, DBP, and APT refers to their shareholdings in the abolished Philippine Amanah Bank (PAB). These government shareholdings have long been totally worthless because of the total bankruptcy and insolvency of the Philippine Amanah Bank which is now being

resurrected by the BSP by usurping the name of our Islamic Bank; h) that the complaint states that certain persons were “nominated by the president of the Philippines and elected in the alleged general shareholders meeting held on June 30, 1999. This is not true, the President of the Philippines did not nominate anyone but in his letter of June 22, 1999, he wrote to DBP Chairman Ramoncito Z. Abad (not to the chairman of the Islamic Bank) expressing ONLY A DESIRE – not a nomination; i) that the complainant should be educated about the charter of the Islamic Bank to discover that we do not have to be under the supervision of the BSP because the Islamic Bank is not just a bank as defined under the General Banking Act but also an INVESTMENT HOUSE”. Should it operate as an investment house, the Islamic Bank is under the supervision of the SEC; j) it must also be noted that the charter provides them exemption from the provisions of the General Banking Act and Central Bank Act. The charter provides the following exemption: “SEC. 39. Non-Applicability of Selected Acts. – In order to achieve the international and domestic objectives of Islamic banking business, the provisions of the following acts and laws shall not apply to the Islamic Bank to the extent as herein rendered inoperative: “(1) The provisions of the Central Bank Act and the General Banking Act with particular reference to the determination of bank interest rates, loans and discounts, and any interest-bearing instruments or charge: provided that nothing contained herein shall be construed to impair the powers of the Central Bank to supervise and regulate the activities of the Islamic Bank.”; k) that the undersigned respondents also question the capacities of Rolando A.Q Agustin and Rosalina P Ojascastro as representing the Monetary Board in the instant legal action. Under Section 18, par (c) of the new Central Bank Act, R, A. 7653, it is the Governor of the BSP who is authorized to represent the BSP in any legal proceedings, action or specialized legal studies; r) Finally, it must be noted that in supervising the Islamic Bank, the Monetary Board shall supervise it in accordance with the Sharia’ Law (Sec. 43, R.A. 6848) [Pages 7, 8, 9, and 10, DOJ Resolution, on I.S. No. 99-1806, dated February 6, 2001, Manila, Philippines] UNQUOTE THE DOJ RESOLUTION What happens next? The malicious complaint did not progress but it had wasted investigators time. The lawyers were not authorized by the Monetary Board of the Bangko Sentral. They confessed to have acted on their own – not the Central Bank.