At a luncheon attended by businessmen and military leaders Peter Wallace made a joke about the Glorietta explosion, which the top brass did not like. The joke was funny (Filipinos having the most explosive shit in the world) but the follow-ups (according to the report) less so.
It's not a case of racism, just bad comedy.
Wallace should've stopped at the first joke. The only reason to repeat a theme, ad nauseam, is when the audience is still lapping it up. Diminished laughter means you should quit while you're ahead.