Exposés: Investigative Reporting for Clean Government
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A compilation of Filipino investigative journalist Jarius Bondoc’s biggest exposés: the military comptroller who routinely raided the Armed Forces of the Philippines treasury; the airport construction from which three administrations extracted kickbacks; the national broadband network (NBN) and the Mt. Diwalwal gold mine illegally awarded to ZTE Corp. of China; Malacañang’s surrender of sovereignty over the West Philippine Sea; and more.
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Exposés - Jarius Bondoc
Exposés
Investigative Reporting for Clean Government
Copyright to this digital edition © 2012 by
Jarius Bondoc
Anvil Publishing, Inc.
All rights reserved.
No part of this book may be reproduced in any form or by any means without the written permission from the copyright owners.
Published and exclusively distributed by
ANVIL PUBLISHING, INC.
7th Floor, Quad Alpha Centrum
125 Pioneer Street, Mandaluyong City
1550 Philippines
Sales & Marketing: (632) 4774752, 4774755 to 57
Fax: (632) 7471622
www.anvilpublishing.com
ISBN 9789712727528 (e-book)
Book and Cover Design by Ibarra Crisostomo
Version 1.0.1
DEDICATION
To my wife, Marissa,
my foremost critic, editor, adviser, partner, and (believe it or not) bodyguard; and our daughter Margarita, whose growing-up years were upset many times by threats from the exposed;
and
To my many sources,
whether identified or anonymous at their request, who painstakingly explained the details and ramifications, and risked as well their jobs and personal safety.
Table of Contents
Introduction
Chapter 1 NBN-ZTE
Chapter 2 NAIA-3
Chapter 3 Diwalwal-ZTE
Chapter 4 Military Corruption
Chapter 5 Spratlys
Chapter 6 Election Fraud
Chapter 7 Chinese Poachers
Chapter 8 MOA-AD
Chapter 9 Pork Barrel
About the Author
INTRODUCTION
You snickered when a general’s wife recounted matter-of-factly how they routinely took travel money from military contractors. You raged against the illegal ZTE deals for the Diwalwal gold mines and a broadband network. Even if an infant when the executive scammed the NAIA-3 construction, and the legislature the pork barrel, you suffer the effects.
Those are but five of many exposés I compiled in this book. Some of you will seethingly recall or learn for the first time about the rest, like the near handover of territory to Moro separatists. Others might understand the issues better in context: e.g., how letting China explore the Philippine Sea weakened our sovereignty. Most will wonder why shenanigans, like poll rigging and vote buying, recur in much the same form and magnitude after momentary lulls. Is it because Filipinos do not learn from national experience? Or maybe, forces who resist reform simply are mightier? As Adlai Stevenson noted: Those who benefit by the vested privileges or injustices of an existing order always resent and resist change.
These exposés were first published in my column, Gotcha,
in the Philippine Star. I assembled them not so much in terms of the threats of harm my family and I had to endure, but on my personal assessment of their injury to national interest. Some of the columns draw as far back as eight years ago. But after each chapter I provided some updates and outcomes. If from the general drift you notice that the whistleblowers, not the exposed grafters, ended up suffering, then that is the Philippine story. We retrogress economically, politically, and socially because we keep on putting in power the same irresponsible political class.
Coming to that conclusion was not intentional, yet inevitable. My wife and I first chose a dozen exposé topics, and the most detailed columns that amplified them. Then, in editing, we pared down the topics to nine, as the publishers suggested, for easier reading. Last came the writing of updates on each issue. Although short, this was the hardest part. For it turned out that the end-result of most of the exposés was a whitewash by investigators, case weakening by prosecutors and thus dismissal by the courts, or a forgetting by the public. The book is thus an indictment of the rotten system. (I had half the mind to re-title it The Futility of Exposés.
But the higher hopes prevailed of publisher Karina Bolasco and editor Carlos del Prado; thus my gratitude to them.)
When, as signs show might really happen, reinvestigations open and resume, this book hopefully will solidly foreground our knowledge of the cases. Whatever new revelations or findings may come up regarding these cases, from new evidence or testimonies, they can, and will, only be fully appreciated and weighed against what have been established in this book.
Moreso there is urgency and currency in this compilation by a frustrated geezer. It can give insights to a better next generation of whistleblowers and exposers. The trend need not always be, The more things change, the more they remain the same.
In future, something’s gotta give, and good must overcome evil.
Let us help shape that generation and that future for the sake of the Filipino.
Jarius Bondoc
December 2011
NBN–ZTE
March 30, 2007
When agencies break rules, public suffers
The National Broadband Network (NBN) would hew together government’s landline, cellular, and Internet infrastructure. Administrations have long dreamed of it, and launched three smaller but failed types: Telecom Office, Municipal Telephone Public-Calling Office, Telepono sa Barangay. Enter Amsterdam Holdings Inc. (AHI), proposing to take over the work from the Dept. of Transportation and Communication (DOTC), and erect a bigger one. AHI’s Orion Project directly would interconnect all provincial capitols, city halls, and first- and second-class municipios. Geared to support health and education, it would cover all state colleges, half of public high schools and hospitals, and most private hospitals. Wireless service also would be given to 1,203 national agencies and state firms, 2,000 post offices, 350 state colleges, 2,643 high schools, 200 hospitals, 117 city halls, 41 provincial capitols, 465 municipios, and 5,000 barangay halls.
All this AHI promised to build in four years for $240 million under a build-own-operate scheme, as stated in the Build-Operate-Transfer (B-O-T) Law.
In the unsolicited proposal of Dec. 5, 2006, AHI pledged to bill government a percentage below the lowest rate of local telecom firms: 50¢–70¢ per call. This would cut by a fourth the P3.5 billion that government spends on calls yearly. All AHI needs is an assurance of executive performance, as stated in the B-O-T Law, that government would use half of Orion’s capacity. The other half would be sold to private users to subsidize the discounted government rate.
Under the law, DOTC must start studying the unsolicited proposal within 60 days. Then, it must submit the papers to the National Economic and Development Authority (NEDA), for a Swiss challenge, which basically opens the bidding to other businesses to match the price set by AHI. Seventy-five days from receiving AHI’s papers, DOTC has not moved. Worse, it accepted another unsolicited bid, prohibited under the B-O-T Law, from a Chinese firm.
The new proposal, from ZTE Group, offers a government-to-government loan, which in turn would require a sovereign guarantee of repayment. The B-O-T Law forbids so in unsolicited proposals. The ZTE plan is only to erect the broadband facility then let DOTC run it. This runs counter to government policy of privatizing its telecom assets. ZTE’s price is even higher, $262 million, and would take longer to finish. Yet DOTC is rushing to endorse it to NEDA.
On Mar. 18, 2007, AHI filed a complaint to DOTC Secretary Leandro Mendoza, who was supposed to respond within a period of 15 days. There was no reply.
April 20, 2007
DOTC rushing to favor Chinese firm by today
Even if there were cries of undue haste and unlawful business practice, Pres. Arroyo herself oversaw the signing of the contract for the NBN with Chinese company ZTE.
AHI, a Filipino firm that first thought of the project that will be awarded to ZTE, is preparing to sue. ZTE’s offer was inferior in all respects. For starters, it cost much more: first at $300 million, negotiated down in Mar. to $262 million, then restored to $300 million for the signing ceremonies. Government will have to borrow the $300 million too. Taxpayers would be saddled with annual appropriations to run the system, on top of loan repayments. In contrast, AHI would build and run the network on its own at no cost to government. ZTE’s scheme would take five years to set up, at fewer agencies covered; AHI’s no-cost but wider coverage would take only three.
DOTC Sec. Leandro Mendoza came out to explain late in Mar. why he ditched AHI. He claimed that the company had not submitted papers to back up its financial and technical know-how. According to Asec. Lorenzo Formoso, the AHI setup would remain a plan until they could show a proper feasibility study.
AHI head Nathaniel Sauz disputed this, having reviewed all requirements before filing the unsolicited bid. He constantly conferred with Asec. Elmer Soñeja about the feasibility study. They even gave a copy of AHI’s supply pact with Huawei, China’s No. 1 and the world’s No. 2 maker of telecom equipment (with annual sales of $11 billion, compared with $3 billion by ZTE, China’s No. 3). This is why AHI was surprised to suddenly receive from Soñeja a letter on Mar. 26 saying their documents were deficient.
No less than DOTC memos uphold Sauz and belie Mendoza, Soñeja and Formoso. A technical working group headed by Soñeja apparently had evaluated both the AHI and ZTE proposals on Mar. 6, on orders of Mendoza. Citing the group’s (irregular) preference for ZTE, Mendoza then endorsed it to NEDA Sec. Romulo Neri. Only much later did Soñeja fire off the letter to AHI about the supposedly lacking papers—well after the evaluation memos.
AHI publicly pleaded one last time for DOTC to hold a transparent comparison of its offer with ZTE’s. In a repeat of the inaction on its proposal, it was ignored.
The law is on AHI’s side, though. In approving ZTE’s late proposal, NEDA must first put it to the B-O-T Law’s mandatory Swiss challenge. By rushing to sign in China today, DOTC is setting itself up for indictment for gross breaches and corruption.
The corruption angle is about to explode. Already being documented were the frequent trips to Shenzhen of the ZTE-backing election man, and the role of a certain powerful official’s spouse also will be publicized.
More clues of fraud have in fact surfaced. An American firm, Arescom, appears to have filed an unsolicited bid similar to ZTE’s, but again much earlier and for only $135 million, or less than half the cost. In a letter to NEDA’s Neri, Arescom is demanding to know why the Chinese proponent took precedent.
April 23, 2007
Contract with Chinese supplier breaks 4 laws
Despite warnings of potential fraud, Malacañang went on and signed Saturday in China a hurried, overpriced telecom contract. The violation of four major laws could cost the administration the senatorial election and expose Pres. Arroyo to yet another impeachment suit.
Two months ago, the concept of an NBN wasn’t a priority, but since ZTE entered the picture, there was a rush to close the deal. Arroyo witnessed the signing of the supply deal by DOTC Sec. Leandro Mendoza and ZTE chairman Hou Weigui.
Government officials are forbidden to make purchase or sign construction contracts during election periods, lest they favor or hurt certain businesses for political reasons. The ZTE deal thus violates the Omnibus Election Code—unless issued a waiver by the Comelec.
From murmurs at DOTC, a Comelec bigwig is behind ZTE’s entry.
The supply deal also was signed sans public bidding, another breach. If ZTE is to erect a broadband infrastructure, why disregard the e-Procurement Law requiring simultaneous submission of bids via the Internet on a specified date and time?
Again, telecom men suspect DOTC itself broke rules that it proposed during Congress debates on the procurement act. Questions abound if Mendoza will take the rap for a powerful official’s spouse who is also pushing for ZTE.
Biddings aim to elicit the best price for the best product. A US firm, Arescom, is complaining to NEDA Sec. Romulo Neri why DOTC endorsed the supply offer of a Chinese proponent that is almost identical to ours, using similar technology but which will cost more than double our offer of $135 million.
Arescom had submitted its papers well ahead of ZTE.
To buy ZTE’s system, government would need a loan, accompanied by a sovereign guarantee of repayment—both actions going against the B-O-T Law.
ZTE will only sell and set up the broadband network, then turn it over to government to operate and maintain. This violates the Telecoms Development Act, which ordered government starting 1995 to privatize all its telecom facilities.
April 25, 2007
Chinese telecom firm corrupted other govt’s
Not only does the ZTE deal in the Philippines look suspicious, but in recent months it left a trail of corruption across America, Asia, and Africa.
The purchase by DOTC of unessential broadband gadgets closely follows ZTE’s shady dealings in Mexico City. There, Mayor Marcelo Ebrard came under fire last month for commissioning ZTE to set up wireless broadband hotspots
linking schools, government offices, and the city’s thousands of surveillance cameras. Critics lamented that the city is reeling from water and electricity shortage, and denounced payolas to push for a non-priority telecom deal.
The situation is akin to the Philippines, where people lack water, homes, and education. The $330 million, or P16 billion, that ZTE is quoting for the unnecessary infrastructure could be better used for water, housing, and schooling.
ZTE is notorious in telecom circles for bribery to bag contracts. It was recently blacklisted in Ecuador and Ethiopia for overpricing, and in Indonesia for price dumping. Private Philippine clients are said to be unhappy with ZTE products. Despite a stock market listing that raised its assets, ZTE is said to be under Beijing’s command capitalism,
that is, under orders to grab big chunks of the world market for Chinese products by any means fair or foul.
A Cabinet member who was exposed to ZTE’s tactics said he has never seen a group to push as aggressively for a project as these people are.
Sources said that a certain Yu, ZTE head of overseas operations, and Ms. Fan Yan, of finance, gamely accepted the overprice demands of Philippine officials.
April 27, 2007
Hasty China deal worries US envoy
The US embassy is concerned about government’s rush to sign a shady supply deal with a Chinese telecom firm. Amb. Kristie Kenny said so in a letter to Economic Planning Sec. Romulo Neri on Apr. 20, a day before Pres. Arroyo witnessed the hurried contract signing in China.
Malacañang announced the contract signing, but DOTC has yet to disclose the document.
Kenny urged Neri to avoid undue haste and take the time to carefully review
the competing offers for an NBN. Kenny said multiple American firms
had told her of the planned purchase, and thus stressed open competition and transparency.
In a letter to The STAR Neri said the Commission on Information and Communications Technology (CICT) first broached the NBN to the Cabinet-level NEDA in Oct. 2006. He stressed though that the choice of contractor for the project is the main responsibility of DOTC, and they are in a better position to clarify any concerns on the proposals of AHI and Arescom.
June 13, 2007
But first, where is that ZTE contract?
Malacañang announced the signing of the supply contract for a national broadband network
in Boao on Apr. 21, witnessed by Pres. Gloria Arroyo, who, back in China last week, lauded it as among major landmarks
in PH-China ties.
A major question arises though: Where is the contract?
DOTC Sec. Leandro Mendoza should answer as contract signatory and proponent. But as murmurs roar of his impending promotion to executive secretary, he has also kept mum about the controversial transaction and withheld documents from the public.
Disclosing the papers would elicit challenge by rivals, acceptance by worried diplomats, probe by lawmakers, review by experts, or support by businessmen. At the very least, it would prove whether the NBN is indeed a major landmark as billed. Hiding it only buttresses media exposés that the project not only is unnecessary but also overpriced by $200 million (P10 billion).
Malacañang Official News Release No. 5 of Apr. 21, 2007 is the only proof that a contract does exist. Datelined Boao, Hainan, to where Arroyo flew at dawn that day to speak to Asian executives, it listed five economic agreements she oversaw before flying off in the afternoon. Second on the list was the NBN, that is, that Sec. Leandro Mendoza and ZTE Corp. vice president Yu Yong inked the supply contract (to) improve government communication capabilities.
All broadsheets carried the news item. Close to two months since, Mendoza has yet to make public the contract that telecom experts say could spark a new round of impeachments. Only a DOTC subaltern named Ricardo Diaz has dared to talk, saying broadly that the agency is hell-bent on implementing the deal. Last week Ramon Sales resigned from heading Malacañang’s CICT ostensibly for poor health, but most likely because his signature appears as co-endorser of ZTE against earlier lower bids.
The heat is on Mendoza at this point. A telecom lawyer said the Cabinet man is in breach of the Constitution, which requires: Article II, State Policies, Sec. 28: The State adopts and implements a policy of full disclosure of all its transactions involving public interest.
Disregarding AHI’s and Arescom’s offers constitutes graft, in transactions that are grossly and manifestly disadvantageous to public interest.
Six business groups urged the president to diplomatically abrogate the contract.
In a newspaper ad, the Management Association of the Philippines, Makati Business Club, Financial Executives Institute of the Philippines, Bishop-Businessmen’s Conference, Foundation for Economic Freedom, and Action for Economic Reform suggested that the money be put instead in education, where the nation can benefit the most.
They said the P16 billion could build 36,000 classrooms or 6,000 rural health clinics or 120,000 artesian wells.
Asked last week by foreign execs about the controversial deal, Presidential Management Staff Chief Cerge Remonde advised DOTC men to explain the NBN. Transparency must be observed in government infrastructure projects, he said.
June 15, 2007
Do we really need a gov’t broadband?
Government spends P4 billion anually for landline, mobile, and Internet services.
So why is government raring to spend $330 million (P16 billion) in borrowed money for an NBN?
From sketchy claims of DOTC subalterns, the NBN supposedly will improve government communications. A seamless connectivity will link all government offices through landlines, cellular phones, and the Internet. DOTC Project Manager Norberto Conti was quoted as claiming that the NBN will also save the government P3 billion a year since outgoing calls will be monitored by the time the system starts operating in three years. The implication is that P3 billion of the P4-billion yearly government expense are unauthorized long-distance phone calls.
At any rate, according to Economic Planning Sec. Romulo Neri, CICT first endorsed the NBN to the Cabinet in Oct. 2006. In a Nov. 21 meeting of Cabinet members in NEDA, Neri and CICT chairman Ramon Sales presented the idea to the president. Arroyo preferred that a private firm initiate it as a B-O-T project, at no cost to government. After all, it has no money for telecom infrastructures and was compelled by the Telecoms Act of 1995 to privatize all its telecom facilities.
DOTC at first liked the AHI’s B-O-T proposal submitted on Dec. 5. But then along came ZTE Corp. of China. Instead of initiating formal studies of the first proposal (AHI’s) as required by the B-O-T Law, DOTC began negotiating with ZTE in Feb. for direct purchase of the broadband equipment.
A project that was not even a priority in Feb. suddenly became rush work. What was supposed to be a B-O-T deal, as AHI proposed, became a supply sale, as ZTE prevailed. Strangest of all, the ZTE price, at first $300 million then haggled down to $262 million, suddenly rose to $330 million at the signing table.
Government would have to borrow the amount, considering the lack of funds. And yet Malacañang proclaimed the ZTE deal as a fresh investment.
In truth, future generations will have to repay the P16 billion that was borrowed.
On top of the hardware cost of P16 billion, government will need to allocate billions of pesos more each year to run and maintain the NBN. All this, supposedly to save P4 billion a year that government spends on calls.
Perhaps the project evaluators changed their options from free to expense, B-O-T to direct purchase. They might have their reasons. But then, Arescom Inc. of USA, with NASDAQ-listed Wireless Facilities Inc., had also proposed to supply the NBN hardware just like ZTE. Its price—given last year—was only $135 million. This means the authorities came to like ZTE’s higher tag for any number of unstated reasons.
June 20, 2007
Why are they dealing with a firm like ZTE?
The Presidential Anti-Graft Commission (PAGC) fired its officer, Vida Bocar, who started a probe of Cabinet men. As to why she was axed, superiors claimed Ms. Bocar had violated the confidential nature of PAGC proceedings.
But other forces were at play. Ms. Bocar had begun looking into a potential P10 billion kickback from an unnecessary P16 billion project. Naturally, certain eyebrows were raised in regard to the kickbacks from the ZTE dealings. That ruffled powerful feathers and endangered PAGC posts. Ms. Bocar was conveniently accused of indiscretion.
Apparently, ZTE has had cases of shady dealings in other countries as well.
ZTE’s country manager in Liberia and his co-conspirators have been indicted for bribery. The ZTE man reportedly bribed regulators to ease out the real winner of a telecom project bidding. He also falsified bid papers to make it appear that ZTE was China’s largest telecom supplier, when it is only third. A report on the case says that ZTE violated corporate laws not only of Liberia but also of China against unfair competition.
A similar probe broke out in Libya. ZTE submitted false claims of track record and technical skill. Two of the fake papers reportedly contain the forged signatures of a private telecom executive in Manila and a junta leader in Burma.
ZTE presently is being investigated also in Burma for corrupting a general who doubles as minister of post and communication. The officer had contracted ZTE to supply a $150 million system for 300,000 phone lines. The amount, to be borrowed from a Chinese bank, was ten times the real cost of the project, according to industry experts. Another ZTE contract for a million phone lines in another Southeast Asian country cost $30 million, a report from Bangkok stated.
Earlier ZTE indictments in Ecuador and Ethiopia also were for graft and bribery.
June 22, 2007
Would you believe, ZTE contract was stolen
?
DOTC Asec. Lorenzo Formoso said that the contract signed by government with ZTE Corp. of China in Apr. was stolen, therefore unavailable for public viewing. Apparently, the only two sovereign copies
disappeared from a hotel room in Boao, Hainan, soon after the signing.
Jaws dropped at a forum on the ZTE deal at Ateneo Makati. The 50 telecom experts, lawyers, economists, and journalists had gone there to ask many questions about the NBN. Here now was Formoso, the DOTC officer for the NBN, saying two controversial months after the signing that the ZTE papers were gone.
Formoso wanted to move on to the supposed benefits of an exclusive government broadband. But the audience wouldn’t let him, so he had to reveal more.
The reason they only disclosed the theft now was for fear of national shame and the delay came from the National Bureau of Investigation (NBI) who took their time investigating, according to Formoso. He told the audience to ask them (NBI) for details. All he knew was that the Philippine commercial attaché in Guangzhou was responsible, by protocol, to keep the signed documents for official transmittal to Manila and ZTE’s head office.
Mendoza said Emmanuel Ang (the commercial attaché mentioned earlier) has been charged with infidelity in the custody of public documents. I checked with the head of an NBI division, who in turn asked six other units including Interpol, and all said they never handled the case.
The theft
raised more questions than answers. Ms. Arroyo had left her husband’s bedside, from heart surgery, just to witness the signing in Boao on Apr. 21 of five different contracts, including ZTE’s, but the only contract that disappeared was the ZTE deal.
Why were there only two signed copies? Contract signings between two countries usually have an even number of copies for both sides, so that even if one party loses its set, the other would gladly provide one of its own. No answer.
DOTC was supposed to release a copy of the contract on Jun. 22, 2007. It never showed up.
June 25, 2007
Emmanuel Ang, Philippine commercial attaché to Guangzhou, has not been charged to date with the alleged loss of government’s contract with ZTE Corp. But that’s all he can say about the case of infidelity in the custody of public documents that DOTC Sec. Leandro Mendoza has talked about. Ang promises to go public once he gets a lawyer today.
Asec. Lorenzo Formoso, DOTC’s point man for the P16 billion telecom deal, says not just the only two signed sovereign copies
were stolen. Soon after the signing in Boao of four other contracts with Chinese firms on Apr. 21 witnessed by Pres. Arroyo, all those papers also went missing. For protocol, the commercial attaché was supposed to notarize the documents prior to official transmittal to Manila and the Chinese side. The Chinese-Filipino partner of the cyber-education deal disputes this, however. The source, requesting anonymity lest he be linked to the ZTE controversy, says the Chinese copy of that contract remained with the Chinese side, and only the Philippine copy was lost, if ever.
Sen. Mar Roxas and Sen. Pia Cayetano planned a formal Senate inquiry on the theft
and the events leading to the assailed contract.
June 27, 2007
DOTC’s defense of NBN
Why build an NBN exclusively for government? DOTC Asec. Lorenzo Formoso answered:
The annual P4 billion spent by the government consists of voice-only landlines, mobiles, dial-up Internet, DSL, leased lines, PABX and various LANs, retail NDD and IDD—but no data network. Each agency sources its own provider. E-mail and file transfers are via Yahoo! or Google mail. An NBN would put all this under one system.
The NBN has two components. Infrastructure is made up of network transmitters, WiMAX cluster, IP core, integrated data center, network support, and management subsystems. Network applications and services include VoIP, intranet capacity, Internet access, and videoconferencing. Its 145 microwave relays and 300 WiMAX bases will serve 2,295 national agencies, and 23,549 towns and barangays.
Justifications: The NBN is a fully integrated single IP platform to allow seamless voice, data and video connectivity within and among national, regional, and local agencies. As a common information pipeline for the government, it will marshal the IT resources of the government, avoid duplication of systems, and host all e-government applications, including adoption of cost-saving VoIP. It is