‘Lakas contributor to receive P700-M’

Philippine Center for Investigative Journalism ( First of two parts )

A businessman who is a member of the ruling Lakas party and close to both President Arroyo and former President Fidel Ramos is about to get a windfall: P700 million in settlement claims on a power contract that has been found to be one of the most onerous entered into by the National Power Corp. (Napocor).

Four years ago, Catalino Tan abandoned the $143-million project to rehabilitate the Binga hydroelectric plant in Benguet, leaving behind not only a dam still choking in silt, but also a messy trail of legal cases and unsettled financial obligations.

Yet in memoranda issued the past few weeks, top Napocor officials have recommended that Tan be given back what a government inter-agency review committee said last July was an anomalous contract. They also recommended paying Tan $13.8 million he said the government still owed him.

The recommendation comes in the midst of controversies surrounding overpriced power plant contracts and has been attributed by insiders at the Binga plant and at Napocor to the businessman’s political connections.

Insiders assert that Tan’s being a childhood friend of Ramos and his generous contributions to Ramos’ presidential campaign and party, Lakas, in 19992 were major factors in his winding up with the multimillion-dollar contract.

Now, they say, Tan is at it again, and has been using his connections to Lakas, the dominant party in the ruling coalition, and the First Couple, as well as calling on old friends in the Napocor and lawyers identified with Ramos adviser and now Supreme Court Justice Antonio Carpio.

The PCIJ was told Tan was unavailable when it tried to contact him at his office. But Presidential Assistant for Political Affairs Joey Rufino admits that Tan is "an active member" and supporter of Lakas. Still, Rufino added, while Tan "may be a friend, we don’t do things that way… He is close to FVR (Ramos), but that doesn’t mean that because he was close he got (the contract)."

"There’s no reason why he should not run Binga," Rufino said. "He’s being maligned and being attacked, poor man. He’s sickly, he’s old. He asked for our help. So we’re just looking into this."

Who runs Binga?

Insiders insist the powers-that-be are doing more than just looking. In the past, political as well as personal ties have always determined who gets to control Binga, the small but strategic power source in Northern Luzon that generates some P1.5 billion in revenues yearly. Through three administrations, management of the 100-megawatt Binga plant has passed from one close friend of Malacañang to another, enabling them to pocket millions of pesos in profits by doing almost nothing.

Almost a decade after the Binga rehabilitation contract was signed, there has been only minimal rehabilitation work done at the dam. Silt build-up remains a problem. If no dredging is done soon, the mud and silt will soon reduce the reservoir’s storage capacity. Water flow would then not be enough to make the turbines run and generate electricity.

Tan, a boots supplier to the military, garments manufacturer and producer of canned food, had no track record in power generation prior to taking control of the Binga power plant during the Ramos administration. But he happened to be a godson of Ramos’ father, the late congressman and ambassador to Taiwan, Narciso Ramos. When Ramos left office, his successor Joseph Estrada put his own godson, Anthony Escolar, in charge of Binga.

Now that Ramos has regained influence in government and Lakas is once more in power, Tan is maneuvering to reclaim Binga by way of his personal and professional relationships with present officials.

Tan’s network of past and present allies is star-studded. Justice Carpio, for instance, played a crucial role in the Binga story. As Ramos’ presidential legal counsel in 1993, Carpio gave the go signal for the Napocor to enter into the negotiated contract with a company linked to Tan for the rehabilitation of the Binga power plant.

Tan later became a client of the Villaraza and Cruz law office, whose founders include Carpio and Avelino Cruz, now the presidential legal counsel. Newly appointed Ombudsman Simeon Marcelo is also a former partner of the same firm.

These days, Tan has also been dropping the name of President Arroyo herself, as well as that of First Gentleman Mike Arroyo, whenever he talks to officials in the power sector. And he has been seen attending Palace parties where, on one occasion, he was heard reporting to the President his problems recovering the Binga plant. In addition, leaders of Lakas have lobbied on Tan’s behalf with past and present Napocor officials, insiders in the state power firm say.

Two key Napocor officials are paving the way for Tan’s return: company president and chief executive officer Rolando Quilala and general counsel Rainier Butalid.

Tan and Quilala have had dealings in the past. Years ago, Quilala headed Napocor’s Northern Luzon Regional Center (NLRC) which had jurisdiction over the Binga hydroelectric plant. Quilala’s son, Rabindranath, now works for Tan and is a business partner of Tan’s son, Erwin.

Last Aug. 29, Quilala wrote the Napocor board proposing to pay Tan $13.83 million to settle the various financial and technical issues that have arisen out the Binga contract since 1998. Yet two years ago, a report submitted by a nine-member technical working group said it was actually Tan who owed the Napocor $9.6 million because of his failure to comply with provisions of the contract, mainly the dredging of the Binga reservoir.

Quilala’s letter left it to the Napocor board to decide whether or not to give the contract back to Tan. Butalid, Mrs. Arroyo’s former student and Justice Carpio’s fraternity brother in influential Sigma Rho, picked it up from there. On Sept. 17, he wrote a memo addressed to Quilala, saying the Napocor was wrong in terminating its contract with Tan in 1998. In effect, Butalid was saying that Tan’s contract was still in force.

Whether or not the contract is valid is one of the main issues in the Binga controversy. In late 1998, after Ramos left office, Tan told the Napocor he was unilaterally terminating the contract and turning the plant over to the state power firm. His reason was that the Napocor had stopped paying him the energy fees the plant was producing.

The state utility company did not deny this, arguing that it felt Tan was overcharging it even as his firm failed to perform the required rehabilitation work. It also pointed out that Tan’s company was having an intra-corporate dispute, and therefore thought it best to stop payment until the matter was settled.

This was the time when people closely identified with then President Estrada were trying to take control of Binga, and after other investors in Tan’s company filed a petition at the Securities and Exchange Commission (SEC) questioning the right of Tan’s Binga Hydroelectric Plant Inc. (BHEPI) to enter any agreement with the Napocor.

Dispute revived

In 1993, the original rehabilitation contract had been awarded to the China Chang Jiang Energy Corp., which later became the BHEPI. But by 1998, a dispute over the ownership of the CCJEC was revived, prompting the SEC to form a management committee to temporarily take over Binga.

When Tan gave up Binga because of Napocor’s refusal to pay BHEPI, the state firm considered his move tantamount to abandonment and termination of the contract. But Butalid, in his letter to Quilala, argued that the Napocor could not prove its claim that Tan was unable to do the work required. Moreover, he said, the state company failed to comply with procedural requirements for the termination of the contract.

Seven years ago, however, Quilala himself had been vocal in his opposition to the Binga contract. In a letter to Napocor management in March 1995, Quilala questioned the payment of P700 million to CCJEC when in fact the company had not met the deadlines for dredging the Binga reservoir, which was fast filling up with silt.

In that letter, Quilala also pointed out that Napocor was paying CCJEC an unreasonable amount of money because of "lack of controls" on the Binga contract. At the time he wrote that letter, Quilala was still the group manager for power generation of the NLRC.

But Quilala’s tone changed as years passed and Tan took over the company. Documents show that by 1999, when the SEC stepped in to intervene in the ownership dispute in CCJEC, Quilala was siding with Tan. By then, Quilala had become chairman of the Binga Task Force and acting head of Genco 4, a spin-off agency of Napocor.

Minutes of a Task Force meeting in March 1999 quote Quilala as questioning the legality of the SEC-installed management committee, "since Tan doesn’t have a representative in the committee." Tan had declined to name a representative.

Quilala’s closeness to Tan prompted the businessman’s rival investors to file a contempt case against Quilala before the SEC. The case was later withdrawn.

By early 2001, though, Tan was getting help from Quilala’s son Rabindranath, known to Binga employees by his nickname ‘Abet,’ in his attempts to regain control of Binga. The younger Quilala, who is managing director of a company providing engineering services, has been representing Tan in dealings with local government officials in Benguet. In the minutes of the regular session of the Sangguniang Bayan of Itogon, Benguet, Abet Quilala is identified as a representative of Catalino Tan.

The elder Quilala explains that his son was invited by Tan to join his group, since Abet Quilala’s firm is one of several companies with pending financial claims from Tan’s BHEPI. Those claims would be paid once Tan reassumes control over Binga.

Rolando Quilala says that his name is being dragged into the Binga controversy only because of the involvement of his son, whom he describes as a Benguet politician who has had dealings with the local government.

Rolando Quilala, however, can hardly deny that his recent decisions, as well as those of Butalid, work in Tan’s favor. They also bring Tan back full circle to Binga.

In 1993, Tan brokered the rehabilitate-operate-lease (ROL) contract for the power plant and brought in investors from mainland China to implement the contract. Our investigation shows that he later maneuvered to gain control of the Chinese company, the CCJEC, through an allegedly fictitious investor and questionable corporate practices.

Tan also renamed the CCJEC as the Binga Hydroelectric Plant, Inc. and became its chairman and president. In the process, he eased out the other investors, who challenged his takeover by asking the SEC to intervene in the ownership dispute. During Ramos’ time, however, the SEC never acted on the other investors’ complaints.

‘A friend, but not close’

In an interview with the PCIJ last August, former President Ramos described Tan as "a friend, but not really close." But other people interviewed in the course of the PCIJ’s investigation into Binga – including Rufino – have invariably linked Tan’s name to Ramos. Lawyers and engineers say Tan was widely known to be acting on behalf of Ramos because, as one of them said, the Binga project was a "Ramos-Lakas project, which was the justification for everything."

Bank records on file at the SEC also indicate ties between Tan and the Ramos family. In early 1997, Tan withdrew P100,000 from company funds deposited in an account in his name and donated it to the concert of Ramos’ singer-daughter Jo. He also took out P1 million to put up a professorial chair in engineering in honor of Ramos’ father Narciso at the Pangasinan State University (PSU), in Ramos’ home province. There are several other withdrawals from the accounts, worth tens of millions of pesos, for unspecified purposes.

These disbursements became part of the complaint filed by other investors against Tan. They said that because company funds were being maintained in Tan’s personal accounts, he and other company officials could "appropriate the funds… by or for themselves at any time."

The same bank records show Tan making payments to the Villaraza and Cruz law office, which he had hired two years earlier to represent the company in a case before the Construction Industry Arbitration Commission. There is also an entry showing payments to another law firm, the Villanueva Bernardo Gabionza law offices (now the Villanueva Gabionza and De Santos law offices), which handled all other cases on Tan’s behalf.

There are other displays of Tan’s magnanimity, which also seems to show support for the Ramos family and Lakas at the same time. The school buildings he built in Benguet, for instance, are named after Ramos’ mother, Angela V. Ramos. Tan also named his building on Estraude street in Binondo "Lakas Tao" after the party that Ramos used originally to launch his presidential bid in 1992. Binga plant employees say Tan campaigned actively for Lakas in the 1998 elections and was even seen meeting with the party treasurer at a hotel on Roxas Boulevard.

Tan’s generosity extends to the President herself. Sometime in 2000, when Mrs. Arroyo was vice president, Tan donated a school building to the Catbalogan IV Central Elementary School in Samar in the name of her father, former President Diosdado Macapagal.

According to Rufino, Tan has wanted to go to Singapore to file an arbitration case against the Philippine government because of Binga. But, said Rufino, "he didn’t want to embarrass GMA. It would have generated bad publicity and created an impression that the government never honors deals." (To be concluded)