In a privileged speech, Santiago claimed the deal was authorized by former President Fidel Ramos without public bidding. She said the deal virtually gave away public land to a private corporation, with the government even shelling out some P3.1 billion to develop the project.
"Where in the world can you find a government that gives a huge amount of money to a developer for the purpose of reclaiming land and then gives the reclaimed land to the developer?" Santiago asked.
Santiago branded the project, which was officially known as the Smokey Mountain Development and Reclamation Project, as "Anak ng Amari" (Child of Amari) — a reference to a similar Manila Bay reclamation scandal that erupted during the Ramos administration.
That deal between the Public Estates Authority (PEA) and Amari Coastal Bay Development, a private corporation, to develop the Freedom Islands located at the northern portion of the Manila-Cavite Coastal Road in Parañaque City was nullified in 2002 by the Supreme Court, which ruled that reclaimed lands are public lands and cannot be sold to private parties without the authorization of Congress.
Santiago recounted that in March 1999, Ramos authorized the NHA to enter into a joint venture agreement with R-II Builders Inc., owned by Reghis Romero II, to reclaim 40 hectares of Manila Bay alongside the Radial Road 10 (R-10) and convert it into a housing, industrial and commercial complex.
Romero was in the headlines in 2001 after being taken hostage by Abu Sayyaf rebels along with a female friend from a posh resort off Palawan. He and the woman reportedly paid a huge sum as ransom to the bandits.
Santiago said that under the PEA-R-II contract, the Ramos administration told the public that the project will be implemented "at no cost to the government" as R-II Builders would spend for the entire project. However, this was in exchange for owning the entire reclaimed land, which was even later expanded to 79 hectares.
"Just like all pies in the sky and tall tales, this one turned into a fiasco. R-II built a few low-cost housing units and then declared that it had run out of money. Thus, failing to comply with its contractual obligation to fully finance the project," Santiago revealed.
But instead of suing the developer for breach of contract and damages, Santiago claimed that the Ramos administration financed the project itself at a cost of some P3.1 billion.
"Even more amazingly, the same administration gave the developer the added right to reclaim 150 hectares of land. And — wonder of wonders — the same administration gave 10 hectares of reclaimed land to Harbour Centre Port Terminal (also owned by Romero)," Santiago said.
She explained that the Ramos administration gave Harbour, which operates harbor facilities in the project site, 10 hectares of reclaimed land valued at P1.75 billion in exchange for 60 percent of voting shares in the corporation.
However, Romero allegedly was able to dilute the government’s share further through anomalous methods. "Romero is now majority owner of the Harbor Port Terminal, although majority ownership was intended to belong to the government financing institutions that financed the project," she claimed.
"The entire Smokey Mountain project turned into a scam even worse than the Amari case, because at least in Amari, the negotiations were conducted by the PEA, which is authorized by law to do so. In the R-II case, negotiations were conducted by the NHA, which simply has no authority," Santiago stressed.
"Further, Amari paid PEA the sum of P1.8 billion to buy reclaimed land. In the R-II case, in effect the NHA paid Romero P3 billion and then gave the reclaimed land to Romero," she added.
Moreover, Santiago said that the Ramos administration, particularly the NHA, did not comply with any of the essential procedures before a public land can be sold.
"To transform reclaimed land into alienable land involves a long and complex process," Santiago said.
These steps include, among others, a declaration from the government that the lands in question are no longer needed for public use, public service or quasi-public use; an authority from the Department of Environment and Natural Resources (DENR) to dispose of the land; an authority from PEA to reclaim areas under water; a public bidding for selling or leasing the lands and the approval of the Commission on Audit regarding the selling price.
Moreover, Santiago emphasized that even if all the other requirements have been complied with, government cannot sell public land unless Congress passes a law authorizing the sale.
The Build-Operate-Transfer (BOT) law and the Local Government Code also specify that the contractor or developer, if a corporate entity, can only be paid with leaseholds on portions of the reclaimed land.
She also said that she will file a bill defining a special crime, to be known as "malversation of reclaimed lands," which seeks to punish any public officer who aids, cooperates with or otherwise consents to the transfer of reclaimed lands in favor of any private corporation without the authority of Congress.
"The penalty should be identical with the penalty for plunder — reclusion perpetua or death," she stressed.
She has also proposed that her speech be referred to the public accountability, environmental and natural resources, public works and government corporations and public enterprises committees in the Senate.