Slush fund, secret payoffs at Piatco

Is the Piatco concession to build and run NAIA Terminal-3 void from the start? Presidential adviser Gloria Tan Climaco thinks so and has explained her reasons at the Senate inquiry. Laws were broken in six steps in the making of the contract:

* Piatco should have been disallowed from the start from making a counter-offer to the unsolicited proposal of Asian Emerging Dragons Corp. way back in 1996. In coming forward with a Swiss challenge, Piatco at that time declared Security Banks as its partner. The bank and its subsidiary SB Investments were to finance the $350-million construction with more than half of their assets. That, Climaco says, was already a breach of the General Banking Law which limits to only 15 percent of assets what a bank may invest.

* AEDC was never shown the terms of reference of Piatco’s counter-offer, to which it was entitled under the Build-Operate-Transfer Law. As the original proponent of Terminal-3, AEDC had a right to match Piatco’s bid. Only now do the six taipans in AEDC realize that they lost because the government reviewers were comparing apples and oranges. AEDC had wished to be repaid its $350-million investment through a 64-percent cut in the P500-terminal fee to be collected from departing passengers over 25 years. Thus, it offered to remit P120 million as the government’s 36-percent share. Piatco had offered P17.3 billion over the same period.

How? From a terminal fee of $20 (P1,100), plus control of 12 public utilities – porterage, ground handling, food catering, passenger services, leases, etc. – that AEDC never thought of taking over from government in the first place.

* The 1997 Concession Agreement contained major changes in the terms of reference from Piatco’s original bid. That was where Piatco got the power to charge whatever it wants for 12 government-regulated utilities. Government was left with authority to set the rates only for four: terminal, check-in, aircraft parking and tacking fees. Another deviation: Piatco need not honor contracts on international flight operations, leases and services at Terminal-1, but government was to handle the cost in case Piatco was sued by any airline or service contractor or lease holder. Such departures from bids are not allowed by the B-O-T Law and the Public Bidding Act.

* The 1997 contract was dramatically altered through an Amended and Restated Concession Agreement (ARCA) in November 1998. Inserted this time was a clause for government to guarantee all of Piatco’s loans, again a violation of the B-O-T Law that aims to free government from such headaches as raising funds or issuing guarantees in the first place. The $20-terminal fee was declared as just the starting rate, which Piatco may opt to raise during the 25-year concession. Performance testing of the terminal was deleted as a basis for government’s issuance to Piatco of a Certificate of Project Completion. These, too, were major departures from the original terms of reference of Piatco’s bid and thus disallowed by law.

* From the ARCA emerged three supplemental agreements. Again, more deviations from the 1996 bid and the 1997 original contract. Piatco would no longer dig a 2.7-km tunnel from Terminal-1 to Terminal-3 from its pocket. Instead, government was to pave a road between the terminals at its expense, plus destroy seven hectares to the adjacent Nayong Pilipino park to make way for a cargo terminal, plus flyovers into Terminal-3. All this, at a cost of billions of pesos to taxpayers. Yet the same supplemental agreements stated that government no longer had a right to audit Piatco’s project expenses, yet another violation of the B-O-T Law. The supplements already are being enforced although the NEDA’s investment coordinating committee has yet to approve them.

* Fraport AG of Germany entered the picture as a Piatco partner just before construction began in June 2000. It was to own 30 percent of Piatco, while Nissho Iwai of Japan would hold 10 percent, in compliance with the maximum 40 percent that the Constitution allows for foreign involvement in public utilities. SB Investments came to own 10 percent. It turned out, however, that Fraport bought shares and lent cash to three of the four firms owned by the Cheng family and comprise 50 percent of Piatco. Fraport thus came to have a director for finance in Piatco. This breaks the Foreign Investment Act and the Anti-Dummy Law.

How did Piatco’s managers think they could pull the trick despite the six violations of laws? The answer probably lies in Climaco’s parallel revelations about Piatco’s finances.

In June 2001, Piatco hired Alfonso Leongson as crisis PR consultant, in time for the opening of a newly -elected Congress in July. Reportedly a retired communications manager of a drug firm and a Cheng relative, Leongson was to collect $200,000 (P10 million) a month for one year as professional fee, plus bonuses totalling P200 million. Piatco chairman Cheng Yong told the Senate last week that Leongson had collected P110 million by December 2001 before stopping work. Why Leongson would forgo the rest of his huge fees, Cheng did not explain. All he said was that the man used the fees for a media effort against NAIA service contractors, but did not provide Piatco with receipts from advertising placements. Left unexplained too was why the money for a media campaign in Manila was deposited in an account in Hong Kong.

At any rate, two House committees investigated the Piatco deal while the service contractors went to the Ombudsman with evidence on the dummy operations. Soon afterwards one of the committees declared the contract valid, while the other abruptly suspended its inquiry. The Ombudsman also dismissed the contractors’ complaints.

First Gentleman Mike Arroyo and presidential consultant Dante Ang have refuted the claim of a retired senator that they’re linked to Leongson. Of course, they’re not. They have nothing to do with those House or Ombudsman investi-gations.

Meanwhile, the Senate is looking into another Climaco revelation, this time about an Emmanuel Cuevas linked to Piatco. Cuevas reportedly asked lessors interested in putting up businesses at Terminal-3 to cough up P5-million "goodwill money" which went to his bank account or Leongson’s slush fund. Supply, equipment and construction contractors were also asked to pay "marketing fee" of eight to ten percent of their price quotations, in exchange of Piatco management’s approval. The fees ranged from hundreds of thousands to tens of millions of pesos.

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That column on 500,000 nursing vacancies in the US, Britain, Asia and Australia (Gotcha, 11 Sept. 2002) flooded me with reactions. An eye-popper came from Atty. Emmanuel Tipon of Fremont, California, who wrote that it’s not so much the qualifying CGFNS and NCLEX exams that Filipino nurses fail to pass, but the Test of Spoken English (TSE). Tipon said a US client recently recruited 400 nurses from Manila who readily passed the CGFNS, NCLEX and the Test of English as a Foreign Language (TOEFL). But only 35 passed the TSE, a new US visa requisite for foreign recruits. Sadly for the nurses, the Immigration and Naturalization Service would not waive the rule.

Tipon understood why and explains: "Can you imagine a situation where a patient complains about pain in her back and the nurse who failed the TSE relays to the doctor pains in her breast? The doctor then examines the patient without further ado but with no justification either."

Tipon prescribed a solution: "Before taking the exam, Filipino nurses should take a crash course in spoken English, preferrably under American mentors. When Filipinos claim to speak fluent English, it might be true if they’re conversing with fellow Filipinos, but not with Americans.

They might not understand each other."

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Meanwhile, readers who e-mailed for job placements must know that I’m not a recruiter. I merely wrote about the shortage of nurses.

Those who want may reach Grow Inc. at 6764 Ayala Ave., Makati City 1226; tel. nos. (02) 887-8447 loc. 7834 to 36, (02) 891-3718 (fax). E-mail: www.growinc.net or [email protected].

Another interesting reaction came from Evelyn Victoria of Sharp-Karilagan Training Academy, a Tesda-accredited outfit that prepares seamen bound for luxury liners in TSE and TOEFL. They also conduct six-month courses for caregivers seeking jobs in the US or Britain. Before another flood of e-mail, I might as well run their address: 5th Flr., Shipping Centre Bldg., Don Andres Soriano Ave., Intramuros, Manila (in front of the Manila Cathedral). Tel. Nos.: (02) 527-6418, 527-1590.

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Catch Sapol ni Jarius Bondoc, Saturdays, 8 a.m., on DWIZ (882-AM).

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You can e-mail comments to [email protected].