Series of anomalies marks NAIA-3 deal

In suing RP in Washington 2004, Fraport made many bizarre claims. One was that Gloria Tan Climaco, then-presidential adviser on strategic projects, tried to shake down the German airport operator. Too, that Pancho Villaraza, once Gloria Arroyo’s private lawyer, abetted her. Both were vindicated last week, though, when the International Center for Settlement of Investment Disputes dumped Fraport’s coming to court with unclean hands. Fraport had broken RP law in buying control of the local contractor for NAIA-3, so ICSID will not help collect $425 million in advances for the airport construction.

In fact it was Climaco, backed by Villaraza in 2001-2002, who first advised government to withhold payment for an illegal deal. Her findings of Piatco-Fraport corporate misdeeds served as basis for the ICSID’s 194-page ruling. The same findings in 2003 led the Senate to conclude fraud, and the Supreme Court to void the NAIA-3 contract. Villaraza, calling the extortion yarn a concoction to cover up Fraport’s dirty dealings, says the ICSID verdict can be used to prosecute.

Fraport’s dummying in Piatco came in a second phase of anomalies, the investigations showed. The first violations were of the Build-Operate-Transfer Law, the General Banking Act, the Tax Code, and the Anti-Graft and Corrupt Practices Act in 1996-1997. Piatco had edged out an original proponent to erect and run NAIA-3 by offering totally different terms of reference. The bank that gave financial backing had committed all of its assets to the deal. Piatco was to acquire all powers to impose tolls and fees from various airport services unimpeded by the regulatory agencies. Yet, transportation and economic officials ignored the breaches, and rushed to award to Piatco. Breaches of the Penal Code, specifically bribery, likely were committed too.

Although a contract already had been awarded, nothing happened for two years until a new administration came along. This by itself was another legal violation that authorities ignored. At any rate, Fraport in 1999 flew in and bought one-third of Piatco, plus more from subsidiaries PAGS, PTI and PairCargo — for a controlling 61.44 percent. “Secret shareholders agreements” were signed, in which Piatco ceded to Fraport all decisions on airport operations, and granted Fraport veto rights over other matters. In exchange, Fraport would advance the construction funds. All this was in breach of the Anti-Dummy Law and the 40-percent constitutional limit of foreign equity in public utilities like airports. ICSID pounded on this in ruling that Fraport cannot claim protection under an RP-Germany investment pact because it had broken a provision of that pact to obey the laws of both lands.

They’d only just begun. Piatco-Fraport proceeded to renegotiate the B-O-T contract. Certain civil works to widen roads, span flyovers, and dig tunnels were removed from their list of responsibilities and transferred to the government. Transport officials acquiesced despite the multibillion-peso burden to taxpayers. Illegally, one of them had wangled from Piatco-Fraport the earthmoving and excavation subcontracts; others helped themselves to smaller supply deals. Piatco changed the design to include a four-storey duty-free mall that international travel regulators were to deem as contrary to commonsensical airport safety and security. Fraport raised the rates it would collect from passengers, airplanes, cargo and cars even while the terminal was still being built. All this was contained in an Amended and Revised Concession Agreement and three supplements. Economic planners never got to approve the changes as required by law.

 More anomalies came during construction by general contractor Takenaka Corp. of Japan. Piatco and Fraport managers imposed on Takenaka their separate lists of subcontractors and suppliers who were to be favored. The managers clearly made money on the side — big money — at the expense of shoddy construction. Piatco’s list included companies of its owners, who were responsible for the clogged drainage, thin floor tiles and picture window glass, and ceiling that fell on the eve of the terminal’s soft-launch. Fraport had in its list the maker of baggage carousels that bogged down dozens of times during test-runs, escalators that can carry only 7,000 passengers per hour instead of the specified 8,000, and second-hand passenger air tubes.

Still another wave of irregularities came in early 2001. The third supplement was sneaked through, and a fourth was tabled for signature. As insurance, Piatco-Fraport appointed Alfonso Liongson “PR consultant” to be paid a total of $10.5 million, contingent on securing five government approvals. Climaco and Villaraza blew Liongson’s cover, and the bagman fled to California.

Climaco has since resigned her Cabinet post. Villaraza later testified at the ICSID trials that Climaco’s research helped to clinch. Constrained by ICSID’s confidentiality rules, they cannot move much against the criminals in many stages of wrongdoings under three administrations. But their papers can be used to jail their false accusers. New crusaders can pick up where they left off and, for starters, sniff out why only half of the P3 billion paid by government last Dec. actually went to Fraport.

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