Enough proof of fraud to jail ZTE contractors

This week senators will probe further Malacañang’s efforts to silence ZTE-scam witness Jun Lozada, including a P500,000 gift from top official. A sidelight would be affirmations by two senators’ aides that Sec. Romy Neri did call his President Gloria Arroyo evil thrice during a meeting in Dec. All dramatic stuff, fit for live TV coverage. But after that senators would have to comb tediously the details of the $330-million telecom contract to see where the $200-million overpricing is. And then, after reviewing similar Chinese-funded projects, they need to study the big picture of why China became so generous when Malacañang acceded to joint exploration of the Spratlys and even the country’s continental shelf.

Already whistleblower Joey de Venecia has submitted an analysis of ZTE Corp.’s prices for Equipment, $194,051,628, and Services, $135,429,313. Citing open industry figures, he swore that Equipment should be only $96,078,246, and Services, $36,733,786. In effect, there was overpricing of $196,668,909, that is $329,480,941 minus $132,812,032 (Gotcha, 23 Jan. 2008). From outside the Senate halls, ZTE protested de Venecia’s figures, but refused to sit in the hearings it called a “political circus.” It also went on invoking confidentiality of proprietary information in hiding the details that the Filipino people would have had to pay. Unfortunately for the Chinese firm, senators already gave out copies to media outlets, which in turn posted these in websites.

If a confidential source of mine finally finds courage to testify, worse overpricing will unravel. He was a technical man of the Filipino lobbyists for ZTE, so was privy to the specifications and unit costs. From his files he has recalled only $69,083,643 for Equipment and $29,498,000 for Services, for a total of $98,581,643 (Gotcha, 28 Jan. 2008). So the overpricing in the final contract was $230,899,298; or $329,480,941 minus $98,581,643. The source also has a lot to say about how much the lobbyists got from ZTE bribers from late 2006 to early 2007, in effect showing consummated graft.

Still another source, also in telecoms, showed how at least one item in Equipment was overpriced (Gotcha, 18 Feb. 2008). He must stay anonymous for now because of a quaint relationship to an official linked to the contract. But he zeroed in on ZTE’s price of $1,784 for 25,844 WiMax subscriber units, for a total of $46,107,524. This is for BreezeMAX PRO CPE Outdoor Radio Unit, made by Israel’s Alvarion, a leading maker of WiMax solutions. The source pointed out that a leading competing brand, Proxim Tsunami MP.16 3500 Subscriber Station with Integrated 18 dBi Panel Antenna, could be ordered online for $579.99 apiece. (Senators may check out the link: http://www.wirelessnetworkproducts.com/index.asp?PageAction=VIEWPROD&ProdID=1404). Using the competitive price of $580 and assuming that ZTE doubled it for profit (100-percent markup in telecoms very rare in highly competitive IT industry), the source found overpricing of $16 million in the hardware. He unearthed another sting of $19 million in installation, testing and commissioning of the WiMax gadgets. This, from ZTE’S price of $1,000 for each of the 25,844 sites, or $25,844,000s, when the going rate is only $250 tops per location, or a total of $6.5 million for 25,844 locations.

Still one more telecom source since Apr. (the one whose e-mail vile eavesdroppers had cloned), researched the Alvarion model stated in ZTE’s annexes. He noted that it is vintage 2004. Meaning, it does not capable of beaming signals up to 30 kilometers, contrary to claims of USec Lorenzo Formoso at the Senate. Moreover, the same model is not optimized to carry Voice over Internet Protocol (VoIP) traffic, again contrary to Formoso’s blabber. Meaning, the national broadband network would never have worked as intended, but end up as another white elephant like the Bataan nuke plant.

Lastly, a NEDA insider pointed out overpricing in the Services side (Gotcha, 20 Feb. 2008. Citing government procedures, the source defined the contract as “design-build” under the Federation of International Consulting Engineers. Then citing NEDA rules, the source further stated that detailed engineering design should not exceed six percent, and construction supervision ten percent, or a total of 16 percent, of Equipment cost. Yet in the ZTE contract. the Services cost of $135,429,313 was 70 percent of the Equipment cost of $194,051,628. It was also 41 percent of the total contract price of $329,480,941.

The same NEDA source noticed many procedures breached, and requirements not attached to the ZTE contract (Gotcha, 22 Feb. 2008). These instances constitute graft, for entering into a transaction grossly and manifestly disadvantageous to public interest.

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The National Telecommunications Commission should look into the user of these numbers: 0916-3949807, 0915-4127945, 0916-4129034. During the 2007 congressional-local elections, those numbers were used in text brigades to malign candidates of the Opposition. After that, they were used to badmouth ZTE-scam whistleblowers Joey de Venecia and Jun Lozada. Last week it was used to spread the canard that Vice President Noli de Castro had bought a P200-million mansion for a supposed mistress.

The pattern gives the NTC a clue on who the cell phone menace is.

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