DOTC $30-M extortion: Czech exec’s affidavit

The $30-million extortion from Czech train supplier Inekon was in the news again last week. Supposedly the NBI found scanty evidence to nail Metro Rail Transit general manager Al Vitangcol. But Justice Sec. Leila de Lima belied the dropping of the case. She ordered an internal NBI probe of whoever floated the trial balloon.

Following, as refresher, are excerpts from the affidavit of Inekon CEO Josef Hušek about the July 2012 misdeed:

“I am Chairman, Board of Directors, of Inekon Group, a company registered in Prague, Czech Republic. I have been with Inekon since 1995 as Chief Executive Officer.

“Inekon is an established producer of rail systems, including trams, delivering its products to markets in North America, Europe, and Asia. Since 2007 Inekon has expressed interest in supplying trams for line MRT-3 in Manila.

“On 9 July 2012, upon our arrival in Manila, Czech Ambassador Josef Rychtar presented the business schedule. It included meetings with DOTC Usec Rene Limcaoco and MRT general manager Al Vitangcol the following day.

“Ambassador Rychtar informed us about Mr. Vitangcol’s proposal to meet him unofficially for dinner on the same day, 9 July 2012. Having accepted, Mr. Haloun, Inekon rep, and I met Messrs. Vitangcol, Manalo (Boyet) Maralit, our local consultant, and Wilson de Vera in a restaurant in Makati. Ambassador Rychtar attended. Contrary to our intentions, the dinner turned to be social rather than business; we presented our new offers for the project, without result.

“Before dinner ended, people accompanying Mr. Vitangcol suggested to move to a private place to continue our discussion. Since we needed to understand better the technicalities of the tram delivery, we agreed. The meeting took place at the residence of Ambassador Rychtar (nearby). Messrs. Haloun, Maralit, Wilson de Vera, and I attended.

“While talking about the tender, Mr. Wilson de Vera suggested: we would be selected as supplier of the trams and related services, provided we paid in advance to an unknown entity a certain amount. Mr. de Vera indicated such advance payment should amount to $30 million.

“This suggestion shocked us, as we did not expect this way of doing business. We explained that any sum paid in advance would increase the final price of our products and services.

“Mr. Wilson de Vera left several times the residence to consult someone by mobile phone. When he finally returned, he told us that according to Mr. Vitangcol the contract price per tram was not to exceed $3 million, as that is the ceiling set in an MRT consultancy report. He then told us that the sum of $2.5 million instead of $30 million indicated originally would be sufficient as an advance payment.

“We refused that proposal and intended to leave the residence. Before we did, Mr. Wilson de Vera encouraged us to think about his suggestion until the official meeting the next’ day at MRT.

“The next day we met Usec Limcaoco at DOTC. In the afternoon, Mr. Haloun and I, together with Ambassador Rychtar, met with Mr. Vitangcol in his office in Quezon City.

“When we arrived, Messrs. Vitangcol, general manager of MRT, and Wilson de Vera were there. Mr. Maralit arrived late due to traffic.

“Mr. Vitangcol asked if we accepted the proposal of Mr. Wilson de Vera the day before. He insistently proposed to sign an agreement establishing a joint venture of Inekon Group and people suggested by him. The joint venture would constitute Inekon’s partner in the Philippines, with 60 percent of its shares held by Inekon and 40 percent by people proposed by Mr. Vitangcol, and its purpose would be to assume the contract for maintenance of MRT, which was soon up for renewal.

“We refused both offers. This apparently upset Mr. Vitangcol. We left his office without any follow up on the negotiations.

“On our way back to the hotel, Ambassador Rychtar informed us that he just received via mobile phone a text message from Mr. Maralit. In the message, Mr. Maralit informed Ambassador Rychtar that Mr. Vitangcol and Mr. Wilson de Vera were furious because we refused their suggestions. According to that message, MRT would never do business with Inekon.

“We left the Philippines on July 13, 2012.

“I affirm that the contents of this statement are true to the best of my knowledge.”

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No longer may Customs collectors accept generic tags for imports, like “leather goods” or “meatloaf” or “biscuits.” Henceforth they must require specific grades or brands, like “Coach bags” or “Spam luncheon meat” or Oreo chocolate cookies.”

No longer too may collectors refer merely to historic port files to determine an import’s value and corresponding duty. They must now refer to global industry standards and references.

The twin moves form part of the new Customs administration’s reforms in the declaration and assessment of imports. These will curb collusion between cheating Customs personnel and importers.

Fuzzy descriptions enable briber-importers and bribee-Customs men to misclassify and undervalue cargos, and so lower the duties. Same with just referring to the past three years’ files as bases for assessments.

Under an updated Valuation Reference Info System, Customs officers must check out various industries’ agreed references. All such references easily are accessible on Internet websites. Example, the Means of Platts-Singapore, of petroleum fuels traded in that island-state, for real-time import valuation in the Philippines.

Domestic businesses have been pushing for the use of such info-sites. The Philippine Iron and Steel Institute recommends the global Metal Bulletin, which monitors the price and volume of steel products and inputs.

The PISI used website figures recently to charge three Customs-Cebu officers and Joyland Industries Corp. with smuggling (see Gotcha, 17 Feb. 2014). About 35,000 tons of steel wire rods, in 17 shipments, were valued at only $295 per ton. During those months the rods were worth $670 to $800 a ton, based on the Metal Bulletin; the $295 was cheaper than local rates for scrap iron. The government lost $80 million in taxes.

New Customs chief John Sevilla reportedly is completing the list of industry price references.

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