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NBN ZTE Scandal

Page history last edited by PBworks 16 years, 1 month ago
Arroyo not just witness at NBN-ZTE deal signing



By Tony Bergonia

Philippine Daily Inquirer

First Posted 02:20:00 03/06/2008


MANILA, Philippines -- President Gloria Macapagal-Arroyo was more than just a witness to the signing of the scandal-ridden $329-million National Broadband Network (NBN) deal with Chinese firm ZTE Corp.



Documents showed that when Transportation and Communications Secretary Leandro Mendoza signed the deal on April 21, 2007 at the Haikou Meilan International Airport in Hainan, China, he did so on behalf of the President.



Ms Arroyo, on April 20, 2007, signed a special authority allowing Mendoza to sign the deal on her behalf.



Ms Arroyo issued the special authority despite information relayed to her on irregularities that surrounded the project.



Romulo Neri, then director general of the National Economic and Development Authority (NEDA), said he informed Ms Arroyo of a P200-million bribe offer by then Commission on Elections Chair Benjamin Abalos Sr. to secure NEDA endorsement of the NBN-ZTE deal, according to transcripts of his testimony at the Senate.



Neri, the transcripts said, relayed the information to Ms Arroyo before the President flew to China at midnight of April 21 to attend the Boao Forum and to be present at the signing of the ZTE contract.


“She (Ms Arroyo) told me not to accept it (the bribe),” Neri told senators, according to the transcript of his testimony.



In an interview with radio station dzRH on Feb. 23, Ms Arroyo said she received information of anomalies in the deal “from someone” on the eve of her trip to China.



Favila’s special authority


The only other special authority that the President issued in connection with the NBN-ZTE deal was to Trade and Industry Secretary Peter Favila, allowing him to enter into a $4-billion memorandum of understanding (MOU) with a sister company of ZTE Corp., ZTE International Limited (ZTE Int’l), for various projects that included the NBN.



Ms Arroyo issued the special authority to Favila on July 12, 2006, on the same day that Favila signed the MOU with Yu Yong, ZTE Int’l president and ZTE Corp. vice president.



Michael T. Defensor, then presidential chief of staff, and Hou Weigui, ZTE Corp. chair, signed the July 12 MOU as witnesses.



Ms Arroyo and Executive Secretary Eduardo Ermita were also the signatories to the special authority issued to Favila, a copy of which the Philippine Daily Inquirer also has.



Investment, supply contract


Sought for comment, Press Secretary Ignacio Bunye said: “Maybe, that’s better addressed to the two Cabinet secretaries.”



Favila said he signed the MOU on behalf of the government.



He said he was designated to sign the MOU because he happened to be the investment secretary. “(T)he MOU between the Republic of the Philippines and ZTE was a cooperative agreement to work together ... in the development and implementation of various investment activities,” he said.



Mendoza said what he signed was a supply service contract agreement, not a perfected contract.



Witness to President’s agony


Favila said last week that Ms Arroyo had “agonized” over whether to push through with her trip to China for the Boao Forum and the signing of the ZTE contract because, by doing so, she would have to leave her ailing husband.



“I was a witness to how the President was agonizing on the decision that she has to make,” Favila said.



At the time Ms Arroyo left for China, her husband, Jose Miguel Arroyo, was fighting for his life at the St. Luke’s Medical Center in Quezon City following heart surgery that, his doctors said, few survived.



Through the April 20, 2007, special authority, Ms Arroyo designated and authorized Mendoza “to sign, execute and deliver … the contract for the supply of equipment and service for the National Broadband Network Project” with ZTE Corp.



Mendoza granted full powers


“Secretary Mendoza is further granted full powers and authority to do and perform every act and thing which may be requisite and necessary … as I, the President of the Republic of the Philippines, might or could lawfully do or cause to be done by virtue of these presents,” said the special authority signed by Ms Arroyo and Ermita.



The special authority was issued in response to a letter from Mendoza, dated April 16, 2007, asking the Office of the President to issue such an authority “in order to immediately implement” the NBN project.



Chinese ambassador’s letter


It also came after a March 26, 2007, letter from Chinese Ambassador Li Jinjun to the President telling her that “it would be very helpful and necessary if Your Excellency could extend your personal attention to coordinate.”



“Your Excellency, the Chinese government is looking forward to your attending the Boao Asian Forum and visit to Chong Qing, Shanghai and other cities of China,” said Li’s letter to Ms Arroyo.



Informed by someone


Ms Arroyo, in the dzRH interview on Feb. 23, said “someone” informed her of anomalies surrounding the NBN-ZTE deal just as she was preparing for her trip to Boao, China.



She didn’t mention that it was Neri who reported the anomalies to her.



She said in the same interview that she immediately took steps to have the report investigated, but had to push through with her trip and the signing of the deal just the same because “there was another country involved.”



She said that she quickly took steps to have the deal canceled. She did so five months later.



The President scrapped the deal on Oct. 2, 2007, weeks after Jose “Joey” de Venecia III, head of a firm that failed to get the NBN deal, testified at the Senate that Abalos and the President’s husband were involved and pressed him to abandon his bid for the project.



De Venecia and star witness Rodolfo Noel “Jun” Lozada said the ZTE deal was overpriced by $130 million to fund “commissions.”



Puzzled by urgency


Several senators said they were puzzled by the urgency that pushed Ms Arroyo to proceed with her trip to China at a time when her husband was still fighting for his life following the delicate heart surgery.



Witness Dante Madriaga, however, said in his testimony at the Senate last week that Ms Arroyo’s presence was required by ZTE officials for the release of some $30 million in kickbacks to the “Greedy Group plus plus” that was packaging the NBN-ZTE deal.



The Greedy Group, according to Madriaga, is composed of the President, her husband, Abalos, former police official Quirino “Torch” de la Torre, IT expert Leo San Miguel, and businessman Ruben Reyes.



Madriaga, in his testimony, quoted ZTE executive Fan Yang as saying that the President’s presence at the signing of the contract was ZTE’s precondition for the release of the $30 million to the so-called Greedy Group.



The amount, according to Madriaga, was to be spent during the 2007 elections for administration candidates.



First Couple among beneficiaries


Madriaga also testified that the First Couple were among the beneficiaries of the kickbacks.



Documents showed that while Ms Arroyo, in her interview with dzRH, said that she took steps to have the project canceled as a result of reports of anomalies, her officials didn’t seem to get her message.



The documents showed that officials involved in the NBN-ZTE deal, led by Mendoza, pursued the project even after Neri, or “someone” as the President put it, reported the anomalies to her.



On May 29, 2007, a little more than a month after Ms Arroyo was informed of the anomalies, the office of Finance Secretary Margarito Teves received a letter from Mendoza requesting the Department of Finance “to facilitate an agreement on a soft loan from the Export-Import Bank of China” for the NBN-ZTE deal.



DOJ opinion


Also in May 2007, Mendoza wrote to Justice Secretary Raul Gonzalez requesting the Department of Justice to issue a legal opinion “to give support to the contention that the NBN project can be considered an executive agreement.”



On June 21, 2007, Gonzalez wrote Mendoza asking for copies of documents on the deal, including a “loan agreement with the China Eximbank,” to support a legal opinion that the deal was an executive agreement that would justify the absence of public bidding.



In July 2007, Mendoza wrote Gonzalez back to inform the justice secretary that the Department of Transportation and Communications had submitted the required documents, including the ZTE contract and the loan agreement with China Eximbank.



Executive agreement


On July 26, 2007, the DOJ, in Opinion No. 40, Series of 2007, declared the deal as an executive agreement, although “with regard to the supply contract (with ZTE) … only representations as to the contents thereof were made to this department because of confidentiality issues.”



The Office of the Press Secretary, in a news release documenting Ms Arroyo’s visit to Boao on April 21, said the President pushed through with the trip despite her husband’s condition but abbreviated her visit to 12 hours “to honor a commitment.”



The NBN-ZTE deal, according to a National Bureau of Investigation report on the alleged theft of the Philippine government copy of the contract, was signed at the VIP room of the Haikou Meilan International Airport in Hainan, China, just as the Philippine delegation that attended the Boao Forum, including Ms Arroyo, was preparing to return home.



Shortly before the signing, Hou, ZTE Corp. chair, made a courtesy call on Ms Arroyo at the airport.



At the Boao Forum, Ms Arroyo announced her administration’s priority for IT projects.



We agree with you that technology is a powerful tool …,” Ms Arroyo said at the forum, addressing herself to Bill Gates, Microsoft founder and one of the world’s richest men.



With a report from Michael Lim Ubac

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