Wednesday, 12 September 2007

How Joey de Venecia discovered overprice

GOTCHA
By Jarius Bondoc
Original article at The Philippine Star
http://www.philstar.com/index.php?Opinion&p=49&type=2&sec=25&aid=20070911151

Recounting events of Dec. 2006, Joey de Venecia says Comelec chief Ben Abalos at first tried to buy him out of the NBN bidding for $10 million. When he turned him down, Abalos allegedly changed tack and strived to make it look like they were partners. There was the tete-a-tete that Abalos called at his office in Intramuros, Manila, for DOTC Assistant Sec. Lorenzo Formoso to witness. And there was the meeting with ZTE Corp. bigwigs in China on Dec. 27 where Abalos stressed he was with the son of the Speaker, so they better come across with the promised commissions.

It was during that Shenzhen meeting when Joey confirmed to himself that kickbacks were to be paid. Earlier, though, he discovered how much.

Abalos has refused to talk about Joey’s revelations and denies any link to the $330-million (P16-billion) ZTE deal. My requests for live talk-radio interviews the past several Saturdays have been turned down. All three of us reportedly will be summoned to the Senate to tell all we know.

Joey was reluctant to join that Shenzhen meeting. Not only was it smack in the middle of the Christmas holidays. He also was worried where Abalos’ lobbying for ZTE would take him, given the $10-million bribe offer. At that time, Joey’s Amsterdam Holdings Inc. already had made an offer to DOTC to undertake the NBN on its own, no cost or risk or loan to the government, for $240 million. All AHI wanted in return was for government to subscribe to half of its built capacity, but at 25-percent lower than other telcos.

Abalos said he wanted to introduce Joey to ZTE execs. Joey replied that he already knew them as suppliers of his Broadband Philippines Inc. Abalos insisted that Joey join him even for just one day at Kempinski Hotel near ZTE headquarters in Shenzhen’s Nanshan district. Remembering his reelectionist dad’s instructions to be nice to the old man, Joey relented.

Before seeing the ZTE top guns, Joey was ushered into Abalos’ suite. There he was shown ZTE’s proposed equipment supplies, with a notional price of $262 million. Joey was surprised that, for such huge amount, ZTE’s telecom backbone would cover only 30-40 percent of the country. His AHI budget of $240 million, arrived at with the help of ZTE managers in Manila, was for 80-percent coverage.

Joey faxed what he now calls “the Abalos design” to his technical men in Manila. Under instructions to confer with George Zhu Ling, ZTE’s Philippine country manager, the technologists reported back their findings. Based on the specified supplies, ZTE’s real price should only be half of $262 million, or about $130-$132 million.

Incidentally, a third competitor, Arescom Inc. of California, earlier had offered to sell the same telecom system as ZTE’s for only $135 million. Last week Filipino telco executives, studying DOTC’s claims in newspaper ads, said they easily could supply the same system for only a third of ZTE’s final contract price of $330 million. In short, basic prices from different sources are about the same.

Joey pointed out the price discrepancy to Abalos. He recalls the latter telling him that if they partner in the deal, AHI should mimic the ZTE rate, then cover the off-book commission of $130 million or so. It would be easy, Joey recalls being cajoled into accepting, “my law firm will fix the papers.” Yeah, right, and I go to jail for money laundering, he said to himself.

The matter was left hanging. ZTE vice president Yu Yong and project chief Fan Yan had arrived and were waiting for them downstairs. Joey, Abalos and four cronies of the latter proceeded to the meeting room. There Abalos allegedly pounded his fist on the table to stress the need to release the money because top Filipino officials and “the party” were waiting.

So from Joey’s recollection, there was overpricing of $130-132 million in the original ZTE price of $262 million in Dec. 2006. But why did the figure rise further to $330 million by the time it was signed by DOTC Sec. Leandro Mendoza and Yu Yong on Apr. 21? The answer perhaps lies with then-NEDA Sec. Romy Neri.

In broadcast interviews, Neri has said that Abalos did bring the ZTE brass to him to discuss the NBN project. But he would neither confirm nor deny being offered P200 million to approve it. Will he neither confirm nor deny too that a big businessman stepped in sometime Feb. and Apr. 2007 to include another $70-million overprice — this time for a political party? That tycoon reportedly is responsible for Neri’s yanking out of the NEDA.

The total overprice runs up to $200 million (P10 billion). Sen. Panfilo Lacson says part of it already has been paid out. No wonder the huge sums going to nasty PR operators nowadays, including P200,000 apiece to defend the deal and P300,000 to malign the critics.

* * *

It was supposed to be held last Monday till today at the Wack Wack Golf and Country Club on the behest of Abalos, a former president. But the three-day summit of electoral reformists and Comelec officials has been postponed indefinitely. No date or venue has been reset for a long-delayed assessment of the May 2007 midterm election and discussion of loopholes in election laws.

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