Contractors at fault

The Senate probe on the national broadband scandal has produced three key witnesses. The first was businessman Jose de Venecia III, who squealed on the alleged anomalies surrounding the $329-million contract after his company lost the bidding for the project. The second, former Philippine Forest Corp. president Rodolfo Lozada Jr., is dubbed by the media as the “star witness” who has become the object of hero-worship by Arroyo bashers after linking the First Couple to the allegedly overpriced project. The third is Dante Madriaga, who claims to be a former technical consultant for the ill-fated project awarded to China’ ZTE Corp. The public, however, seems to look upon Madriaga with distrust.

This piece would dwell more on Lozada and Madriaga because they are often compared with each other by people who have heard their testimonies. And also because while the young De Venecia was the first to expose the national broadband mess, Lozada and Madriaga came in to corroborate his allegations.

Both Lozada and Madriaga are electronic-electrical engineers with long work experience in their field expertise. Initially, Lozada didn’t want to testify at the legislative inquiry because he was afraid of the consequences. What made him decide to turn whistleblower was the alleged attempt by government men to abduct him and even finish him off. On the other hand, Madriaga said he came to the Senate on his own to clear himself from the allegation that he was demanding a P5 million to P10 million fee in exchange for his testimony. When he showed up at the Senate uninvited and started talking like a parrot, he vehemently denied that he was a witness for sale.
Nevertheless, the stigma that he is a paid and unreliable witness, and worse, a Trojan horse, remains hanging over his head.

Lozada, a consultant of Secretary Romulo Neri (during his stint as director general of the National Economic and Development Authority) who evaluated the ZTE-NBN project proposal, claimed that the project was overpriced by $200 million. He confirmed Neri’s claim that former Commission on Elections Chairman Benjamin Abalos dangled a P200 million bribe in exchange for a favorable Neda endorsement of the project.

He also backed Neri’s claim that advance payments were made by ZTE to the Filipino group—led by Abalos—that designed and brokered the project. Madriaga said, though, that he had only a faint idea how much money was actually doled out.

Madriaga, for his part, identified himself as part of a team that designed the NBN project and served as liaison officer of ZTE from May 2006 to March 2007.

He testified that the NBN project originally cost $50 million but it later ballooned to $310 million and finally, to $329 million. He said the drastic increase in the cost was due to the gang of four’s “greed” for bigger commission and profits. But he said whatever windfall the gang of four demanded, the ZTE people wanted to be matched with the same amount for themselves.

He called the group, which also included businessmen Leo San Miguel, Ruben Reyes and retired Police Gen. Quirino de la Torre, the “gang of four.”

Perhaps, the most repulsive portion of Madriaga’s testimony was his claim that $41 million had been paid to the group in advance by ZTE, and that half of the amount allegedly went to the First Couple.

What Madriaga told the joint Senate investigating panel was, in the words of many observers, nothing less than explosive. And if he is telling the truth, then he is a bigger witness than Lozada.
But Senator Juan Ponce Enrile noted that certain things Madriaga said did not dovetail with the testimonies of De Venecia and Lozada.

He said most of Madriaga’s testimony was not based on his personal knowledge. One possible exception was when Madriaga supposedly saw First Gentleman Mike Arroyo in the company of the group at Wack-Wack Golf and Country Club in Mandaluyong City.

Senator Panfilo Lacson, who convinced his fellow senators to allow Madriaga to testify even without the benefit of prior evaluation, admitted that what the witness said was mostly hearsay. But he insisted this did not necessarily mean that Madriaga had merely concocted his tale or that he lied before the Senate probers.

Senator Alan Peter Cayetano, chairman of the Blue Ribbon committee, said he had so far not found any inconsistency in Madriaga’s testimony. The same thing was said by Senate President Manuel Villar.

But what dumbfounds Senator Richard Gordon is why Madriaga refused to sign his own account of the ZTE-NBN story which he himself had written. In that account, Madriaga said the gang of four succeeded in persuading ZTE to release another $5 million supposedly to “fix” the young De Venecia and stop him from causing troubles. But in his oral testimony, he said the request for this amount did not materialize. Despite this-not-so-minor discrepancy in Madriaga’s testimony, Cayetano and company said they found no reason to drop him as a witness.

The other day, Bases Conversion and Development Authority president Narciso Abaya called up this journalist to present his side on the subject of our column last Monday—the complaint of certain Central Luzon local governments and sub-contractors about non-payment of fees for services rendered, as well as taxes and quarry fees in connection with the multi-billion peso Subic-Clark-Tarlac Expressway project.

These financial obligations remain unsettled despite the fact that the 94-kilometer expressway is about to be completed and turned over to the government. The local governments and sub-contractors are supposed to get their payments from the two major Japanese contractors for the flagship road project—the Hazama-Taisei-Nippon Steel Joint Venture and the Kajima Consortium. They are up in arms because while the two Japanese contractors are being paid without fail by the BCDA for their project billings, the latter have been remiss in giving to the local governments and sub-contractors the money that is due them for their services.

Mr. Abaya explained that the BCDA should not be blamed for the problem because the payments in question are out of their hands. He said the moment funds are released by the BCDA to the main contractors, they should in turn set aside the corresponding amounts to settle their obligations to the local governments, sub-contractors and other creditors. Thus, the matter is between the contractors and the local governments/sub-contractors to resolve. Of course, the BCDA can use friendly persuasion to see to it that legitimate claims are settled. But beyond that, it may be accused of intrusion into a matter that is outside of its domain.

The BCDA head said that the local government and sub-contractors could always sue the erring Japanese contractors as a last recourse.

But he found no rhyme nor reason for doing this if only the contractors would act sensibly, instead of running away from their obligations, in the light of the fact that the BCDA had not been remiss in paying them for every segment of the project that was finished.

Later, this journalist received a letter from Abaya. Excerpts from the letter:

“We wish to inform you that the BCDA has never been remiss in paying the progress billings of the two Japanese contractors... As a matter of fact, as proof of our concern for local sub-contractors, we have always required the two Japanese contractors to attach a certification in every progress billing that they had earlier paid the claims of such sub-contractors.

“Without such certification, the Japanese contractors would not be paid. In this regard, we take exception to your use of “inaction” and “apathy” and attributing these to us, because the contrary is true. We have always acted with concern to make sure that the main contractors’ obligations are met.

“As far as legally possible, asking the Japanese contractors to certify that they indeed paid their sub-contractors is the farthest we can go. We cannot interfere in a contractor-subcontractor conflict or misunderstanding.

“If there is a question on the legitimacy of their claims, then the sub-contractors should go to the courts. Be that as it may, BCDA is urging the Japanese contractors to review their payables and see if they still have outstanding obligations vis-à-vis their sub-contractors, supplies and the government units. BCDA, which is not even privy to these contractor-sub-contractor contracts, cannot act as a collecting agent.

“As an added assurance, 10 percent of the Japanese contractors’ total billings is retained for one year from project completion. Unpaid obligations and corrective works can be charged to this amount.”