Case filed vs DOTC chief over broadband deal

By Volt Contreras
Inquirer
Last updated 03:16am (Mla time) 08/29/2007

MANILA, Philippines -- Saying the public was misled about the National Broadband Network (NBN) project, an opposition congressman Tuesday lodged a criminal complaint against Transportation Secretary Leandro Mendoza and several others who sealed the $329-million deal with a Chinese firm without public bidding.

Nueva Vizcaya Rep. Carlos Padilla (NP) accused Mendoza and two assistant secretaries of the Department of Transportation and Communications of “giving undue advantage” to ZTE Corp., China’s third largest telecommunications firm, which bagged the NBN project aimed at linking government agencies nationwide through a common electronic backbone.

Padilla said the DOTC officials “discriminated against and deliberately refused to act on the proposal” presented by Amsterdam Holdings Inc. (AHI), a company partially owned by Jose de Venecia III, a son and namesake of the House Speaker.

“The project cost of over $329 million that will be shouldered by Philippine taxpayers in the ZTE contract is iniquitous compared with the $240-million project cost proposed by AHI,” Padilla said in a complaint filed Tuesday with the Office of the Ombudsman.

Covered by the election period during which no government contract should be signed, Mendoza and Yu Yong, ZTE vice president, inked the deal on April 21 in ceremonies witnessed by President Gloria Macapagal-Arroyo.

On the same day, Trade Secretary Peter Favila signed with Chinese authorities a $460-million deal to build a satellite-based backbone for the Cyber Education Project (CEP) on behalf of the Department of Education.

Both agreements were sealed in Boao, China.

Senate probe

For his part, Sen. Edgardo Angara said the Senate would investigate the “indecent haste” in allocating P26.4 billion for the CEP.

“Before embarking on a P26.4 billion worth of project, I think we should first ask why no First World country has adopted this. No studies have been made regarding the effectiveness of TV-based instruction in basic education,” Angara said in a statement.
Aside from citing Mendoza, Padilla’s complaint named Assistant Secretaries Lorenzo Formoso and Elmer Soneja as respondents.

Soneja was included in the criminal complaint in his capacity as chair of the DOTC bids and awards committee for information and communications technology (BAC-ICT).

The respondents included four top ZTE executives led by its chair, Hou Weigui, vice president Yu, Manila office chief representative George Zhu Ying, and executive director Fan Yan.

Padilla also alerted anti-graft investigators about several “John Does” or “public officers and private individuals who conspired with the respondents to defraud the government by entering into an illegal contract with ZTE Corp.”

All aspects suspicious

The lawmaker asked the Ombudsman to prosecute Mendoza and the others for violation of the anti-graft law and the Government Procurement Reform Act.

“The officials I have charged are liable for misleading the public and executing this anomalous contract and should be punished accordingly,” Padilla said in a statement.

“There was no bidding done for this project, and under the law all telecommunications projects of the national government have to be bid out.”

“All aspects of this contract are suspicious because they actually tried to hide it from the public. Even the Department of Justice ended up looking silly when it came out with an opinion that the contract was legal even though it had not even received a copy from the DOTC,” Padilla said.

The DOTC would rather have the country incurring a $329-million loan from China for the NBN, “even though Malacañang and DOTC records would show that there were several private companies volunteering to undertake the project at no cost to our government,” he said.

Timeline

The congressman gave the following narration in support of the charges:

• In September 2006, ZTE submitted an “unsolicited proposal” to the Commission on Information and Communications Technology (CICT). The proposal called for a government-to-government loan to fund the construction of the NBN.

When completed, the project is to be turned over to the DOTC for its operation and maintenance, according to the ZTE proposal.

• Around the same period, AHI “also expressed intention to undertake the development of the NBN without any fund appropriation and guarantee from the national government.” It proposed a system it then dubbed as the “Orion Network.”

• On Oct. 17, 2006, then Secretary Romulo Neri of the National Economic and Development Authority (NEDA) wrote AHI a letter conveying his support for the Orion Network. Padilla attached a copy of Neri’s letter to the complaint.

• About a month later, a meeting between President Macapagal-Arroyo and the NEDA Cabinet cluster “discussed the necessity for a privately funded government broadband network.”

The officials in that meeting also “expressed their unanimous view that the government connectivity and (info-tech) infrastructure should be developed at no cost, and with savings, to the national government.”