Arroyo slips another scandal noose
By Joel D Adriano
MANILA - Like the famous escape artist Harry Houdini, Philippine President
Gloria Macapagal-Arroyo makes one great escape act after another.
In the latest, the Ombudsman's Office cleared Arroyo and her husband Jose
Miguel Arroyo on August 27 of any involvement in a scandal surrounding the
US$329 million National Broadband Network (NBN) deal with China's ZTE Corp. The
project would have electronically wired the country's bureaucracy, but it was
plagued with accusations of overpricing and kickbacks and has since been
scrapped.
In her eight years in office, Arroyo has survived over a dozen major scandals,
including the alleged money laundering of at least 321
million pesos ($6.6 million) by her husband under the fabricated name of Jose
Pidal, a Department of Agriculture fertilizer fund scam worth 728 million pesos
which was allegedly used to buy votes during the 2004 national elections, and
the still lingering accusations of vote-rigging in the same polls in Arroyo's
favor.
Throughout the scandals, and despite consistent negative public opinion poll
ratings, Arroyo has maintained a tight grip on power. Political analysts
attribute her survival to deft maneuverings, including her appointments of
retired military personnel to key government posts and the use of government
budgets to secure political support in congress. That support has helped her
overcome three different impeachment complaints in the Lower House of
Representatives, where her administration enjoys a strong majority.
There are also mounting concerns among the political opposition that
independent checking and balancing institutions have bowed to political
pressures. In the NBN-ZTE controversy, the Ombudsman cleared Arroyo of charges,
first raised in a senate investigation, that she violated anti-graft laws due
to irregularities and attempted bribery in the government-tendered deal.
The Ombudsman also reasoned that even if Arroyo were guilty of obstructing the
filing of criminal charges against those involved, she could not currently be
prosecuted because of immunity laws that protect her from lawsuits while in
office. As for her husband, the Ombudsman cited a lack of evidence that he
attempted to guide the contract to a preferred bidder. The Ombudsman ruled that
it "has not been presented with convincing and solid evidence directly or
indirectly linking Mike Arroyo to the project".
ZTE officials involved in the aborted project were also absolved of any
wrongdoing. On February 2008, the company issued a statement saying that “it
has neither done anything wrong nor has it bribed anyone" to secure the
project.
Legal experts interviewed by Asia Times Online, however, believe that the
Ombudsman may have erred in the ruling. They said that executive immunity laws
don't allow the president to rule with impunity, particularly when the acts are
allegedly criminal in nature.
Others have raised questions about the ombudsman's independence: the current
Ombudsman's Office is headed by Merceditas Gutierrez, a law school classmate of
Mike Arroyo and former chief legal counsel to the president. Since the news of
the resolution broke on August 27, Gutierrez has been sick and out of public
view. Other ombudsman officials have been scarce, with only Jose de Jesus
taking media inquiries.
A silent scapegoat
The Ombudsman did order the filing of graft charges against two subordinate
officials, Romulo Neri, who was then the director general of the National
Economic Development Authority (NEDA), and Benjamin Abalos, then the chair of
the Commission on Elections and who remains at the center of the controversy.
Abalos stands accused of demanding $130 million worth of kickbacks in the ZTE
deal and also stood to gain from commissions from the project, said star
witness Rodolfo "Jun" Lozada Jr, then of the Philippine Forest Corp and a
consultant to Neri in the project, during a senate hearing two years ago.
Abalos resigned as poll chief in October 2007 when the scandal first broke.
During the same senate hearing, Neri said that while playing golf with Abalos
sometime in 2007, the latter offered him a 200 million pesos bribe to award the
NBN contract to ZTE. As NEDA chief, Neri was the official responsible for
recommending final approval of the deal to President Arroyo.
He told the senate in 2007 that he reported Abalos' bribery attempt to Arroyo,
who told him not to accept it. But when the senators asked Neri what the
president instructed him to do about the project, Neri invoked executive
privilege. The political opposition in the senate believes that he has gone
silent because of the president's husband's alleged involvement in brokering
the deal.
Jose "Joey" de Venecia III, a losing bidder in the project and son of the house
speaker at the time, told the same senate hearing that the Mike Arroyo urged
him to "back off" from the project during a meeting with Abalos at a golf
course. He claimed that Abalos had discussed the deal on the phone with Mike
Arroyo in his presence on several occasions.
De Venecia also quoted businessman Ricky Razon, who is close to the
administration, as saying that Mike Arroyo was set to receive a $70 million
"commission" in the project. He claimed that the project was overpriced by at
least $130 million to allow for kickbacks, including Arroyo's alleged $70
million cut.
On September 11, 2007, the Supreme Court voted eight to seven to approve a
petition for a temporary restraining order, which put a legal brake on the ZTE
Corp deal. Most of the dissenting justices, critics noted, were Arroyo
appointees. Several days later, President Arroyo scrapped the project after De
Venecia's testimony implicated her husband in bribery allegations and triggered
widespread public indignation, including in the media.
In its recommendation to President Arroyo to file graft charges, the Ombudsman
ruled that while Neri first revealed the attempted bribery and did not accept
it, he did nothing to stop the transaction. The Ombudsman also directed the
Office of the President to suspend Neri for six months without pay from his
position of president of the Social Security System, which he has led since
July last year. Pressure is now mounting on Neri to break his silence and
testify in the wake of the Ombudsman's recent ruling.
The Ombudsman's ruling, however, leaves many questions unanswered. Both Arroyos
traveled to the Shenzhen Golf Club in China to play golf and lunch with ZTE
officials on November 2, 2006. President Arroyo initially denied playing golf
with ZTE officials, only to backtrack after photos of the game were published
in a leading newspaper.
Meanwhile, Senator Richard Gordon has said her presence at the ZTE Corp's main
office represented a possible violation of ethical conduct for elected
officials. Gordon, chairman of the senate blue-ribbon committee investigating
the case, said it showed at the least a lack of judgment on the president's
part to play golf and dine with corporate representatives who were at the time
bidding to win a multi-million dollar government contract.
President Arroyo was also in China for the signing of business deals with
Chinese investors worth $1 billion, including the NBN-ZTE project, in April
2007. The various deals would have made China the biggest foreign investor in
the country that year, with various deals in mining, energy and infrastructure.
Originally conceived as a build-operate-transfer project, the NBN-ZTE deal
became a straight official development assistance loan by China, which some
Filipino legislators claim is disadvantageous to the country because the 3%
interest rate is higher than current market rates.
The Philippines desperately needs new foreign investment to boost its stalling
economy and create badly needed jobs. At the same time, in the wake of the ZTE
scandal, there is a growing perception among Filipinos that Chinese firms are
willing to bribe local officials to secure big-ticket projects.
This year, the World Bank reported bid rigging in road projects in the
Philippines involving three Filipino and four Chinese firms. All seven
companies were subsequently blacklisted by the bank from bidding on its funded
projects.
At the same time, the scandals have undermined Chinese investor confidence in
the Philippines, according to Luis Arriola, a former government official and
now charged with handling trade relations for Hong Kong in the Philippines.
Arriola said that China was now flush with cash and that the Philippines could
miss a golden opportunity because corrupt politicians were upending legitimate
business deals.
Joel D Adriano is an independent consultant and award-winning freelance
journalist. He was a sub-editor for the business section of The Manila Times
and writes for ASEAN BizTimes, Safe Democracy and People's Tonight.
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