Chinese Corruption found New Partner and Infiltrated Philippine High
Society-- Philippine officials implicated in telecom kickbacks

International Herald Tribune

Philippine officials implicated in telecom kickbacks

By Carlos H. Conde
Tuesday, September 18, 2007

MANILA: The husband of President Gloria Macapagal-Arroyo and the head of
the Philippine elections commission were accused Tuesday of interceding
on behalf of a Chinese telecommunications company that subsequently
signed a $329 million contract with the government.

In his testimony at a senate hearing Tuesday, Jose de Venecia 3rd,
chairman of a Filipino company that lost in the bidding, said the
election commissioner, Benjamin Abalos, had intervened on behalf of the
Chinese company to receive kickbacks.

Venecia also testified that Arroyo's husband, Jose Miguel Arroyo,
angrily shoved a finger in Venecia's face during a meeting in March and
told him to "back off" in his efforts to win the bid.

Venecia explained to senators that he took Arroyo's gesture to mean that
Amsterdam Holdings, Venecia's company, should not participate in the
bidding for the National Broadband Network project, which would link the
Philippine bureaucracy's telecommunications and Internet networks. He
did not say that he believed Arroyo took kickbacks.

The government later announced the contract had been awarded to ZTE
Corp., which says on its Web site that it is the largest listed Chinese
telecommunications manufacturer and wireless solutions provider. ZTE's
phone lines were busy and the company did not reply to e-mailed requests
for comment.

Venecia said Abalos, the chairman of the Commission on Elections,
offered him a bribe of $10 million just to withdraw from the bidding. He
told the senators that he had refused the bribe and that when he made
public this month Abalos's alleged offer, Abalos threatened to have him
killed.

"It was Chairman Abalos who was pushing for the ZTE proposal," de
Venecia said under oath. "It was also Chairman Abalos who stood to
receive for himself any kickbacks from the colossal overpricing" of the
project, he added.

This scandal is just the latest in a string of corruption allegations
against the Arroyo administration. And it came at a time when the
government, encouraged by the economy's strong showing in the first half
of the year, has been trying to woo foreign investors and giving
assurances that corruption in the Philippines, among the worst in
Southeast Asia according to rankings by Transparency International, is
being addressed.

It has also provided President Arroyo's opponents more ammunition in a
drawn-out political tussle that began with allegations that she cheated
in the 2004 elections and that her husband wields more power than is
generally accorded to a presidential spouse.

The issue has also pitted the administration against the
opposition-controlled senate, which had invited government officials to
the hearing but refused to appear.

Arroyo said she had instructed the transportation and communication
secretary, Leandro Mendoza, to explain the contract not to the senate
but to the Supreme Court, which recently issued a temporary restraining
order on the project after a petition by Amsterdam Holdings.

At the Supreme Court, President Arroyo said in a statement Tuesday,
"there are no politics and the court's processes are based on evidence.
We can determine there if the contract is legal and if it is in the
interest of the public." Last week, she said her government would honor
its contracts.

Arroyo's husband was reported to have left the country Monday, fueling
speculation that he wanted to avoid being subpoenaed by the senate. His
lawyer, Jesus Santos, dismissed Venecia's allegations as black
propaganda. "He's in it for the media mileage," Santos said.

The president's husband has already faced accusations of corruption,
among them that he received money from illegal gambling. He is widely
regarded here as a power broker benefiting from his wife's political
influence, although he denies this. He has sued several journalists who
dared to write about these allegations.

Abalos denied that he had attempted to bribe Venecia. "Do I have that
kind of influence?" he said Tuesday. He called the charges "ridiculous."

Abalos said in late August that he had met with ZTE officials in China
and dined and played golf with them. On Monday, his lawyer said Abalos
had merely introduced ZTE officials to Mendoza and other administration
officials and that there was nothing improper about this.

ZTE, for its part, came out with a series of newspaper advertisements
this month denying any wrongdoing.

In his testimony Tuesday, Venecia said his company had offered to build
the project through a scheme that would be of no cost to government. The
contract with ZTE, however, required a loan from the China Exim Bank. He
also said the ZTE contract was overpriced by as much as 100 percent to
account for the cost of kickbacks.

He said that Abalos offered the bribe in a meeting at the elections
commission office in December. The alleged meeting with Jose Miguel
Arroyo was meant, according to Venecia, to reconcile Venecia and Abalos.

As a result of Venecia's testimony, there are now demands for the
scrapping of the project. "This is corruption on a grand scale taking
place at the highest levels of government," said Renato Reyes, secretary
general of the leftist group Bayan. "With these revelations, pushing
through with the contract would be politically costly for the Arroyo
regime," he said.

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