Climaco, Cheng deny Piatco buyout

Senior presidential consultant for strategic projects Gloria Tan-Climaco and the Cheng family have denied the reported buyout of the latter’s shares in the Philippine International Airport Terminal Co. (Piatco), the consortium that built and was supposed to operate the Ninoy Aquino International Airport Terminal 3 (NAIA-3).

Earlier reports said Climaco was leading talks among local investors who are being persuaded to form a group that would consider the possibility of buying out Cheng’s 60 percent interest in Piatco.

The Cheng group, on the other hand, was reported to be actively looking for investors willing to buy them out of Piatco.

Fraport AG, the German airport operator, owns the remaining 40 percent of Piatco, which won the right to develop and operate the NAIA-3 terminal under a build-operate-transfer scheme but the facility has never been opened following the controversy over the project’s BOT contract.

"The value of Piatco shares was in its franchise and its contracts. If the Supreme Court holds that Piatco’s contracts are void, Piatco will not have a franchise to operate an airport. The value of its shares would be comparatively nil, and any buyer would lose his/her shirt on this. Any financial advisor worth his/her salt would advise his/her client to await the decision of the Supreme Court on the validity of its franchise," Climaco said in a statement.

She added that "on the assumption that Piatco’s contracts are valid, Piatco is bound to still lose the franchise due to its default in failing to deliver a complete and operational airport last Dec. 16, 2002."

Climaco also cited previous statements of Transportation and Communications Secretary Leandro Mendoza and Manila International Airport Authority (MIAA) general manager Edgar Manda which confirm that Piatco, to date, has 42 major outstanding deliverables — which include corrective construction on the facility, non-complying equipment, and hundreds of unapproved deviations from its tender design.

These statements were based on reports made by the quality assurance inspector, Japan Airport Consultants, Inc., which was engaged by both Piatco and the DOTC-MIAA to ensure the consortium’s compliance with the standards for the construction of the project, she said.

"Either way, Piatco shares would no be an advisable purchase by any third party. Any person would see through this smear campaign to discredit me by accusing me of unethical conduct in brokering a sale of valueless shares, and paying huge amounts for front-page cover for this well-crafted but blatantly false story," Climaco said.

She added that she has always stood firm on her belief that the Supreme Court decision on the validity of Piatco’s contracts should be awaited before the government can take any action on this matter.

"It is not our business to bail out every investor who, by his shenanigans, gets himself into a losing proposition. Our business is to protect the interests of the Filipino people," Climaco said.

The Cheng group’s legal counsel and spokesperson, Liwayway Vinzons-Chato, said in a statement that the "Chengs are not selling their Piatco shares, for $250 million or for any other price. Anyone who claims that the Chengs have offered to sell their interest to Enrique Razon or to anyone else is simply making up stories."

Chato was alluding to allegations made by Perfecto Yasay Jr., the spokesman of Piatco’s "main detractor," the MIAA-NAIA Association of Service Operators (MASO).

She confirmed, however, that the Chengs received numerous offers from different sources to buy them out of Piatco. Chato claimed that the interest in convincing the Chengs to sell their Piatco shares was apparently fueled by a steep commission offered to anyone who could convince the Chengs to walk away from the NAIA-3 project.

"There is an active conspiracy to dispossess the Chengs of their participation in NAIA-3. This first manifested itself when Climaco announced in the Senate that the government was taking over NAIA-3. When that plan was aborted, Climaco and her cohorts from the Office of the Solicitor General and the Department of Justice convinced the President to nullify the Piatco contracts out of the blue," Chato said.

"Now they are actively sowing fear in the minds of Piatco’s stockholders by representing that they have the means to secure a Supreme Court declaration of the contract’s nullity in the hope that they could coerce the Chengs to sell out."

Climaco, according to Chato, a former Bureau of Internal Revenue commissioner, was formerly the presidential adviser for strategic projects in charge of the NAIA-3 project, but has since resigned to become an unofficial consultant to the President and a private investment packager.

Talks last week between Fraport executive chairman Wilhelm Bender and the Cheng family found that "the group of Climaco threatened Fraport that, with the impending Supreme Court decision nullifying the Piatco contracts, the only way Fraport could ever recover its Philippine investment is for Fraport to convince the Chengs to abandon NAIA-3," Chato said.

She added that before Bender flew off to Frankfurt last Thursday, the Cheng’s family patriarch, Cheng Yong, informed him that he was not selling at any price and would continue to defend Piatco’s rights even under pressure from certain sectors of government.

A few days later, Fraport announced the complete write-off of its investment in NAIA-3.

"We have always known that Piatco’s political and legal troubles were all just fabricated by greedy political conspirators who could not accept that the NAIA-3 project slipped through their influential fingers in 1996. This harassment proves that once again," Chato said.

Sources, according to Chato’s statement, confirmed that Climaco and lawyers from the politically connected law firm Villaraza and Angangco were busy preparing documentation during the past five weeks preparatory to Bender’s trip to the Philippines.

"They drew up a strategy to oust the Chengs using Fraport’s money by alarming Fraport with an allegedly impending decision of the Supreme Court against Piatco," the source said.

The same source explained that Fraport was supposed to buy out all other Piatco stockholders, then sell NAIA-3 to the government, which would pay Fraport the value of the terminal through the conversion of Fraport’s investment into a loan receivable from the government.

The government would then award the operation of NAIA-3 to favored businessmen, "the ones Climaco has always been pushing for."

"Obviously the potential for side deals and kickbacks every step of the way is significant," the source said.

The source added that "with the Chengs refusing to be bullied, you can expect" Piatco’s case against the government before the International Court of Arbitration to proceed and Fraport to file its own case against the government before the World Bank arbitration.

"You could just imagine the embarrassment and scandal to President Arroyo’s administration once evidence on the underhanded tactics of her officials is presented before the international community," the source said.

According to another source, it was the Climaco group that had been deliberately derailing the project from the start, specifically to drive down the price of its shares.

"It’s enough that they caused enough controversy between the partners for the price of the shares to come down. This way, it will become cheaper for any prospective investor," the source said.

The source added that "in any case, even if the contract is voided, there is still something that prospective investors can buy."

Compensation

Meanwhile, Fraport still has a chance to be compensated even if the Supreme Court (SC) nullifies Piatco’s BOT contract.

The SC has yet to decide on the Piatco case but sources said Fraport’s participation in the project would not be a complete loss, although the German company would have to absorb huge losses regardless of which decision is handed down.

According to a well-placed source, the existing rules on the pretermination of BOT contracts require the government to compensate the proponents for the investments they have already put in, provided that they could prove that they were not party to onerous aspects of the contract.

"If the SC declares the contract as null and void, the government would have to preterminate it since it is the party that is supposed to be at a disadvantage," the source said. "Even if it happens that way, however, government is still required to compensate the investors if they meet the conditions."

The source said that since Fraport came in after the controversial Piatco contract was amended, it could come out with "clean hands" and recover part of the investments it has already put in the airport terminal.

The source, however, added that it would no longer be possible for the members of the Piatco consortium to work together since Fraport was no longer willing to work with the group led by businessman Jeffrey Cheng.

"In fact, if the SC decides that the contract is valid, then Fraport will have a bigger problem since it doesn’t want the Cheng group in the consortium anymore," the source pointed out.

On the other hand, the Supreme Court has directed the government and other affected parties to comment on Piatco’s motion stating its decision to submit a request for arbitration with the secretariat of the International Chamber of Commerce’s International Court of Arbitration (ICA) on the NAIA-3 controversy.

The SC, in an en banc resolution dated March 18, gave the respondents 10 days to file their comments.

The affected parties include the DOTC and the MIAA through the Office of the Solicitor General, MASO, the MIAA Workers’ Union, the more than 20 labor unions representing 12,000 workers in NAIA-1 and NAIA-2, and Reps. Salacnib Baterina of Ilocos Sur, Clavel Martinez of Cebu and Constantino Jaraula of Cagayan de Oro.

They all asked the High Court earlier to nullify the Piatco deal for being unconstitutional and disadvantageous to the government and the airport workers.

On Dec. 10 last year, the Supreme Court recommended "mediation or arbitration" in settling the legal issues surrounding the five contracts to build NAIA-3 and gave the parties 30 days to possibly thresh out their differences.

But Acting Government Corporate Counsel Manuel Teehankee earlier said the government will oppose Piatco’s bid to subject the dispute to arbitration since the case is pending with the Supreme Court and such a move would be sub judice.

Teehankee said the government’s position is that the whole contract is illegal and must be canceled, including provisions of the contract calling for arbitration in case of dispute.

He added that no talks took place between the government and Piatco during the 30-day period given by the SC, which had already lapsed.

Teehankee said the High Court did not provide blanket authority for arbitration.

Last March 4, Piatco lawyers formally submitted a request for arbitration before the ICA, asking it to immediately resolve the NAIA-3 dispute.

Reports said the ICA asked the Philippine government to respond within 30 days from March 6, when the court acknowledged Piatco’s request, warning that ICA "has the power to set the procedure in motion even in the absence of the answer."

In a related development, Reps. Prospero Pichay and Jacinto Paras, as well as the Save NAIA-3 Coalition (SNC), criticized Climaco for "double-dealing" and being an "opportunist."

Pichay said in a statement that "if these reports are true, then Climaco should be unmasked as an opportunist who used her presidential connections so she could benefit from a new arrangement that she had personally engineered in the first place."

He asked how Climaco could offer to buy something that is not for sale. "Is she depending on using influence to force Piatco to sell? This is highly irregular."

Pichay noted that if Climaco is pressing the government to buy out Piatco, "she again would be disappointed because the government has no money."

SNC spokesperson Segismundo Diaz, for his part, said that Climaco’s "slip is really showing. She was really after the Chengs because she was interested in the project herself."

He said Climaco is a "sneaky operator, amoral to the conflict of interests her balancing act entailed" but could be fronting for somebody else – "perhaps a high-profit oppositor, a losing bidder or a highly placed government official."

Paras, chairman of the House committee on transportation and communications, said he may yet call for a hearing into Climaco’s business activities since it may aid lawmakers in enacting laws that could strengthen the current anti-graft law.

"There is a prohibition in the law against persons using knowledge gained from their government service for their personal and commercial benefits," he said.

Accusing Climaco of "gross opportunism," Paras said "she was not efficient enough in speeding up strategic projects as she was tasked to do. But her business acumen is incomparable as she now assembles a NAIA-3 raiding party." — Des Ferriols, Aurea Calica