Whom to prosecute for Piatco contracts

Comes now the day of reckoning. With the Supreme Court voiding the Piatco contract, along with a revised version and three supplements, the Ombudsman will now investigate those responsible for the mess. The paper trail reveals whom to grill.

Building a modern international airport costs hundreds of millions of dollars. The Court said the Cheng family’s PairCargo shouldn’t have won the NAIA-3 deal in 1997 to begin with because it was short of capital. This violated the Public Bidding Act and the Build-Operate-Transfer Law. A year before, original proponent Asian Emerging Dragons Corp. pointed to a breach as well of the General Banking Act, because the Chengs’ partner Security Bank was pitching in its entire assets for the project.

A technical committee of the Manila International Airport Authority was supposed to scrutinize the papers of PairCargo and partners. Its head was Pantaleon Alvarez, later to become congressman and transportation secretary. A bids committee was supposed to compare PairCargo’s challenge to AEDC’s original bid. Right then, it should have noticed major deviations from AEDC’s terms of reference. The members – transportation undersecretary Primitivo Cal, MIAA general manager Francisco Atayde, Wilfredo Trinidad, Cesar Valbuena and Herminia Castillo – let it pass. After which, the Chengs organized Piatco composed of Security Bank, PairCargo and other family firms.

Listed as PairCargo directors were Cheng Yong, Jefferson G. Cheng, Henry T. Go, Lilia G. Cheng, Jean G. Cheng, Jason G. Cheng, Raoul Hille, Manfred Reimer, Stephan Bauchspiess, Eberhard Muller and Katherine Arnaldo. Security Bank’s directors were Frederick Dy, Anastacia Dy, Philip Ang, Eduardo Lim, George Ty, Paul Mac, Rodolfo del Rosario, Godofredo Galindez, James Meng, Manuel Olpa and Ralph Simporio.

Approval by the National Economic and Development Authority is needed for any B-O-T project. The NEDA never mustered the required six votes of board members for assent. Yet then-transportation chief Arturo Enrile (deceased) proceeded with the signing of the concession agreement with Piatco chairman Henry Go on July 12, 1997.

Before it even started construction, Piatco wangled contract revisions a year later from newly-elected President Joseph Estrada’s appointees. The Court frowned on the revisions which, like the deviations from the terms of reference, gave Piatco undue advantage over competitors. The planned passenger terminal fee was raised from P500 to $20, at that time roughly P1,040. Piatco would earn an additional P3-5 billion per year of operation, yet the government share remained at P180. A state guarantee of Piatco’s million-peso construction loans was also inserted, against the B-O-T Law.

New transportation chief Vicente Rivera signed the Amended and Restated Concession Agreement with Piatco chairman Go on Nov. 26, 1998. The required NEDA assent came much later in June 1999, and only on condition that the Bangko Sentral would accept the state guarantees.

With still no construction, Piatco wangled a first supplement to the ARCA in August 1999. Rivera again signed with Piatco president Cheng Yong. Supplement 1 obligated the government to cede land worth P500 million for an additional taxiway, repair storm drains for P200 million, span an EDSA-Tramo overpass at a cost of P150 million, repave roads leading to NAIA-3 for P345 million, and build an elevated expressway to the airport for P9 billion.

Supplement 1 also replaced Piatco’s original job to build an access tunnel from NAIA-2 to -3 with a surface road. What should have cost it P800 million became only P100 million. To do that, however, government was obligated to cede 8.6 hectares of Nayong Pilipino worth P500 million. Government also spent P1 million to tear down the park. All these were implemented without NEDA approval.

As ground works finally began, Cheng Yong signed a Supplement 2 with new MIAA general manager Antonio Gana on Sept. 4, 2000. The deal allowed Piatco to deduct P121 million in subterranean work from its future payment of concession fees to the government. It also set Supplement 1 into motion, yet again did not have NEDA approval.

A Supplement 3 was signed by Cheng Yong with transportation undersecretary Wilfredo Trinidad (of the 1997 bids committee) and new MIAA general manager Ed Manda on June 22, 2001. The deal expounded on the surface road between NAIA-2 and -3.

There were side agreements for prosecutors to look into. The P10-million monthly media consultancy fee of Cheng kin Alfonso Liongson was not for advertising. It pegged cash releases to the issuance of certain government licenses and permits. In short, bribes. Many more contracts were for commissions for supply deals and lease rights to duty-free shops, collected by Cheng crony Manuel Cuevas, a congresswoman’s son-in-law.

Hefty commissions demanded by Cuevas, allegedly on behalf of the Chengs, led to overpriced but faulty construction. MIAA’s quality inspector Japan Airport Consultants noted numerous defects before construction halted in December. Among these were in the moving walkway, cooling tower, air and water balancing, plumbing fixtures and fire extinguishers. Air-conditioners and fire sprinklers were fewer, and the picture window glass and floor tiles were thinner, than specified. Light bulbs were too dim. The terminal was not yet in use, but the tires on passenger bridges already were worn out. The generator blew up on test-run.

Fraport AG of Germany joined Piatco just before construction began. On paper, it owns only 30 percent. In reality, it bought into the Cheng firms that make up Piatco, and thus holds 61.5 percent – a breach of the Anti-Dummy Law and Foreign Investments Act. Piatco’s corporate lawyers drafted the buy-in papers. Those same lawyers, as officers of the Makati Business Club, now cry that the Supreme Court decision will scare away foreign investors.

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