Taxpayers to pay for NAIA-3 flaws

It’s no surprise that NAIA Terminal-3 is beginning to fall apart before its completion and opening. The collapse of the entrance ceiling and faulty drainage only confirm what investigators discovered about Piatco, German partner Fraport, and Japanese general contractor Takenaka in construction. That is, that the trio scrimped on quality but lavished on extortions from subcontractors and suppliers.

What’s surprising is that government expropriated the facility that stands on public land and after Supreme Court repeal of Piatco’s irregular build-operate franchise. Expropriation comes with the duty of determining just compensation for the property owner. Piatco does not own the land; its contract was declared void ab initio. It owns nothing. And yet government is negotiating with it a "proper payment". This early we can smell who the loser will be: the taxpayers, as always.

From the start Piatco’s acts were, uhm, odd. It landed the Terminal-3 deal in 1996 but sat on it two long years before starting civil works. Only in 1998, after wangling new terms under a revised contract and two supplemental agreements from a kinder administration, did Piatco buckle down to build.

And when it did, odder acts came. Piatco signed with Takenaka what could have been a standard contract for international constructors. But they inserted a Section 4.5 and a Schedule 7 (see Gotcha, 10 Apr. 2006). The riders gave Piatco and Fraport, through an Employer’s Committee, sole right to okay Takenaka’s subcontractors and suppliers. The Committee had a list of favored agents to whom Takenaka must subcontract or buy supplies. Thus did Fraport affiliates and Pantaleon Alvarez bag multimillion-peso deals for info-tech, security and earth moving. Alvarez in 1995 had sat in the technical and bids committees that studied and awarded Piatco’s franchise. In 1998 he was vice head of a House body that whitewashed a probe on Terminal-3. In 2001 as transportation secretary, he signed a third supplemental agreement and designated a Piatco-Fraport front as new terminal franchisee. Coincidentally Piatco bagman Alfonso Liongson was paid $600,000 and $200,000 for the two approvals in two weeks.

The Cheng family that owns Piatco also steered contracts to itself. Schedule 7 listed Cargo Data Exchange Center as preferred supplier, next to Fraport’s LH Systems, of info-tech. CDEC’s information sheet filed with the SEC states its CEO as Jason Cheng, Piatco director and son of Piatco boss Vic Cheng Yong. CDEC shares offices with Piatco. Four Piatco officers and directors, including Papa Vic, are in CDEC’s board.

Schedule 7 also listed Danish firm Crisplant as preferred supplier of baggage-handling systems. Tests on the BHS bared serious flaws, like bags shooting into wrong chutes and jumbled baggage source coding. Worse, Crisplant installed below-par equipment. Piatco’s bid documents promised a BHS of 8,000 bags per hour; Crisplant’s was only 7,000. Passengers would be inconvenienced in a supposedly state-of-art airport. Piatco and Fraport couldn’t care less.

Piatco-Fraport also let Crisplant order two bomb-detectors from GE InVision (formerly InVision Technologies). Tests by the International Air Transport Association saw the machines breaking down 15-20 times a day – truly a terrorist’s or smuggler’s delight.

InVision was charged with flouting the US Foreign Corrupt Practices Act in connection with Terminal-3. The US-SEC issued a cease-and-desist order on findings that InVision paid a Philippine agent $108,000 as sales commission. The agency further sued that InVision knew all along that part of the cash would bribe Philippine officials. It fined the firm $617,704.

Italcontract Inc. must have been on the preferred list too since, on 14 Dec. 2000, it gifted Piatco alternate bagman Emmanuel Cuevas "marketing fee of 12 percent from any sales derived from NAIA-III project." The fee was for "the sale of China granite stones"; Italcontract bagged a $1.5-million supply of Chinese granite floor tiles to Takenaka. Cuevas’ "marketing fee" would have hit a cool $180,000 or, at the exchange rate then of P48:$1, about P8.64 million. Did Cuevas pay the BIR correct taxes in 2000 and 2001? Or did he, as insiders aver, split the loot three ways with Jeffrey Cheng and "a certain government official"? In which case, did the latter two pay taxes as well?

The oddities didn’t end with Sec. 4.5 and Schedule 7. Piatco also got Takenaka to alter the approved airport design to include a huge mall in lieu of quiet duty-free shops. US Federal Aviation Administration men couldn’t believe what they saw: an unsecured hall, open to the public, for all sorts of canteens and stores. But Piatco had a grand plan. It charged stall applicants P5 million each just for the right to be considered.

Given the shoddy work that Piatco put into Terminal-3, no wonder it’s crumbling despite non-use. A bigger wonder is that a cabal of officials, hearing of the great wealth behind the great crime, is offering "recompense" to a firm whose contract is void from the start and does not own the prime land on which it built a monstrosity. The cabal even has an odd term for it: "replacement cost". Worse, it ignores not only what already has been stolen in construction kickbacks, but also punishment for the thieves. They bribed, they continue to bribe. And so, taxpayers will just have to grin and bear the cost – as usual.

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