NAIA3: PIATCo Fiasco

Malaya 01/06/2006

Corruption wraps Piatco concession
Time line shows it all

BY AMADO P. MACASAET
EVENTS and dates hardly leave any doubt that the award of the NAIA Terminal 3 to Philippine International Airport Terminals Corp. and its partner, Fraport, was attended by corruption, deceit and bribery.
The award was, as declared by the Supreme Court, illegal from the very beginning and therefore did not exist.
Yet, Piatco filed a request for arbitration with the International Chamber of Commerce in Singapore. Fraport filed a similar request with the International Center for the Settlement of Investment Disputes in Washington DC. Both of them are seeking compensation in spite of the fact that the panel of lawyers defending the Philippines has shown beyond doubt because it is undisputed that the Philippines is a victim of what could be considered criminal acts by the partners.
The time line of Piatco’s corrupted concession shows it all.
Yet, Malacañang is said to be prepared to award Piatco and/or Fraport the incredible amount of $450 million in payment for a supposedly world-class airport that is unfinished and certified as unsafe.
Records show that in June 1996, or around the time the countdown started for the last two years of the Ramos presidency, the Department of Transportation and Communications issued competitive and comparative proposals and bid documents for the construction of the proposed new terminal of the Ninoy Aquino International Airport.
In September of the same year, Pantaleon D. Alvarez, a member of the pre-qualification and bid awards committee (PBAC), set up a meeting and introduced Jeffrey Cheng to Antonio Henson, president of Asian Emerging Dragons Corp. which earlier submitted an unsolicited original proposal for NAIA 3.
On Oct. 15, 1996, the PBAC declared Paircargo as the winning bidder. Nevertheless, the PBAC invited AEDC to submit a counter bid.
On Feb. 27, 1997, the Paircargo group was formally incorporated as the Philippine International Air Terminals Corp.
In a short period from January to April 1997, Piatco negotiated the terms of the concession agreement with the PBAC.
On April 15, AEDC filed a suit with the Pasig City regional trial court demanding that the award to Piatco be nullified, claiming that the company was not properly pre-qualified.
Two events took place in 1996. On September 20, Paircargo of the family of Cheng Yong submitted the only competing bid to the PBAC.
Four days later, on September 24, the PBAC pre-qualified Paircargo. AEDC objected, saying that Paircargo did not satisfy the nationality requirements of the BOT law. Neither did Paircargo satisfy the financial requirements specified in the bid documents.
On Dec. 11, 1996, the PBAC awarded the bid to Piatco.
The Investment Coordinating Committee of the NEDA noted the concession agreement but did not approve it for lack of signatories.
Piatco hired Fraport on September 1998 as consultant. The German company insisted on a rebidding.
The DOTC, Manila International Airport Authority, and Piatco signed an "amended and restated concession agreement" (ARCA). The DOTC proceeded to submit the ARCA to the ICC for approval.
Quisumbing Torres, the firm that did due diligence, alerted Fraport "to the serious limitations and risks arising from the Terminal 3 project."
President Estrada wrote a memorandum on Feb. 11, 1999, "affirming the government’s commitment to extend full assistance to Terminal 3 in order to insure its completion and the commencement of its commercial operation by 2001."
On March 12, 1999, the Fraport supervisory board decided to invest in Piatco through equity and interest free-loan in spite of the warnings of Quisumbing Torres of the risks and serious limitations in the Terminal 3 project.
CHANGES
On the same day, Rodom Fetiza of the technical staff of the NEDA informed the ICC Technical Board of 80 substantial changes in the text of the ARCA compared to the 1997 concession agreement. The changes, according to Fetiza, affected the rights of government.
He argued with DOTC Secretary Wilfredo Trinidad that the changes were illegal because they translated into government guarantees which were not allowed under the Build-Operate-Transfer Law.
In spite of the objections, the ICC Cabinet committee conditionally approved the ARCA although the technical working group objected to the language.
Fraport put in equity in the Terminal 3 project and acquired 25 percent of Piatco. In addition, the German company acquired 40 percent of Philippine Air Ground Services (PAGS) and another 40 percent of PAGS Terminal Inc.
The two companies both controlled by the family of Cheng Yong are direct and major stockholders of Piatco.
The purchase of shares by Fraport resulted in a cascade that in turn raised the equity of Fraport, a foreign company, beyond the 40 percent constitutional limit.
On Aug. 19, 1999, the board of NEDA approved the ARCA. Slightly more than a week later, on Aug. 27, 1999, the first supplement to the ARCA was signed.
TAKENAKA HIRED
Takenaka, a 300-year-old Japanese company, got from Piatco the engineering procurement contract.
A Dr. Losch, consultant of Fraport, reported on April 1, 2000, that prospective long-term lenders were unhappy with the project "because they recognize that the Chengs lack the money, experience, competence and business reputation to make Terminal 3 successful."
Prophetic warning, as it now turns out.
Piatco established a kickback scheme identified under Schedule 7 of the engineering and procurement contract.
Also as early as April 2000, the quality assurance inspector noted that the design drawings were "extremely different from the tender design drawings."
Wintrack was hired on June 7, 2000 as subcontractor to demolish and clear subterranean structures from the construction site.
In the same month, on the 15th, construction of Terminal 3 finally began.



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