FRAPORT HAD APOLOGIZED TO ARROYO'S PERSONAL LAWYER

MANILA, OCTOBER 17, 2003  (STAR) By Aurea Calica  - German airport operator Fraport AG had apologized to the personal lawyer of President Arroyo and her husband, First Gentleman Jose Miguel Arroyo, regarding allegations that the lawyer extorted money from the firm in connection with the Ninoy Aquino International Airport-Terminal 3 (NAIA-3) dispute.

But the apology was given to Arthur Villaraza, lawyer of the Arroyos, long before Fraport filed a complaint before the World Bank alleging that he demanded "several tens of millions of US dollars" in exchange for getting a favorable government opinion on the NAIA-3 contract.

A statement signed by lawyer Raoul Angangco, Villaraza’s partner in the law firm, said Fraport’s director and chief executive officer Dr. Wilhelm Bender apologized in writing to Villaraza on May 17, 2002 for the "misunderstandings concerning recent discussions in Manila."

Bender noted that "neither Fraport nor its representatives did intend to discredit your law firm or you personally in any way."

"Since this has caused you unintended concern and grievance, we sincerely apologize," Bender said in his letter.

The law firm said the letter of apology belies any claims that Villaraza tried to extort from Fraport "tens of millions of dollars" to work on the ouster of the Cheng family, one of the major partners of the German firm in the consortium Philippine International Air Terminals Co. Inc. (Piatco) which constructed the NAIA-3.

They said it was Dr. Dietrich Stiller, Fraport’s legal counsel, who wanted a meeting with them sometime in February 2002.

The law firm said Fraport really wanted the Chengs out of the NAIA-3 consortium project, not the government.

"It is the (law) firm’s policy not to accept any engagement which may eventually lead the firm to taking a position adverse to (the) government. There was also no discussion whatsoever in regard to fees, much less the manner in which it was to be paid," Villaraza and Angangco Law Offices said.

The law firm further said Villaraza denied allegations that he was "raising (campaign) money for the President." It added the firm is engaged in the practice of law for its varied clients.

Fraport, which largely funded the NAIA-3 project, sought before the World Bank International Center for Settlement of Investment Disputes (WB-ICSID) on Sept. 17 arbitration of its conflict with the Philippine government over the contract.

In support of its request, Fraport complained Villaraza allegedly demanded "millions of US dollars" in exchange for getting favorable government action on the Terminal 3 dispute.

Villaraza’s law office earlier denied the allegations, claiming it was the German firm who offered the amount which they simply rejected.

Former internal revenue commissioner Liwayway Vinzons-Chato, counsel for the Chengs, claimed Fraport was trying to force her client out of majority control in the consortium.

Chato said that Fraport officials and their legal counsel Dr. Stiller made an offer to buy her clients’ shares in the project on March 19 this year but this was denied.

The Chengs own People’s Air Cargo and Warehousing Co. Inc., which directly owns shares of stock in Piatco.

When it failed to buy out the Chengs’ shares, Fraport filed a request for arbitration before the WB-ICSID, Chato said.

Aboveboard

The President insisted yesterday the actions taken by the government after she voided the contract with Piatco have been "aboveboard."

Mrs. Arroyo stressed the government followed "international accepted norms of due process and fair play" contrary to complaints made by Fraport.

"The actuations of the Philippine government in this case have been consistently transparent and aboveboard," Mrs. Arroyo said.

"If the Philippine Senate wants to undertake its own investigation of alleged extortion charges, well and good. We have nothing to hide and there will be no coddling of anyone," she said.

The President denied anew allegations of extortion attempts supposedly made by her two close Palace aides to shake down Fraport.

Mrs. Arroyo said she is willing to place herself under investigation by the Senate or any probe body to clear her name and her two Palace aides — presidential consultant Gloria Tan-Climaco and chief presidential legal counsel Avelino Cruz, a former partner of the Villaraza law office — of allegations of extortion.

In a statement, Cruz yesterday denied the allegations and said the nullification of Piatco contract was not the result of government’s alleged unlawful demands.

"The government never made any unlawful demands," Cruz said.

"The petition for the nullity of the Piatco contracts was filed with the Supreme Court by private individuals and members of Congress," he said.

Cruz said the Department of Justice (DOJ) and the Office of the Solicitor General rendered their respective opinions that the contracts were null and void, "for which reason they cannot be legally implemented."

Being the chief presidential legal counsel, Cruz said he merely concurred with the findings.

"These served as basis for the government’s position on the issue of the validity of the Piatco contracts," he added.

Mrs. Arroyo cited her decision to void the contract because of its onerous provisions on Nov. 29, 2002 which was later upheld by the Supreme Court.

"The Supreme Court rendered a decision untrammeled by executive interference," Mrs. Arroyo said.

Climaco had claimed Fraport representatives offered her two board seats if she succeeded in easing out the Chengs from the consortium.

Sen. Panfilo Lacson said the complaint of extortion filed by Fraport against the Philippine government before the WB-ICSID is an indication of high-level corruption in the Arroyo administration.

Lacson claimed yesterday the exchange of letters between Climaco and a Fraport representative indicated that the Palace aide overpriced the German firm’s settlement offer by $100 million.

Lacson also denied allegations by Climaco that the Chengs were able to convince him to include in his Oct. 13 privilege speech the disclosure of the complaint filed by Fraport before the WB-ICSID on Sept. 17.

"I have not talked to any of the Chengs about my privilege speech and I would like to inform Mrs. Climaco that my Malacañang sources, who could no longer stomach the top level corruption in government, provided me, with the documents pertaining to Fraport’s law suit against the Arroyo administration," Lacson said.

The opposition lawmaker said the exchange of letters between Climaco and Fraport representatives could serve as the "smoking gun" on the extortion raps by the German firm before WB-ICSID.

He said in a letter dated Aug. 6, 2002 sent to Climaco by Peter Henkel, head of a Fraport team in charge of the firm’s investments, and Jorg Seyffart indicated the German firm was only asking for $300 million as reimbursement for its investments in the NAIA-3 project.

But instead of acknowledging the proposal made by Fraport, Climaco in a reply letter dated Aug. 10, 2002 offered a $400 million compensation, Lacson claimed.

"The (Philippine) government, though its designee, shall pay US$400 million as full settlement of all obligation to Piatco i.e., reimbursement of equity and advances of shareholders, payment for Terminal 3 (construction, equipment, project completion)," Lacson quoted Climaco in her letter purportedly sent to the Fraport representative.

Presidential chief of staff Rigoberto Tiglao and Tourism Secretary Richard Gordon accused Fraport of engaging in "political blackmail" when it filed a complaint before WB-ICSID.

Palace sources said a possible "diplomatic protest" is being considered by the Philippines against Fraport in linking Mrs. Arroyo to the extortion claims.

Easy Way Out?

Despite the arbitration bid initiated by Fraport before WB-ICSID, Malacañang is open to continue out-of court negotiations with Piatco consortium, Trade and Industry Secretary Manuel Roxas II said.

Roxas said this was precisely the reason why Mrs. Arroyo appointed him to head a three-man committee to ensure the opening of NAIA-3 even if the issue remains pending.

Roxas said their committee has been negotiating with businessman Jose Alvarez, one of the Piatco partners who was designated "representative" to discuss the proposed terms of settlement in the case.

Roxas also reiterated the willingness of the government to shoulder the estimated $90 million needed to complete the unfinished portions to make NAIA-3 fully operational.

He said there is also a proposal by which the government and Piatco would select and hire up to three international engineering firms "to appraise" the construction costs.

Finance Secretary Isidro Camacho said the filing of a complaint by Fraport before an international body might have a negative impact on investors.

Despite the case, Camacho said the process to determine just compensation for Fraport should continue since the Philippine government has already made this commitment early on.

Camacho downplayed the threats made by Fraport that the government could lose its overseas assets, saying that the statement was meant to intimidate the Philippine government and should be ignored.

Camacho, however, said the threat was "merely meant to intimidate," adding that even the impact of the arbitration case on investor confidence was minimal since the controversy has been raging for some time.

He said he met some businessmen in Germany earlier this year and made a commitment to ensure that Fraport would be properly compensated for its participation in the NAIA-3 project.

"What the commitment recognizes is the fact that there is indeed an asset, which is NAIA 3, and the government wants to utilize it," Camacho pointed out. "The government has always been ready to compensate Fraport for its participation in this project."

Fraport’s case is the second of two cases filed against the Philippine government before the WB-ICSID and credit rating agencies have raised the alarm that the Philippines was losing its credibility because of its handling of build-operate-transfer (BOT) projects.

Earlier, the Swiss company Societe Generale Surveillance (SGS) filed a case before the arbitration court claiming the Philippine government refused to pay a total of P6 billion for services rendered.

Credit rating agencies already warned that the controversies surrounding big-ticket BOT projects have diminished the credibility of the government’s sincerity to get private sector participation in infrastructure development.

Aside from the NAIA project, two other major undertakings were locked in controversies, namely – the Maynilad Water Project and the Metro Rail Transit Project. - with Marichu Villanueva, Des Ferriols