MANILA, AUGUST 5, 2013 (MANILA STANDARD) By Francisco S. Tatad - Two conflicting stories have emerged from the alleged attempt to extort $30 million from Inekon Group a.s., the Czech transport firm trying to sell tram cars to the Department of Transportation and Communication for the capacity expansion of 14-year-old Metro Rail Transit III running from Taft Avenue in Pasay City to its North EDSA terminal.

The first seeks to implicate the President’s sister Ballsy Aquino Cruz (photo at left) and her husband Eldon in the alleged attempt.

The second points to a group identified with former DOTC Secretary, now Secretary of Interior and Local Government Manuel Roxas II (photo lower right) and incumbent DOTC Secretary Joseph Emilio Aguinaldo Abaya, and led by Al S. Vitangcol III, general manager of MRT3.

Upon Vitangcol’s suggestion, Inekon hosted dinner in a private restaurant on the evening before the scheduled official meeting between the visiting Czech executives and the MRT3 officials. Aside from Vitangcol and Rychtar, this included Inekon’s chief executive officer Josef Husek and chief operating officer Milan Haloun, and Vitangcol’s three “private associates” named Manolo Maralit, Wilson de Vera and Marlo de la Cruz, the sources said.

Contrary to some reports, the alleged extortion attempt happened in July 2012 in Forbes Park, rather than earlier or later, in Prague. Sources close to Josef Rychtar, the Czech ambassador to the Philippines, said it happened during a post-dinner meeting hosted by Rychtar at his residence between two visiting Inekon executives and Vitangcol’s group.

The three would later become part of PH Trams-CB&T JV, a consortium which would replace Sumitomo Corporation of Japan as the MRT3 maintenance service provider in October that year, despite its alleged lack of any rail maintenance experience.

After dinner, Vitangcol suggested that they continue discussion in a more private place, the sources said. Rychtar suggested his residence, but for no known reason, Vitangcol failed to join the meeting, leaving his three associates to attend on his behalf. De Vera spoke for the group, but appeared to be consulting with somebody on the phone all the time, the sources said.

It was here where the $30 million “commission” was proposed and rejected, the sources said. And because of this, one of Vitangcol’s associates reportedly texted Rychtar a message saying Inekon would not get any contract from DoTC at all.

At the official meeting between Vitangcol, Rychtar and Inekon the next day, technical issues were discussed. But during a pause in the discussions, Vitangcol suggested to the ambassador that Inekon set up a Philippine company to handle MRT3’s maintenance and refurbishment and where someone close to Vitangcol could be among those to own “the hidden 60 percent,” sources said. Rychtar rejected this proposal as well, the sources said.

The 18-km MRT3 was built in 1999 as a “build, lease and transfer” project at a final cost of more than twice its original cost of $350 million. Without depreciation it should cost $900 million now; with depreciation it should have an accounting value of about $336 million.

CKD Prague provided its original 73 trams. But CKD was acquired later by Siemens, and eventually by Inekon. Thus, Inekon is now the proponent of the government-to-government contract to supply 52 new light rail vehicles and 21 option cars, refurbish the existing fleet and provide maintenance, at the cost of $3,050,000 per vehicle (or $158,600,000 for the 52 vehicles), $15,860,000 for spare parts and special tools, for a total of $174,460,000, not including the option cars. Modernization, which will make the existing 73 vehicles look “brand new, ” will cost $1.3 million per.

This is pursuant to a provision in the original contract, which obliges MRT3 and the original equipment manufacturer to undertake capacity expansion after five years. Fourteen years have since passed. The procurement is to be supported by EGAP, the official Export Credit Agency (ECA) of the Czech Republic. It has no room for legal or illegal “commissions.”

The Czech government has tried to pursue this proposal in earnest from the time of Mar Roxas as DoTC secretary. In February 2012, the Czech Ministry of Transportation submitted a formal offer to the DoTC through the Department of Foreign Affairs to provide the necessary “technical assistance” in the MRT3 capacity expansion.

On March 7, Rychtar and Haloun, together with Yorgos Psinakis, Inekon consultant (wrongly identified in previous press reports as his better known uncle, Steve Psinakis), met with DoTC Undersecretary Rene Limcaoco joined by DoTC legal advisor Amina Kapunan at the DoTC. They discussed the possibility of direct negotiations between DoTC and Inekon, as provided by Republic Act 9184.

On March 19-21, Czech Foreign Minister and Deputy Prime Minister Karel Schwarzenberg and Deputy Foreign Minister Dub visited Manila for conversations on this matter, among other things. This suffered a snag when Roxas failed to show up to receive the Foreign Minister for their pre-scheduled meeting. On March 27, Rychtar and Psinakis met with DoTC Undersecretary Catherine Gonzales and her technical and legal staff to discuss the modality of negotiations and financing.

Under the law, direct contracting may be resorted to 1) when procuring goods of a proprietary nature, i.e. when patents, trade secrets and copyrights prohibit others from manufacturing the same item; 2) when the procurement of critical components from a specific manufacturer, supplier or distributor is a condition precedent to hold a contractor to guarantee its project performance, in accordance with the provisions of the contract; and 3) when those sold by an exclusive dealer or manufacturer cannot be obtained from any other source at terms more advantageous to the government.

Despite the circumstances that marked their June and July meetings, Rychtar and Vitangcol met again in November 2012. Twenty-five of the 73 MRT3 trains had ceased to be operational, and their refurbishment and the acquisition of new vehicles had become more urgent. At Vitangcol’s request, Rychtar came to the latter’s office to meet him, but when he arrived, Vitangcol was nowhere, the sources said. Rychtar had to wait for an hour before he was escorted by Vitangcol’s secretary to a coffee shop in Trinoma, where Vitangcol had another meeting with an associate, the sources said.

Rychtar reported the matter to Abaya, but got no indication of what the latter said or did to Vitangcol, or what the latter told the DoTC chief.

Nowhere in any of these incidents did the President’s sister and her husband ever figure. However, it appears that much earlier, in the Spring of 2011, the Cruz couple had decided to go to the air show at the Le Bourget airport in Paris, where various countries showcase their latest aircraft and military weaponry. Rychtar apparently learned of the proposed visit, and suggested a side trip to Prague.

So the couple went, accompanied by Eldon’s winery and food business partner, former DoTC Secretary Pete Nicomedes Prado, a lawyer named Carlos Ocampo and one Rommel Gavieta, said to be interested in arms procurement.

As Cory Aquino’s DoTC chief, Prado had dealings with the Czechs on train matters since 1990. As her mother’s confidential chief of staff, Ballsy Cruz may have had some exposure to some of Prado’s dealings.

But on this particular trip, the focus was said to be on the arms show in Paris. Eldon Cruz, like Gavieta, had reportedly taken an active interest in possible arms procurement in support of the efforts of Defense Secretary Voltaire Gazmin. This item is bigger and more challenging than trains. In Prague, they were joined by Yorgos Psinkas, who apparently wanted his bosses to see how well connected he was to the president’s family in the Philippines.

The Paris-Prague trip was reportedly arranged by the office of Salvador “Buddy” Zamora, brother to the House of Representatives Minority Leader Ronaldo Zamora and mining industry magnate Manuel Zamora, and effectively Eldon Cruz’s employer and “principal.” “Buddy” used to own the MRT 7 project, having acquired it from MRT’s original proponent, Eli Levin, before selling it at a profit to SMC Infra.

MRT 7 has no known pending business with Inekon at this point. To operate its 14-km run from Commonwealth Avenue in Quezon and Quezon Boulevard in Manila to Bulacan, it is reportedly trying to wrap up a financing facility with Japan International Cooperation Agency (JICA) rather than with EGAP in Prague. It is not clear whether Zamora retains any residual interest in MRT7, or whether Eldon Cruz had any role to play in securing a sovereign guarantee for the project from the Philippine government.

But it appears that like MRT3, which obtained a sovereign guarantee from the Ramos administration, MRT7 has also obtained a sovereign guarantee “without subrogation” from the Aquino administration. Under then President (now mayor of Manila) Joseph Ejercito Estrada, who succeeded President Ramos, the government refused to provide any sovereign guarantee to any large private sector project.

As soon as the names of the Cruz couple were mentioned in the press in connection with the alleged extortion attempt, Rychtar wrote President Benigno S. Aquino III a letter clearing his sister and her husband of any involvement. The ambassador considers the Cruz couple his friends, and even occasionally goes to Eldon’s restaurant at the Fort, sources said. But Rychtar failed to mention the names of those who were actually involved.

From the documentation now available it appears that both Abaya and the President had been informed about the extortion attempt not long after it occurred, but had chosen not to do anything about it. To the contrary, Aquino has allowed his spokesman Edwin Lacierda to issue derogatory statements against Rychtar for revealing the extortion attempt while clearing Ballsy Aquino Cruz and her husband Eldon of any involvement.

For his part Abaya, a former congressman who is both a lawyer and an Annapolis naval academy graduate, has threatened to file charges against Rychtar, unmindful of the ambassador’s diplomatic immunity as the alter-ego of the Czech head of state. Under the 1961 Vienna Convention on Diplomatic Relations ambassadors may be declared persona non grata for cause, and expelled from the country where they are assigned, but they may not be prosecuted in any local court, unless their own government waives their immunity, in case of involvement in a serious crime unconnected with the role of ambassador.

Analysts tend to regard the Inekon affair as potentially more destructive and dangerous than the 2007 $329-million National Broadband Network deal with China’s Zhongxing Telecommunication Equipment Company (ZTE) under the Arroyo administration, which got mired in allegations of illegal payoffs promised, if not delivered, to the President’s husband and the chairman of the Commission on Elections. President Gloria Macapagal Arroyo was forced to cancel the contract at the height of the scandal, after it became a possible casus belli for her possible ouster.

Throughout the entire NBN-ZTE episode, no Chinese official ever confirmed the anti-Arroyo allegations of corruption. By contrast, the revelation of attempted extortion on Inekon is coming officially from the Czech ambassador. Unless the political fallout is checked on time, some analysts fear it could deteriorate into something as bad as the U.S. 1972 Watergate scandal, arising from the break-in at the Democratic National Convention headquarters in Washington, D.C., which ultimately led to US President Richard Nixon’s resignation.

Apparently Malacanang does not want to take any chances, and has directed the DFA, through Assistant Secretary for European Affairs Zenaida Angara Collinson, to summon Rychtar, before he went on his current home leave, and ask him to desist from discussing the Inekon affair in the mass media.

At the same time Malacañang appears to have decided to optimize use of the alleged P10-billion pork barrel scam, involving one pork barrel “integrator” named Janet Lim Napoles and some opposition senators, to divert public attention from the Inekon affair. Although the Napoles affair is by itself a legitimate banner story, its timing and the extent of time and space devoted to it seem to fall very neatly within the administration’s pattern of using one scandal to “kill” and bury another.

To the DFA, Rychtar presented Collinson a “non-paper,” which contains details of the extortion attempt. Sources said a shorter “non-paper” had been delivered to the President by his own first cousin Jorge Aquino Lichauco, who used to be a consultant to the Executive Secretary assigned to monitor the DoTC, sometime before the radio station DZRH and Arnold Clavio on GMA’s early morning program, “Unang Hirit,” carried the first breaking news about the alleged extortion attempt.

Why did Aquino not do anything to protect his own sister and go after those who were trying to make a killing from MRT3 and make a joke of his “anti-corruption” drive is the question the President must answer at this time.

In the second part of this article, we shall let the two “non-papers” from the Czech ambassador speak for themselves.

Chief News Editor: Sol Jose Vanzi

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