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  1. There may be some omissions and oversights, some of it done on purpose.
  2. The Madriaga file on broadband deal
  3. ------------ --------- --------- ---
  5. .
  6.   THE following document landed in my mailbox. It's supposed to have
  7. been written by a certain Dante Madriaga. (A check with UP alumni activities
  9. show a Dante Madriaga as earning a BSE from UP in 1966.). For what it's
  10. worth, here it is.
  11. ***
  12.   I am an electronic/electric al engineer by profession. I attended the
  13. University of the Philippines and Texas A&M University .   I have been
  14. in the communications industry for over 30 years.
  15. .
  16.   I was a part owner of a company in the LISP in Cabuyao, Laguna that
  17. exported microwave radio transmitters. I was involved in the original
  18. design of the ARESCOM proposal using a concept similar to what Joey
  19. de Venecia thought about. I have been involved in the preparation and
  20. design of the NBN ZTE proposal since the beginning.
  21. .
  22.   I have been a technical consultant for the project involved not only in
  23. the
  24. design but as a liaison to NEDA, DOTC/TELOF/CICT. I was involved in
  25. all discussions regarding the project including the names of other people
  26. involved, margins and actual pricing details.
  27. .
  28.   ZTE International signed an MOU with the government on March 14 on
  29. a National Broadband Network project. The following is my account of the
  30. project from the start to the time when the negotiations were turned over to
  32. the finance group. With the exception of the China trips I was present in
  33. all the meetings. There may be some omissions and oversights, some of it
  34. done on purpose.
  35. .
  36.   May 2006: The project was brought to ZTE on May 5 by a person
  37. named Stephen Lai, who was originally with Arescom and is a personal
  38. friend of the Arescom president Cris Ching. ZTE approached Chairman
  39. Abalos whom they knew to help on the political side.  Chairman Abalos
  40. enlisted the help of Ruben Reyes a golfing buddy to come up with a team
  41. to expedite matters. Ruben Reyes contacted General Quirino de la Torre
  42. and Leo San Miguel. I was approached by Leo San Miguel whom I had
  43. known before to work on the project. I provided Leo inputs on the
  44. Arescom proposal which ZTE used as a basis to start their design.
  45. .
  46.   June 2006: Ruben Reyes, Leo San Miguel, General De la Torre,
  47. Stephen Lai, Yu Yong, Fan Yang met on June 16 at the Makati Shangri-
  48. La in a private environment to discuss the NBN project. They were later
  49. joined by Chairman Abalos who left first. We start the design work but
  50. are hindered by cost constrains. There is no possible way to achieve the
  51. $130M Arescom budget with the commissions that were needed. They
  52. decide to increase it to $190M and later added some more components
  53. to make it $262M.
  54. .
  55.   Same group meets on June 18 with the addition of Secretary Mike
  56. Defensor and Abalos chief of staff Paz and without Stephen Lai meet
  57. in Wack-Wack to discuss details on the commissions.
  58. .
  59.   July 2006: We make initial presentations to CICT and Telof at the
  60. CICT office. Chairman Sales was present together with then Telof
  61. Asec Frank Perez, the son of Sec Nani Perez, Commissioner Lorenzo
  62. Formoso, ZTE personnel and the DOTC/CICT technical staff.
  63.   Chairman Sales initial comment was that the NBN project was best
  64. left up to private but promised to review the proposal and make
  65. recommendations.
  66.   We made similar presentations to the NEDA infrastructure group,
  67. present was the ZTE group including Fan Yang and the accounting
  68. personnel of ZTE.  NEDA writes a letter to us citing objections to the
  69. initial design.
  70.   PGMA signs an MOU on July 12 designating Sec Favila to negotiate
  71. with ZTE on the government's behalf. Group meets on July 25 in Wack-
  72. Wack to solve the problems.
  73. .
  74.   August 2006: Then DOTC Asec Perez makes a presentation and
  75. objects to the cost and the design. I work with the NEDA group to
  76. smooth out their objections.
  77.  Asec Perez who openly discredits the project is promptly replaced by
  78. Commissioner Formoso who vowed to help with the implementation.
  79. Asec Formoso is a better choice than Asec Perez because he is an
  80. engineer and a lawyer and can defend the project well.
  81.   Chairman Sales reviews the project but is still not convinced; through
  82. back door channels he changes his tune at a later date.
  83.  .
  84.   Group on August 11 goes to China and demands an advance payment
  85. upon orders from the boss ostensibly to facilitate the approval and for
  86. PR. Chairman Abalos leaves first over the weekend. They get it after
  87. mentioning the name of the FG. Ruben Reyes is designated as the recipient.
  88. Group comes back from China on August 15 and meets again with
  89. Chairman Abalos to tell of their success. US$1M was doled out, Ruben
  90. Reyes was designated as the recipient.
  91. .
  92. September 2006: Group meets regularly at Wack-Wack every weekend
  93. at night to discuss ways to facilitate the approval of the project.  NEDA
  94. status is ok but all of a sudden meets a sudden resistance from Director
  95. General Neri. Group meets at Wack-Wack on September 22 to address
  96. the problem.
  97. .
  98. We meet Sec Mendoza at his office and make representations. Secretary
  99.  does not hear the full presentation but endorses us to the then head of
  100. legal Atty. Noel Cruz.
  101.   DOTC legal returns the endorsement of the NBN project to the CICT.
  102. Design is changed again trying to fit the commitments. ZTE and group
  103. argue on the profit margins, they finally decide on September 28 that the
  104. increasing the project amount to $270M will give them a margin of $70M
  105. each.
  106. .
  107. October 2006: The name Joey de Venecia suddenly comes into play
  108. and makes the group worried. He wants the same project but on a BOT
  109. scheme and is adamant about it, he had the idea long before Arescom
  110. and ZTE conceptualized it; in fact the whole idea the Arescom proposal
  111. came from Joey.
  112. .
  113. Leo San Miguel is tasked to fix the problem since he personally knows
  114. Joey. The negotiations do not progress because of Joey's distrust for
  115. the group. Group meets at Wack-Wack on October 11 and decides to
  116. ask the FG for help on how to handle Joey.
  117. .
  118. Ruben Reyes, Chairman Abalos and General De La Torre fly to China
  119. on October 14 and discuss the problem with the ZTE officials about
  120. Joey. ZTE is alarmed but is reassured that everything will be taken care
  121. of with the intervention of the FG.
  122. .
  123. November 2006: Group is notified on November 12 that the President
  124. does not want to borrow and instead wants a BOT scheme similar to
  125. the AHI proposal.
  126.   Group decides to compete with Joey and brings an alternate solution
  127. by bringing out a competing BOT offer.
  128.   Joey is unfazed since he holds all the cards at NEDA with his father's
  129. help and stonewalls the group's effort. Group meets almost daily to
  130. discuss ways to resolve the issues. ZTE is furious at group for not
  131. controlling the situation.
  132.   Group decides that the only way that Secretary Neri would not object
  133. is to offer him a commission of US$4M at that time the exchange rate of
  134. 50-1. Chairman Abalos is designated to fix the problem.
  135. .
  136. December 2006: Group submits a proposal to Chairman Sales changing
  137. strategy and hoping to revive the NBN proposal to a BOT similar to
  138. Joey's proposal.
  139.   In a meeting in Wack-Wack in December 5, FG and Abalos try to
  140. convince Joey to just partner with them and quit his objection. In the
  141. meeting at Wack Wack FG threatens Joey by telling him to back off and
  142. stay out of the project.
  143.   ZTE tries to help out in the conflict and even designs the AHI network
  144. thereby exposing their pricing to Joey's group.
  145. .
  146.   Group goes to China on December 27 with Joey to fix the problem,
  147. they meet with ZTE officials at ZTE HQ but the negotiation fails. It was
  148. during these negotiations that Joey brought up the idea of ZTE partnering
  149. with Hwawei, another Chinese supplier. The suggestion is promptly
  150. dismissed by ZTE and negotiations break down. Group demands an
  151. advance and promptly got it from ZTE before the arrival of Joey De
  152. Venecia. Ruben Reyes is again designated as the recipient. US$5M was
  153. doled out.
  154. .
  155. January 2007: Group abandons the BOT proposal and decides to meet
  156. Joey De Venecia's AHI group head-on with their own BOT proposal.
  157. Asec Formoso organizes a defense by creating a Technical Working
  158. Group (TWG) to evaluate the proposals of ZTE, AHI and Arescom.
  159. It comes as no surprise that the TWG comes up with a report tilted in
  160. favor of ZTE because all of the members are either TELOF or DOTC
  161. personnel, they do not want the offer of AHI since it will be implemented
  162. by the private AHI group.
  163.   Group plots strategy and enlists Secretary Mendoza since Chairman
  164. Sales is a technocrat and Secretary Mendoza is a long-time ally. Group
  165. decides to move Telof back to DOTC citing the reason that CICT is a
  166. commission and cannot implement a project of this magnitude. In the end
  167. Secretary Sales signs the endorsement of the project anyway.
  168. .
  169. February 2007: TWG finishes the evaluation and hands it to the
  170. Technical Working Committee (TWC) who promptly endorses it to
  171. Secretary Mendoza.
  172.   ZTE is endorsed to NEDA by both Mendoza and Sales. Joey is not
  173. impressed and files a complaint about the ZTE proposal to whoever
  174. would listen citing the disadvantages to the government. The project at
  175. NEDA is delayed and the much needed NEDA approval is stalled.
  176. Secretary Neri does not seem to be favoring the NBN and appears to be
  177. part of the problem because he likes the AHI proposal rather than the
  178. NBN which requires a government guarantee.
  179. .
  180. March 2007: On March 8, approval of GMA is secured in order to meet
  181. the deadline for final NEDA approval by the executive.
  182.   Group meets on March 12 in Wack Wack with Yu Yong and Fan Yang.
  183. They finally expand the proposed coverage to increase the amount to
  184. $329M.
  185.   Joey is furious when the NBN proposal is approved and threatens to
  186. expose all the dealings that stopped his much superior proposal. Group
  187. does not appear to be worried and thinks it is just sour graping. Upon
  188. approval by the NEDA, group meets on March 28 in Wack Wack with
  189. ZTE and demands another cash advance which they got. Ruben Reyes
  190. is the designated recipient again. US$10M is again doled out.
  191. .
  192. April 2006: Group meets again in Makati Shangri-La on April 4 with
  193. Yu Yong and Fan Yang of ZTE to discuss ways of getting upfront
  194. money to finance partly the elections and some personal needs. Ruben
  195. Reyes is again designated as the recipient. US$ 30M is again doled out.
  196. Yu Yong agrees but on the condition that PGMA be present at the signing.
  197. PGMA promptly goes to China to witness the signing.
  198.   FG cannot participate since he is hospitalized and Abalos is busy with
  199. the elections. Ruben Reyes takes over all of the negotiations and transfer
  200. of funds.
  201. .
  202. Upon arrival from China on April 27, Secretary Mendoza and Secretary
  203. Favila visit the FG and inform him of the good news.
  204. .
  205. May 2007: Loan negotiation starts.
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