Frafort AG, PIATCO, NAIA 3 --www.inq7.net

Fraport heads say Macapagal lawyer 'asked for millions'
Posted: 11:48 PM (Manila Time) | Oct. 14, 2003
By Juan V. Sarmiento Jr. and Gil Cabacungan Jr.
Inquirer News Service



Climaco, Cruz also linked


A PERSONAL lawyer of President Gloria Macapagal-Arroyo had demanded "several tens of millions of US dollars" from the German airport operator Fraport AG to facilitate the ouster of its Filipino partner from the Terminal 3 project in Manila's Ninoy Aquino International Airport -- known as NAIA 3 -- so groups favored by Malacañang could take part in the project, according to top officials of the German firm.

Fraport chairperson Wilhelm Bender and vice chairperson Manfred Schulch disclosed the demand of lawyer F. Arthur Villaraza in a letter to the World Bank's International Center for Settlement of Investment Disputes (ICSID) on Sept. 17, which they submitted through the Washington-based law firm Milbank, Tweed, Hadley & McCloy LLP.

Reacting to the charges, Raoul Angangco, of the Villaraza-Angangco Law Offices, said, "It was Fraport that approached us but we declined."

The German company is requesting arbitration by the ICSID because President Macapagal-Arroyo nullified on Nov. 29, 2002, the government contracts for Philippine International Air Terminals Co. (PIATCo) to build and operate the NAIA 3. Fraport and the family of PIATCo president Cheng Yong are the major investors in PIATCo.

The President's nullification of the contracts on grounds that they contained onerous provisions forced Fraport to write down its investment of 293 million euros (about 18 billion pesos) in PIATCo in March 2003. Fraport last month placed its total investments in NAIA 3 at 425 million dollars.

The ICSID recently granted the request of Fraport for arbitration to resolve its dispute with the Philippine government on the nearly completed passenger terminal.

The NAIA 3 will have four times the capacity of the existing main airport terminal and can handle 13 million passengers a year.

In a letter to the ICSID, a copy of which was obtained by the Inquirer Tuesday, Fraport said Gloria Tan-Climaco, former presidential adviser for strategic projects, had "strongly suggested" to Fraport to tap the services of Villaraza so the Cheng family would leave the company.

The German airport operator also linked the President's chief legal counsel Avelino Cruz -- a former partner in Villaraza-Angagnco, which was previously named Carpio Villaraza & Cruz -- to efforts to pressure Fraport into ousting the Cheng family from the NAIA 3 project.

Climaco and Cruz have denied any wrongdoing in connection with the voiding of the PIATCo contracts.

Fraport said, "In numerous oral communications, Climaco and Presidential Legal Adviser Avelino Cruz made clear to Fraport that the government would not permit the NAIA Terminal 3 Investment to be successful as long as the Cheng family played a central role."

It said it was Climaco who stated over and over again that the government had wanted Fraport to engage the services of the "politically well-connected Villaraza" of the Villaraza-Angangco law firm, which holds office at the LTA Building of the family of First Gentleman Jose Miguel Arroyo in the Makati business district.

"For example, Climaco stressed during discussions with Fraport in early 2003 that Villaraza should be engaged to facilitate the ouster of the Cheng family from the NAIA Terminal 3 Investment," Fraport said. "Villaraza told Fraport that he would be able to achieve this result upon payment for unspecified purposes of several millions of US dollar."

It indicated that Villaraza was raising money for the President when he demanded millions of dollars from the company.

"Villaraza reportedly is himself a presidential confidant and top fundraiser," Fraport said.



'President might have known'


PIATCo lawyer Frank Chavez described Villaraza, Climaco and Cruz as "an evil but highly profitable ménage a trois" and said the President herself might have known of the money demanded by Villaraza.

"Considering the closeness of this three people, it is highly improbable for the President not to be aware of this extortion," he said.


Fraport said that when its official first met Villaraza, the lawyer said he could work for Fraport "only 'in the background' through other law firms without ties to him."

It said Villaraza had wanted payments to him coursed through banks overseas. "Villaraza also stated that his requirements for representing Fraport likely would include the payments to be made offshore into a bank account not in his law firm's name."

Fraport said that when it informed Climaco that it was not willing to work with Villaraza under such terms, she made it clear to the company that the successful commercial operation of NAIA 3 depended on its tapping the services of Villaraza.

It said Climaco told Fraport that the government would reward it should it succeed in ousting the Cheng family from PIATCo. It added that once the Chengs were ousted, the government, through a corporation, would serve as a "warehouse" for the family's PIATCo interests until other Filipino groups could be brought in.

Fraport said Climaco warned it that it might find itself facing Anti-Dummy Law problems if the Chengs were not ousted.

Fraport said the government also demanded changes to the concession agreement, which would have impeded the drawdown of long-term financing that it had arranged.

The German firm said the government went to the Supreme Court to have the concession agreement nullified when it did not get what it wanted. On May 5, the Supreme Court declared null and void PIATCo's concession agreement and all its three supplemental agreements for NAIA 3.

The NAIA 3 project was approved during the Fidel Ramos administration and the contracts awarded to PIATCo were modified during the Joseph Estrada administration.

Fraport said, "The nullification of the concession agreement and the refusal to compensate Fraport, are in effect, Fraport's ultimate punishment for failing to abide by the government's unlawful demands."

PIATCo vice president for public affairs, Moises Tolentino Jr. said Tuesday PIATCo would seek just compensation if the government insisted on taking over the NAIA 3.

PAITCo and Fraport are seeking between 427 million and 565 million dollars in compensation from the Philippine government for investments, expenses and forgone income incurred in building the NAIA 3, PIATCo's Jose Ch. Alvarez said.

He said that upon reimbursement, Fraport would withdraw the arbitration case it filed with the World Bank.

A government oversight committee on the NAIA 3 led by Trade and Industry Secretary Manuel Roxas II has offered to pay no more than 350 million dollars -- 100 million dollars in down payment and the remainder to be paid after valuation by two international appraisers.

Alvarez said the government offer was virtually plucked out of "thin air" and based only on the concession agreement for the contract, which specified that the passenger terminal cost no less than 350 million dollars. With Abigail L. Ho and INQ7.net





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