· .

Committee on Accountability of Public Officers and Investigations

NBN-ZTE EXECUTIVE SUMMARY

After 13 hearings and 4 technical werking greups, the Blue Ribben Cemmittee came up
with the fellewing indisputable facts:

This is a stery .of hew peep Ie in high places-the relatives of the most pewerful
men and wemen in gevernment tOQk advantage.Qf their relatiQnships, either with their
parent .or speuse, to cajele the Executive'inteentering a natienal breadband contract
that weuld .obtain sef1)et/ling eur.ceuntry,did not need, and which is manifestly
disadvantageeus te th:eF;ilipinQ .peeple;··ltts'abeut the war .of the most powerful, mest
influential and mesf::organizedsyndicates in gevernment, seme members of which are
public .officers, whewete <ill each ether's threats because of an alleged dQuble-cross. It
is abeut the nevercending battle ameng the PQlitical elite fer ecenQmic power,
demination and centrd1.

Onthe .one hand, we have the fermer Cemelec Chairman Benjamin S. Abalos
whe claims to /lave ne less than the First Gentleman as his political sPQnsQr. With him
are Lee SanMiguel, Ruben Reyes and General Quirine De La Terre. They are knewn
as the Filipino group. They are the group that were lobbying for ZTE.

On the ether hand, we have Mr. Jese De Venecia III, the sen .of then Heuse
SpeakerJese De Venecia, Jr. who had ne less than fermer NEDA Directer General
Remule Neri as well as Neri's cenfidante, Engineer Rodelfo Neel "Jun" Lezada, as
staunch supperters .of his BOTsdh.eme. Mr. Jese De Venecia III claims that he is a
whistleblewer. Hewever, there. Were many times in this scandal that he ceuld have
blewh the whistle, but did net. He OnlY starlted cemplaining when he did net get his way.
Mr. Jese De Venecia III and his group were pushing fer Amsterdam Heldings te capture
the natienal breadband centract. .

'i 'I~ tbe middle .of it all, is a President whe was unable te centro I and discipline her
ewn.men as they fight ever their kickbacks. She kept her silence in the midst .of the
cerruptien- 'ilcquiescing and cendening the deed. The facts peinting to her may not be
tetal,\butthe;~tink is perceived te have reached her .office.

Because the NBN-ZTE centroversy had reached fever pitch, the Philippine
gevernment had, te cancel the centract. Former Cemelec Chairman Benjamin Abales
alse resigned from /lis pesitien in the Censtitutienal Cemmissien.

: TheNBN.-Z.T~s.candal. ~emains te.. be one .of the most acrimoniously debated

issues in thePhilippine,s.. If.peeple".: rool< .:af th.eopportunists in this scandal, they will
'" ,¥,' , ,w, , "J""",;~" "
discever that th<?y are··f311 ... sC.?xehgers<~fic:j·.predafers ready to feast on the carrions of
their preys. Andw!fe't:i 'fheyianriot' gentleirrightfi.i! share .of the beety, one .of them
squeals and they start"polnting .fingers at another.

Everyene in this stery st~hd's atdountilbie te the Filipino natien. This deal would
have been kept hidden if all .of the characters were able to "mederate their greed" and if
ever they lived up te the saying that there is "hener ameng thieves." But, the situatien
get .out .of hand and the self-proclaimed leser, Mr. JQse De Venecia III, spilled the
beans.

Page 1 of 3
Committee on Accountability of Public Officers and Investigations

RECOMMENDATIONS:

H.E. Gloria Macapagal- Arroyo

• The President's immunity from suit

The Ombudsman is wrong in merely dismissing the case against

the President on the merepretex(fofllresidential immunity from suit.
",,' ~ '", ~ , ' ,

It is the duty:codtn& Olllbudsmanto investigate impeachable officers. No

exemption is prov[cJedin.Section 22. What the Office should have done was to
investigate and.make·findings
'" '4
for transmittal to the House, if an impeachment would
y.

have been war~anted.,fcrather than a blanket statement or exculpation because of

supposed iminunity.Jlis not for the Ombudsman to make a ruling as to immunity, but
for the Hous.e ta;decide'What to do once it receives the transmittal. Neither was it for the
Ombudsmanto,say that there is no more impeachment process to be had because of
the one-yeqrbar. It is for the House to make that ruling. Private persons such as the
First Gentleman could have been covered in this provision, as well.

Further, the Constitution in Article VII, Section 5 provides that the President
"pre~erve and defend its Constitution, execute its laws, do justice to every man."

Also, Article VII, Section 17.oUhe Constitution provides that: "The President
shall. have control of all the executive departments, bureaus, and offices. He shall
ensure that the laws be faithfully executed." ~ "

. Her acts in this case reveah.hat her performance of presidential duty has been
wanting. ,.,

FORMERCOMELEC CHAIRMAN BENJAMIN S. ABALOS

i". Violation of Section 3 (a) and (h) of Republic Act 3019 otherwise
known as ANTI-GRAFT AND CORRUPT PRACTICES ACT

.:Violation of Article 212 of the Revised Penal Code otherwise known

ias,~CgrnJption of·Pubic Officials.

MR. JOSE "JOEY" DE VENECIA

. ,
III
,,", r"" ,~,)~~ y~":' f', L " " "

• 'Violati6n"o.f'.Seeti6o.'.5.oN~epublicAct No. 3019, otherwise known as

the, A~TI~G:RAFTAt'JD CORRUPT PRACTICES ACT.
Section: 5;:;" Pr;ohibiti6non certain re latives.

FORMER SPEAKER JOSE DE VE~ECIA;lJR.

• Violation of Section 5 of Republic Act 3019 otherwise known as ANTI-

GRAFT AND CORRUPT PRACTICES ACT

• Violation of Republic Act No. 6713 Section 7 (d) otherwise known as

Code of Conduct and Ethical Standards for Public Officials and
Employees

Page 2 of 3
 •
• Committee on Accountability of Public Officers and Investigations

FIRST GENTLEMAN JOSE MIGUEL ARROYO

• Violation of Sections 4 (a) and 5 of Republic Act No. 3019, otherwise

known as the ANTI-GRAFT AND CORRUPT PRACTICES ACT.

SECRETARY LEANDRO MENDOZA, ASSISTANT SECRETARY LORENZO FORMOSO AND

ASSISTANT SECRETARY ELMER SONEJA

• Viqla:li~ii·;Qfi:s~dion3·(ti)ofRA 3019
otherwise known as the ANTI-
GRAFI AN)) CORRUPT PRACTICES ACT.

ENGINEER RODbl.F6NbEL LOZADA

.:Violation of Sections 3 (a) and (h) of RA 3019 otherwise known as

the ANTI-GRAFT AND CORRUPT PRACTICES ACT.

• Violation of Civil Service Law, Book V Chapter 7 Section

54, Executive Order No. 292, Administrative Code of
1987

FORMERNEDA SECRETARY ROMULONERI·

• Violation of Secti611 3 (al and (h) of RA 3019 otherwise known as the

ANTI-GRAFT AND CORRUPT PRACTICES ACT.

SECRETARy;:JOSE "LITO"· ATIENZA, JR. AND FORMER DEPUTY EXECUTIVE SECRETARY

HUBERTO GAITE

. .. Violation Article 150 of the Revised Penal Code

ZTE Corporation,;

An investigation must/be done on the ZTE. Corporation, as well, in order to

determine its role in the Vilho.lE;l r)1e.sll/:W~iIEl we must; the. government must, encourage
the influx of foreign investors and obrpOralionsin drder fo oontribute to employment, and
wealth oreation in the country, these oo'rporafions must be warned not to participate in
illegal transaotions. These oompanies must not contribute or enoourage the corruption
of public officers.

Page 3 of 3
 Republic of the Philippines . -/ 1~ 3
§S>enate
Pasay

INFORMATION SHEET ON
COMMITTEE REPORT NO. 743
Short Title: NBN-ZTE Scandal
Filed On: NOV 1 1 2009

a) COMMITTEE (s) which reported out the bill(s)/resolution(s):

Primary: Committee on Accountabilitv 01 Public Officers and Investigations (Blue Ribbon)

b) BILL(s) and/or RESOLUTION(s) reported out and taken into consideration.

Bill/Resolution/Others Referred to the Ctle(s) on Authors
1. P.S. Res. No. 127 September 5, 2007 Sen. Aquilino Q. Pimentel Jr.
2. P.S. Res. No. 129 September 10, 2007 Sen. Panfilo M. Lacson
3. Privilege Speech entitled September 11, 2007 Sen. Panfilo M. Lacson
"Legacv 01 Corruption"
4. P.S. Res. No. 136 September 19, 2007 Sen. Miriam Defensor Santiago
5. P.S. Res. No. 144 September 24, 2007 Sen. Mar Roxas
6. Privilege Speech entitled September 24, 2007 Sen. Miriam Defensor Santiago
"International Agreements in
Constitutional Law: The
Suspended RP·China (ZTE)
Loan Agreement"
7. Privilege Speech entitled February 6, 2008 Sen. Benigno Aquino III
"The Disappearance 01 NBN·
ZTE Witness Rodollo Lozada

c) ACTION TAKEN by the Committee(s):

_J_ Recommending Approval
with amendments
without amendments
in SUbstitution of
in consolidation w"'iCCth-------
Laid on the Table/Archived

d) COMMITTEE MEETINGS/PUBLIC HEARING CONDUCTED:

Date: Sept. 18,2007 Date: Sept. 20, 2007 Date: Sept. 26, 2007 Date: Sept. 27, 2007
Time: 9:30 a.m. Time: 2:30 p.m. Time: 9:30 a.m. Time: 9:30 a.m.
Venue: Session Hall Venue: Session Hall Venue: Session Hall Venue: Session Hall

Date: Oct. 25, 2007 Date: Nov. 20, 2007 Date: Jan. 30, 2008 Date: Feb. 8, 2008
Time: 9:30 a.m. Time: 10:00 a.m. Time: 10:00 a.m. Time: 10:00 a.m.
Venue: Session Hall Venue: Padilla Room Venue: Padilla Room Venue: Session Hall
Date: Feb. 11. 2008 Date: Feb. 18,2008 Date: Feb. 26, 2008 Date: March 11,2008
Time: 10:30 a.m. Time: 10:00 a.m. Time: 10:00 a.m. Time: 10:00 a.m.
Venue: Recto Room Venue: Padilla Room Venue: Recto Room Venue: Padilla Room
Date: Sept. 1,2008
Time: 10:00 a.m.
Venue: Session Hall
e) If this is a Substitute or Consolidated Bill, does it have any new REVENUE or
APPROPRIATION Provision? _ _

If yes, has the bill been referred to the Finance or Ways and Means Committee and what
were its recommendations?

f) RELATED/COUNTERPART MEASURE from the HOUSE OF REPRESENTATIVES:

Bill/Resolution No. Status in the House Status in the Senate

g) MEMBERS Who Failed to Sign the Report; and Reasons:

Senators Ramon Bong Revilla Jr., Rodollo G. Biazon, Loren B. Legarda, Manuel "Lito" M. Lapid, Anthony
"Sonny" F. Trillanes IV, and Alan Peter "Compaiiero" S. Cayetano

h) Additional Remarks: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _,..._ _ _ _ _ _ _....,-

'"
Submitted by: ROD~JFO
Direct r General,
Date Submitted: 11 ovember
OE S. QUIMBO
OOM
09

I
/ >-

FOURTEENTH CONGRESS OF THE )

'J
REPUBLIC OF THE PHILIPPINES ) \ ) -, ~ 1 )
Third RegulatSession )

SEN ATE

""

of Public Officers and

~5;~~Qj~~~';~ITIilO.L.

j~$i~~ilatg)~(~::;(Jlutio,n ,~,o. rt27 t Pr9posedSenate Resollltior,I

re'il'e~S,i5'eE~'Ch Of Sen. pal'lfil<:lM.Lacson titled "Legacy
I~!~~~i~~!~~~~~~d ,Senate. Res,olution No. 136, Privilege
I~ Defensor SantiagO titled "International
titution,al Law: The Suspended RP-China (ZTE)
Senate Resolution No. 144 and
Benigno Aquino III titled "The
M+n,o~~ Rodolfo.Lozada Jr."

.
, ,'.

MR.

,~, ;;
"'~~~1""'" /~i;:- , ':' ';..,,i.
:fi;~Eji:iblic.,Offic€i[s . and'ln'l1estigations (Blue

Ribbon) has ",W,;;,n.H,oi.f''',llqwing referrals:

,,{Y-, " '
(." ,

Proposed Senate Reso Aquilino Q. Pimentel,

Jr., entitled:

A RESOLUTION DIRECTING THE BLUE RIBBON COMMITTEE AND

THE COMMITTEE ON TRADE AND INDUSTRY TO INVESTIGATE, IN
AID OF LEGISLATION, THE CIRCUMSTANCES LEADING TO THE _
APPROVAL OF THE BROADBAND CONTRACT WITH THE ZTE AND / )Q,
THE ROLE PLA YED BY THE OFFICIALS CONCERNED IN GETTING IT X
Pag\ll{lEbJ lJi'J27
 CONSUMMATED, AND TO MAKE RECOMMENDA TlONS TO HALE TO
THE COURTS OF LAW, THE PERSONS RESPONSIBLE FOR ANY
ANOMAL Y IN CONNECTION THEREWITH AND TO PLUG
LOOPHOLES, IF ANY, IN THE BOT LAW AND OTHER PERTINENT
LEGISLATIONS

Proposed Senate Resolution No. 129, introduced by Senator Panfilo M. Lacson,

entitled:

RESOLUTION DIRECTING THE COMMITTEE ON NA TlONAL

DEFENSE AND SECURITY TO CONDUCT AN INQUIRY IN AID OF
LEGISLATION INTO THE NATIONAL BROADBAND NETWORK
CONTRACT TO THE CHINESE FIRM ZHONG XING
TELECOMMUNICATIONS EQUIPMENT COMPANY LIMITED (ZTE
CORPORATION), WITH THE END VIEW OF PROVIDING REMEDIAL
LEGISLA TlON THAT WILL FURTHER PROTECT OUR NA TlONAL
SOVEREIGNTY AND TERRITORIAL INTEGRITY

Proposed Senate Resolution No. 136, introduced by Senator Miriam Defensor

Santiago, entitled:

RESOLUTION, DIRECTING THE PROPER SENATE COMMITTEE TO

CONDUCT AN INQUIRY, IN AID OF LEGISLATION, ON THE LEGAL
AND ECONOMIC JUSTIFICATION OF THE NATIONAL BROADBAND
NETWORK (NBN) PROJECT OF THE GOVERNMENT

Proposed Senate Resolution No. 144, introduced by Senator Mar Roxas, entitled:

A RESOLUnON URGING PRESIDENT GLORIA MACAPAGAL

ARROYO TO DIRECT THE CANCELLATION OF THE ZTE CONTRACT.

Privilege Speech ot'Sen. Panfilo M. Lacson delivered on 11 September 2007,

entitled:

"LEGACY OF CORRUPTION"

Privilege Speech of Sen. Miriam Defensor Santiago delivered on 24 September

2007, entitled:

"INTERNATIONAL AGREEMENTS IN CONSTITUTIONAL LAW: THE

SUSPENDED RP-CHINA (ZTE) LOAN AGREEMENT"
,
V
Page 2 of 127
 and the Privilege Speech of Sen. Benigno Aquino III delivered on 6 February 2008,

entitled:

"THE DISAPPEARANCE OF NBN-ZTE WITNESS RODOLFO LOZADA

JR."

The Committee has the honor to submit its Report, after conducting an inquiry, to

the Senate.

Recommending the adoption of the recommendations contained herein.

COMMITTEE REPORT

1. INTRODUCTION

[Yjou know you are not a victim. Don't represent yourself as a victim here, All the
Filipino people are victims.

Senator Richard J. Gordon to Mr. Jose de Venecia III

TSN: GUINHAWA 11-3 September 1, 2009, 2:59 p.m" p. 4.

[I]t was the best of times, it was the worst of times, it was the age of wisdom, it
was the age of foolishness, it was the epoch of belief, it was the epoch of
incredulity, it was the season of Light, it was the season of Darkness, it was the
spring of hope, it was the winter of despair, we had everything before us, we had
nothing before us, we were all going direct to heaven, we were all going direct the
other way - in short, the period was so far like the present period, that some of its
noisiest authorities insisted on its being received, for good or for evil, in the
superlative degree of comparison only.

Charles Dickens, A Tale of Two Cities, English Novelist (1812·1870).

',,, " i '.' '-,

The year is 2006 and China is a growing superpower. We want to be friends with

her. She has so much excess liquidity that she is willing to lend money at practically

bargain basement rates. We seek her friendship, we seek her investments, This is not

without reason: for she is our close neighbour and this indeed is going to be China's V
century.
Page 3 of 127
 It was also nearing the 2007 midterm elections. It was a good time to make

money or to raise money for the campaign; it was also a period to make more money

with very few people noticing. And for the corrupt, it was the best time to make big

money from government transactions.

This was the prevailing atmosphere when the most powerful and Influential in

government decided to broker the National Broadband Network deal with the Philippine

government. There are no saints here. And the whole scene is a stink fest.

This is a story of how people in high places: the relatives of the most powerful

men and women in government took advantage of their relationships, either with their

parent or spouse, to cajole the Executive into entering a contract that would obtain

something our country did not need, and that is manifestly disadvantageous to the

Filipino people. It is about the war of the most powerful, most influential and most

organized syndicates in government, some members of which are public officers, who

were at each other's throats because of an alleged double-cross. It is about the never-

ending battle among the political elite for economic power, domination and control.

On the one hand, we have the former Comelec Chairman Benjamin S. Abalos
\", I , •

who claims to have no less than the First Gentleman as his political sponsor. With him

are Leo San Miguel, Ruben Reyes and General Quirino De La Torre. They are known

as the Filipino group.

On the other hand, we have Mr. Jose De Venecia III, the son of then House

Speaker Jose De Venecia, Jr. who had no less than former NEDA Director General

Romulo Neri as well as Neri's confidant, Engineer Rodolfo Noel "Jun" Lozada, as ~

Page 4 of 127
staunch supporters of his BOT scheme. Mr. Jose De Venecia III claims that he is a

whistleblower. However, there were many times in this scandal that he could have

blown the whistle but he did not. He only started complaining when he did not get his

way.

This, too, is the story of a son, taking advantage of a parent's power and

influence in order to capture to himself a most lucrative government contract. This is

not, unfortunately, the first offspring of a powerful official who abused their stations. We

have in our history tales of sons (and daughters) who have in one way or another, used

for their own be~efit the power, popularity, or charisma of their progenitors. It is indeed

sad that we, as a people, still allow this to happen.

In the middle of it all, is a President who was unable to control and discipline her

own men as they fight over their kickbacks. She kept her silence in the midst of the

corruption- acquiescing and condoning the deed. The facts pointing to her may not be

total, but the stink is perceived to have reached her office.

If people look at the opportunists in this scandal, they will discover that they are

all scavengers and predators ready to feast on the carrions of their preys. And when

they cannot geUheir.rightful share of the booty, one of them squeals and they start

pointing fingers at another.

Everyone in this story stands accountable to the Filipino nation. This deal would

have been perfect if all of the characters were able to "moderate their greed" and if ever

they lived up to the saying that there is "honor among thieves." But, the situation got out

of hand and the self-proclaimed loser, Mr. Jose De Venecia III, spilled the beans.

Page 5 of 127
 Hence, this Investigation and this Report.

1.1. PRELIMINARIES

After 13 hearings, 4 Technical Working Groups and two Supreme Court rulings,

Neri vs. Senate Committees (G.R. No. 180643, 25 March 2008 and 04 September

2008), the Committee on Accountability of Public Officers and Investigations (Blue

Ribbon Committee) is submitting its Committee Report on the NBN-ZTE Controversy.

The NBN-ZTE investigations have yielded more than enough information to:

propose remedial legislation to curb graft and corruption; discovered the culpability of

. public officers and private individuals who aided and abetted the commission of

malfeasance, misfeasance and nonfeasance in government; and, unravelled enough

data to paint a picture of how the most powerful and influential in public office sought to

devour prized contracts in government to the detriment of the Filipino people.

The main task of the Blue Ribbon Committee is to investigate in aid of legislation.

Fact-finding which should lead to prosecution is the task of another body, the

Ombudsman. While the Ombudsman already released the results of its Investigation on

August 27, 2009, we willstHI submit the findings of this Committee to aid them towards

a further investigation. ~

Page 6 of 127
 The Ombudsman released two Joint Resolutions, First, on the Administrative

Case against Romulo Neri; and Second, on the Criminal Case finding probable cause

against Benjamin Abalos and Romulo Neri for violation of Section 3 (h) of RA 3019 1 and

against Benjamin Abalos for violating Article 2122 of the Revised Penal Code for

Corruption of Public Officials.

The timing of the release is suspect since both Joint Resolutions were dated

April 21, 2009 but they were released only on August 27, 2009 at the height of the

impeachment proceedings against Ombudsman Merceditas Gutierrez, and before the

reopening of this investigation on September 1, 2009.

Curiously, not only the Ombudsman's Joint Resolutions are wanting in its

findings, 90 0/0 of the 'bases of 'the Resolutions are based on the Transcript of

Stenographic Notes of these investigations and submissions given to this Committee. It

makes us speculate that this is to pre-empt the Committee Report. In spite of that, we

will show the Ombudsman how to conduct a proper, complete and impartial

investigation through this Report.

The task of the Committee is finished, The story has reached its end.
NOW,~.
conclusions can be drawn.
/

1 Section 3. Corrupt practices of public officers. - In addition to acts or omission of public officers already
penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby
declared to be unlawful:
(h) Directly or indirectly becoming interested having financial or pecuniary interest in any business, contract or
transaction \~ c~nnection with which he inter\lenes or takes part in his official capacity, or in whIch he is prohIbited
by the Constitution or by an law from having any interest,

1 Article 212. Corruption of public officials.· The same penalties imposed upon the officer corrupted, except
those, of dlSquallficatlo~ and suspension, shall be imposed upon any person who shall have made the offers or
promISes or given the gifts or presents as described in the preceding articles.

Page 7 of 127
 This report of the Blue Ribbon Committee will concentrate on the malfeasance,

misfeasance and nonfeasance in office by officers and employees of government, its

branches, agencies, subdivisions and instrumentalities as well as the provision of the

Constitution on nepotism in relation to the NBN-ZTE scandal.

The task of the Committee is not to prosecute or convict the characters in this

scandal. The task of the Committee is to investigate in aid of legislation and oversight.

Thus, the findings of the Committee will be submitted to the body, the Ombudsman for it

to do its constitutional role of further investigation and if warranted, prosecution.

As previously agreed upon by the Senate Blue Ribbon Committee, Committee on

Trade and Commerce and Committee on National Defense and Security (collectively,

the "Senate Joint Committees"), there will be three separate Committee Reports

focusing on the following issues:

• The Blue Ribbon Committee to focus on the issue of accountability;

• The Committee on Trade and Commerce to focus on the need for the project

and the alleged overprice; and

• The Committee on National Defense and Security to focus on the security

aspect of the NBN-ZTE deal.

This report is divided into six (6) parts. The first part consists of the Introduction,

which tackles the PreUminaries of the Report; enumerates the dates and guests of the

hearings and the technical working groups; and the Narrative. The second part dwells

on the major characters of the investigation and the contents of their testimonies. The

third part will examine the alleged kidnapping of witness Mr. Rodolfo Noel "Jun" Lozada.

The fourth part contains the Findings of the Blue Ribbon Committee which deals with

the possible malfeasance, misfeasance and nonfeasance that may have been

V/
Page 8 of 127
committed. The fifth part presents the Recommendations of the Committee and

proposed law reform. Finally, the sixth and last part is the Conclusion.

1.2. HEARINGS AND TECHNICAL WORKING GROUPS OF THE NBN-ZTE

INVESTIGATIONS

The 14th Congress conducted 13 hearings and 4 Technical Working Groups on

the following dates with the following guests:

1.2.1. THE HEARINGS

September 18,2007.

Mr. Jose de Venecia III, President, Amsterdam Holdings, Inc. (AHI); Mr. Ramon P.

Sales, Former Chairman, Commission on Information and Communications Technology

(CICT); Iloilo Vice Governor Rolex T. Suplico; Mr. Jarius Bondoc, Columnist,

Philippine Star.

September 20, 2007

Mr. Jose de Venecia III; Mr. Jarius Bondoc; Secretary Leandro R. Mendoza,

Department of Transportation and Communication (DOTC); Secretary Margarito

.. <;,'

Teves, Department of Finance (DOF); Secretary Peter Favila, Department of Trade

and Industry (DTI); Assistant Secretary Elmer Soneja, DOTC; Assistant Secretary

Lorenzo Formoso III, DOTC; Vice-Governor Rolex T. Suplico; Atty. Frederick

Belandres, DOTC Lawyer; Atty. Sergio Apostol, Office of the Presidential Legal

Counsel; Undersecretary Ricardo Paras III, Department of Justice (DOJ); Secretary

Rolando Andaya, Department of Budget and Management (DBM).

Page 9 of 127 (.

Y
September 26, 2007

Mr. Jose de Venecia 1\1; Secretary Leandro R. Mendoza; Chairman Romulo L. Neri,

Commission on Higher Education (CHED), and Former Director General, National

Economic and Development Authority (NEDA); Chairman Benjamin S. Abalos,

Commission on Elections (COMELEC); Assistant Secretary Lorenzo G. Formoso;

Vice-Governor Rolex T. Suplico; Mr. Jarius Bondoc; Mr. Ramon P. Sales; Mr.

Ruben Reynoso, Director, CHED; Mr. Tan.

September 27, 2007

Assistant Secretary Lorenzo G. Formoso; Professor Raul Fabella, UP School of

Economics; Professor Emmanuel de Dios, UP School of Economics; Atty. Josefina

Lichauco, Former Secretary, DOTC.

October 25, 2007

Mr. Jose de Venecia 1\1; Mr. Jarius Bondoc; Vice-Governor Rolex T. Suplico.

November 20, 2007

Mr. Ernesto Garcia, Managing Director, AHI; Atty. Rodolfo Salalima, Globe Telecom,

Inc.; Atty. William Pamintuan, Senior Vice President, DIGITEL; Ramon Isberto, Smart

Communications, Inc.;' Mr. Eric Espanol, Smart Communications, Inc.; Mr. Joevel

Rivera, Bayantel; Atty. Raul Lambino, Lambino Law Firm.

January 30, 2008

Mr. Jarius Sondoc.

February 8, 2008

Engineer Rodolfo Noell. Lozada, President and CEO, Philippine Forest Corporation.

Page 10 of 127 V
February 11.2008

Engineer Rodolfo Noel I. Lozada Jr.; Mr. Jose De Venecia III; Mr. Jarius Bondoc;

Deputy Executive Secretary Manuel Huberto B. Gaite; Secretary Jose L. Atienza,

Department of Environment and Natural Resources (DENR); Mr. Alfonso G. Cusi,

General Manager, Manila International Airport Authority (MIAA); Mr. Octavia Lina,

Assistant General Manager, MIAA; P/Gen Avelino I. Razon Jr., Chief, Philippine

National Police (PNP); M·r. Michael T. Defensor, Director, PETRON, and former Chief

of staff, Office of the President; Sr. Supt. Paul Mascariiias, PNP-Police Security and

Personnel Office (PSPO); Atty. Antonio R. Bautista, Bautista & Partners Law Offices.

February 18,2008

Engineer Rodolfo Noel I. Lozada Jr.; Ms. Carmen Lozada; Bro. Felipe C. Belleza

Jr., FSC, De La Salle Greenhills.

! ", ":'

February 26. 2008

Engineer Rodolfo Noel I. Lozada Jr.; Mr. Jose de Venecia III; Mr. Jarius Bondoc;

Deputy Executive Secretary Manuel Huberto B. Gaite; Mr. Angelita Banayo, Office

of Senator Lacson; Mr. Dante Madriaga; Atty. Gary Jimenez, Office of Sen. Madrigal.

March 11, 2008

Engineer Rodolfo Noel I. Lozada Jr.; Mr. Jose de Venecia III; Mr. Dante Madriaga;

Mr. Jarius Bondoc; Sec. Peter B. Favila; Cpl. Ronnilo R. Ramilla; Mr. Ramon P.
f'"'''

Sales; Mr. Leo San Miguel; Atty. Felisberto L. Verano, Verano Law Office

Page 11 of 127 y
September 1.2008

Mr. Jose de Venecia III, President, Amsterdam Holdings, Inc. (AHI); Engineer Rodolfo

Noel I. Lozada, Former President and CEO, Philippine Forest Corporation; Mr. Ramon

P. Sales, Former Chairman, Commission on Information and Communications

Technology (CICT); Professor Benjamin Diokno, UP School of Economics

1.2.2. THE TECHNICAL WORKING GROUPS

October 15, 2007

Mr. Domingo A. Reyes. Jr., Vice Chairman, Bids and Awards Committee (BAC) for

Communication; Ms. Rebecca S. Cacatian, Member, BAC; Mr. Geronimo V. Quintos,

Member, BAC; Asec. Elmer A. Soneja, DOTC; Ms. Lydia S. Malvar, DOTC; Mr.

Ricardo C. Diaz, DOTC; Mr. Idelfonso Patdu, DOTC.

October 16,2007

Mr. Jose De Venecia III, AHI.

December 06. 2007

Director Edgardo Cabarios, National Telecommunications Commission (NTC); Mr.

Joevel Rivera, Vice President, Bayantel; Atty. Joel D. Peneyra, Assistant Vice

President, Bayantel; Mr. Alexander Bengzon, Head, Regulatory Policy Department,

,
" .
GLOBE TELECOM; Engr. Emmanuel Estrada, Head,Technology Policy Department,

y
GLOBE TELECOM; Atty. Roy 'Ibay, Head, Legal Affairs, SMART; Mr. Alfredo B.

Carrera, PLOT.

Page 12 of 127
 February 15,2008

PIS Supt. Petronio A. Retirado, PNP-PSPO; P/Supt. Melchor H. Ysulat, PNP-PSPO;

Atty. Ronaldo P. Ledesma, Bureau of Immigration (BI); Atty. Norman Tansingco, BI;

Atty. Edgardo L. Mendoza, BI; AP/Capt. Teotimo M. Cruz, MIAA Airport Police;

AP/Capt. Adrian C. Tecson, MIAA Airport Police.

1.3. THE NARRATIVE OF THE NBN-ZTE SCANDAL

"There is ~othing hidden that will not be revealed, and nothing

secret that will not be known and come to light." (Luke 8: 17)

Based on the evidence and testimony submitted to us, the following are the

indisputable facts5 ;

The NBN-ZTE .controversy can be traced from the dinner in the Dasmarinas

Home of then Speaker Jose De Venecia, Jr. That dinner was attended by His

Excellency Li Jinjun, Ambassador to the Philippines of People's Republic of China, In

that dinner, he was joined by Secretary Peter B, Favila, NEDA Secretary Romulo L,

Neri, Department of Finance Secretary Margarito B, Teves and Department of Energy

Secretary Raphael P.M. LotHla, There, a Framework of Cooperation between the

Govemment of the Republic of the Philippines and the People's Republic of China was

conceived,

On March 1, 2006, Secretary Peter B. Favila, NEDA Secretary Romulo L, Neri,

Department of Finance Secretary Margarito B, Teves, and Department of Energy

Secretary Raphael P,M, Lotilla wrote a letter to His Excellency, Li Jinjun, Ambassador,

People's Republic of China, This letter was endorsed by then Speaker Jose De

Venecia.

5 Senator Gordon's PowerPoint presented on September 1, 2009 is attached as Annex A.

V
Page 13 of 127
 The letter thanks Ambassador Li Jinjun for his presence "last January 9, 2006" at

the residence of Speaker Jose De Venecia to discuss the highlights of a possible

framework for economic cooperation backed by indicative projects between the

Philippines and the People's Republic of China.

Major items discussed and brought forward by both sides during the said meeting

were:

1. A plan to hold an RP-China Business Economic Forum from May 24-27,

2006. Conference will be hosted by the Philippine Secretary of Trade and

Industry, Secretary Peter Favila and his counterpart PROC Minister of

Commerce Bo Xilai.

2. An objective to plan a business program for China to invest, and the

Philippines to develop business/economic and tourism opportunities totalling

about US$32-billion.

3. Areas of investment includes - a) Housing needs of the Philippines; b)

Northrail Project; c) Investment in Nonoc Nickel Mines and Samar Bauxite

Mines; d) Public works and infra projects; e) Energy and Power Projects; f)

Industrial Parks/economic zones; g) Tourism Projects; h) Agriculture Projects;

i) Fisheries Projects and j) Textile Mill/Garment Factories.

There is no mention of any Broadband deal during the meeting.

It is worth noting that for the lending operations, the Philippine government

prefers project financing mode whereby, as much as possible, the loan payments will

come from project cash flows. This means that there will be no government guarantee.

Page 14 of 127
 On June 5, 2006, the Government of the Republic of the Philippines (GRP)

entered into a Memorandum of Understanding with the People's Republic of China

(PROC) for the establishment of a Philippine-China Economic Partnership. Then NEDA

Secretary Romulo L. Neri and OTI Secretary Peter B. Favila signed for the Philippines

while Minister of Commerce Bo Xilai signed for China.

The MOU came about when the Ministry of Commerce of China and the

Department of Trade and Industry of the Philippines jointly hosted the China-Philippines

Economic Partnership Forum on June 5-6, 2006 in Manila. In attendance during the

forum were China's Minister of Commerce Bo Xilai, Speaker Jose De Venecia Jr., DTI

Secretary Peter Favila, OENR Secretary Angelo Reyes and NEOA Secretary Romulo L.

Neri.

The MOU contained the followirig:

1. Promote the development of Chinese-Filipino trade and economic relations;

2. Sign the framework agreement to enable the establishment of the Philippines-

China economic partnership; and,

3. Thepropos~dframework will cover the following:

(a) Agriculture and fishery, Housing construction, Public works and

infrastructure, Tourism, Mining, Energy and power, Industrial parks,

Rehabilitation and investments in textile mills/garments factories,

Containe~'inspection machines, leT-based education;

(b) Establishing a functional working mechanism under the Joint Trade

Committee (JTC) to substantiate the above-mentioned cooperation; and

(c) Making mutually acceptable financing arrangements to SUbstantiate the (

above mentioned cooperation.

V
Page 15 of 127
 Please note that the MOU between the Philippines and China did not

mention any Broadband network. It only mentioned an ICT-based education.

On July 12, 2006, another Memorandum of Understanding was executed-this

time between the Philippines and ZTE International Investment Limited (ZTE).

Department of Trade and Industry Secretary Peter J. Favila represented and signed for

the Philippines and ZTE International Investment Limited President Yu Yang

represented and signed for ZTE International Investment Limited. Included in that

Memorandum of Understanding are provisions regarding investments in a nationwide

government broadband communication infrastructure project and the establishment of

an information technology school and training center.

The investment activities include the following:

1. Nationwide Government Broadband Communication Infrastructure Project;

2. Establishment of Information Technology School and Training Center;

3. Exploration, Development and Operation of Mining Areas in North Davao;

4. Exploration, Development and Operation of Mining Areas in Diwalwal; and

5. Establishment of a Special Economic Zone in the Davao area.

This is the first time that Broadband appears in an Agreement.

The following are the Terms of the Agreement between the Philippines and ZTE:

Strategic Commitments:

The capital and operating costs for the development and implementation
of the Investment Projects, in the amount of US$4 Billion, shall be funded
and fully provided for by ZTE International. ZTE International shall provide
the technical know-how and specialized technologies for the development
and implementation of the Investment Projects.

The GRP, particularly the OOF, OTI, OILG, OENR, DOTe, OBM, NEDA
and all other Government Agencies and Offices, shall assist ZTE

Page 16 of 127
 International in the development and implementation of the Investment
Project.

Subsequently, on July 24, 2006, President Gloria Macapagal Arroyo in her State

of the Nation Address (SONA) mentioned the Cyber Corridor Initiative of her

government.

She said:

We will enhance the competitive advantage of the natural "super regions"

of the Philippines: North Luzon Agribusiness Quadrangle, Metro Luzon
Urban Beltway, Central Philippines, Mindanao and the Cyber Corridor."

"The Cyber Corridor will boost telecommunications, technology and

education. The corridor runs the length of all super regions, from Baguio
to Cebu to Davao. x x x (I)n this corridor, the English and Information
Communication Technology Skills of the Youth give them a competitive
edge in call centers and other business process outsourcing. 6 (emphasis
supplied)

President GMA mentions a Cyber Corridor but not broadband.

Allegedly, because of this statement of the President, AHI proponent, Jose

"Joey" de Venecia III, the son of then Speaker of the House of Representatives Jose de

Venecia, Jr. submitted an unsolicited proposal to the NEDA.

On August 7, 2006, ZTE submitted with the Commission on Information and

,1 ,,,., '1'1',';[ ."" , t ,A,., ,,' H '" .- •

Communications Technology (CICT) their proposal for the NBN Project.

Based on the testimony of Engineer Jim Lozada, it was also on September 2006

when former NEDA Secretary Neri asked him to assist NEDA in evaluating the national

broadband network project.

y
6 President Gloria Macapagal-Arroyo, State of the Nation, 24 July 2006.

Page 17 of 127
 Engineer Rodolfo Noel "Jun" Lozada was a very good friend of NEDA

Chairman Romulo Neri. Their friendship goes way back even when Chairman Neri was

still with the Department of Budget Management (DBM). In fact, Jun Lozada even said

that, "When Secretary Neri was in DBM, I drafted a memo for him directing all

govemment agencies to submit their telecom expenses classified into fixed, mobile and

data. 7

On September 4 and 6, 2006, ZTE sent letters to CICT regarding clarification on

the project proposal and incorporating the suggestions of CICT.

The following are the changes suggested by CICT as included in the letters

dated September 4 and 6, 2006:

1. Accommodation for more remote education coverage to include high schools.

2. Optimization from the original video conferencing based real-time interactive

remote education solution toan Internet-based multimedia remote education

solution.

3. Provision for an extended operation and maintenance.

As early as September 8, 2006, Export-Import Bank of China ("China Exim

Bank") already wrote to NEDA informing them that they are ready to exchange opinions
<! ' ,
and explore cooperation opportunities' after China EXIMBANK and ZTE held

discussions resulting in the conclusion that they may be available for transactions on

the NBN project.

On October 10,2006, the unsolicited Build-Own-Operate (BOO) proposal of AHI

was first submitted to National Economic Development Authority (NEDA) by its private

V
7 TSN, Aliccatimbang V-I, February 8,2008,10:53 a.m., pp. 6-7.

Page 18 of 127
 proponent Mr. Jose de Venecia III as Chairperson of the Bandila Communications

Holdings, Inc. in partnership with private Chinese enterprises and institutions.

NEDA transmitted the proposal to DOTC. DOTC Assistant Secretary Soneja told

Mr. Jose de Venecia III to submit the final version of the proposal not later than February

26,2007.

It is worth noting that Mr. Jose de Venecia Ill's unsolicited Build-Own-Operate

(BOO) proposal of AHI was first submitted to NEDA and not to DOTC- the implementing

agency.

On the one hand, Amsterdam Holdings, Inc. was incorporated on August 5, 2002.

It has an authorized Capital Stock of. P 5 Million. Its paid-up capital is P 312,800. Mr.

Jose de Venecia III admits that he is the majority shareholder of AHIBMr. Jose de

Venecia III also admits that he is one of the beneficial owners of AHI. 9

On the other hand, Bandila Communications Holdings, Inc., has an authorized

capital stock of P 40 Million with paid-up capital of P 10 Million. It was incorporated on

July 14, 2006,10 two days after the MOU between the Philippines and ZTE was signed.

NEDA passed ~n the proposal to DOTC. DOTC Assistant Secretary Soneja told

Mr. Jose de Venecia III to submit the final version of proposal not later than Feb. 26,

2007.

8 Affidavit of Jose De Venecia, III, par. 1, September, 10, 2007.

9
TSN, Lpamorca 1-2, September 18, 2007,10:33 a.m. p. 6.
lOS ' . d
ecuntles an Exchange Commission, Articles of Incorporation, Bandila Communications Holdings Corporation.

Page 19 of 127
 It is notable that the unsolicited Build-Own-Operate (BOO) proposal of AHI was

submitted to NEDA first and not to DOTC.

On October 17, 2006, NEDA Secretary Romulo Neri wrote to Mr. Jose de

Venecia III, Chairman of Bandila Communications Holdings, Inc., regarding the latter's

proposed Orion Network Project. Secretary Neri expressed support for the objectives of

the project.

This letter is contrary to the statements that Secretary Neri in a Memorandum

dated September 20, 2007 submitted to the Blue Ribbon Committee on September 26,

2007. There, he said:

4. The NEDA-ICC in its project review process observes and applies the
presumption of regularity in the performance of functions by the
implementing agency with respect to those responsibilities vested in it by
law,

5. Moreover, ICC likewise presumes that the expertise and speCialized

knowledge with respect to various aspects of the proposed project reside
in the implementing agency. Hence, in the review process, the inter-
agency ICC does not substitute its judgment for that of the
implementing agency except where the responsibility and expertise
reside in the ICC or its member agencies. 11

On October 23, 2006, CICT formally endorsed to NEDA for further evaluation

and action the NBN Communications Infrastructure Project proposal of ZTE

Corporation.
I

On October 28, 2006, the national broadband network was officially endorsed to

NEDA by CICT as a government project, not as a Build-Operate-and-Transfer (BOT)

project.

11 Romu I0 Nen,. Memorandum, September 20, 2007.

Page 20 of 127
 This October 28, 2006 endorsement is being denied by former CICT Chairman

Sales in the 13th and last hearing. However, Engineer Jun Lozada alleges that this

endorsement came from Assistant Secretary Lorenzo G. Formoso of DOTC, the head of

TELOF.12

On October 29 2006, President Gloria Macapagal-Arroyo, First Gentleman Jose

Miguel Arroyo and Speaker Jose De Venecia go to Hong Kong.

On October 30, 2009, Comelec Chairman Abalos goes to Hong Kong.

Travel documents also indicate that Engineer Jun Lozada was also in Hong Kong
13
from October 29 - November 6,2006.

On November 2, 2006, President Gloria Macapagal-Arroyo and the First

Gentleman Jose Miguel Arroyo, together with House Speaker Jose De Venecia, and

the then Comelec Chairman, Benjamin Abalos played golf and had lunch with ZTE

officials at the ZTE Headquarters in Shenzhen, China. 14

12 TSN: Solidum 1-2 September 1, 2009 12:49 p.m., pages 6-7.

" Bureau 01 Immigration and Deportation Records, Rodollo Noel Jun Lozada.

14 Presidential Decree No. 46 (1972) makes it punishable for Public Officials to receive, and for private persons to
give, gifts on any occasion, including Christmas.

It should also be noted that Section 7(d) of RA 6713 (Code of Conduct and Ethical Standards for Public Officials and
Employees) provides: "Public officials and employees shall not solicit or accept, directly or indirectly, any gift,
gratuity. favor. entertainment. loan or anything of monetary value from any person in the course of their offiCial
duties or in connection with any operation being regulated by or any transaction which may be affected by the [1/
functions of their office." \ /

Page 21 of 127
 On November 21, 2006, then Presidential Chief of Staff Michael Defensor,

inquired from China's Minister of Commerce Bo Xilai if they were interested in arranging

the financial facility and technical support of the NBN project.

Also on November 21, 2006, during a meeting of the NEDA, President Arroyo

supposedly laid down the following conditions regarding the NBN project:

• The NBN should be undertaken via a BOT scheme;

• It sho~ld be paid for by private funding;

• There should be no government subsidy or outlay for the project;

• A "pay as you use" instead of a "take or pay" scheme should be utilized; and

• The result of the undertaking should be a reduction in government

telecommunication expenses. 15

Although the Senate Joint Committees had requested for the minutes of the

NEDA meeting and other pertinent documents during the ZTE hearings of September

and October 2007, the NEDA refused to submit these on the basis of "executive

privilege." Senators Mar Roxas and Benigno "Noynoy" Aquino III filed with the Supreme

Court on October 26, 2007, a petition to clarify the bounds of executive privilege and

whether it was applicable to that situation. The case remains pending.

Also, it is quite disturbing that despite the President's insistence that the

Government Broadband Network be undertaken via BOT (November 21, 2006 NEDA

Meeting), the Presidential Chief of Staff on the same day writes to China's Minister of

Commerce Bo Xilai if they are interested in providing a "financial facility and

tech 0
support for NBN project."
;/
15
TSN, CFDRIZ IX-I, September 20, 2007, 4:23 p.m., pp. 5-6.

Page 22 of 127
 On December 2, 2006, China's Ambassador to the Philippines Li Jinjun informed

the Philippine government, through then Presidential Chief of Staff Mike Defensor, that

their government would provide a Preferential Buyer's Credit financing support through

China Exim Bank. China also designated ZTE Corporation as the prime contractor.

In the testimony of former Comelec Chairman Abalos, he said: "It was probably

this letter that JDV learned about the situation ... This was in response to the letter of

Sec. Defensor where there has been an appeal for the Chinese Government to finance

the project. ,,16

Some time also in December, Mr. Jose de Venecia III alleges that Come lee

Chairman Benjamin Abalos offered him a technical partnership with ZTE in exchange

for US$ 10,000,000.00.

On December 4, 2006, Ernesto Garcia, Managing Director of AHI wrote a letter

addressed to Secretary Mendoza stating that: "The Speaker's Office had instructed me

to forward the attached material to your office, ASAP.,,1?

The aforesaid "material" was a draft letter to be signed by Secretary Mendoza

endorsing the rival AHI-constructed NBN project to the NEDA.

On December'5,2006; Mr. Jose de Venecia III filed his AHI Proposal with the

DOTC. This is 2 months after Secretary Neri's endorsement that Mr. Jose de Venecia

III files his application with DOTC.

16
TSN, HSGayapa VI-!, September 26, 2007, 10:39 a.m., p.3.

17 TSN, Cisotto V-2 September 26, 2007, 1:33 p.m., p. 4.

Page 23 of 127
 On December 8, 2006, CICT informs NEDA of AHI proposal and that the former

cannot continue with its evaluation because it is incomplete.

On December 27, 2006, Mr. Jose de Venecia III accompanied former Comelec

Chairman Benjamin Abalos to Shenzhen, China where Chairman Abalos allegedly

demanded from ZTE the balance of the latter's commission from the project as well as
18
the share of the Speaker and the President.

On January 3, 2007, NEDA requests DOTC to take the lead in the preparation

and implementation of the Cyber Corridor Projects.

Also, sometime in January 2007, former Comelec Chairman Abalos said to

NEDA Secretary Neri: "Sec, may 200 ka dito."19

Secretary Neri said he mentioned such conversation to the President, where the

President told him nono acceptthe bribe. 20

On January 18, 2007, former Comelec Chairman Benjamin Abalos allegedly

called Engineer Jun Lozada and berated and cursed him over the phone since

Chairman Abalos was ':acGus'ing Mr. Jose de Venecia III and Jun Lozada of double-

crossing him. Chairman Abalos was claiming that he has in his possession several
,
wiretapped conversations of Mr. Jose de Venecia III and Engineer Jun Lozada. After

this conversation, Engineer Jun Lozada allegedly distanced himself from the project.

18 Mr. Jose de Venecia III admitted in the September 1, 2009 hearing that he also subsequently met with ZTE
officials in Diamond Hotel.

19
TSN: GUINHAWA 111-1, September 26,2007, 10:09a.m., p.B; ADMasicap IV-I, September 26,2007, 10:19a m
p.9.

20 TSN, L. Sapida 11-5, September 26,2007,7:30 p.m., p.4i BRHGonzalies VII-I, September 26,2007,10:49 a.m., p. 6.

Page 24 of 127
 Sometime in February 2007 at the height of the campaign for national elections,

at a reconciliatory meeting at Wack Wack Golf and Country Club in Mandaluyong, the

First Gentleman allegedly shouted at Mr. Jose de Venecia III to "back-off."

On February 13, 2007, the Office of the President Issues EO 603 reverting the

supervision and control of the Telecommunications Office (TELOF) and the operating

units of the DOTC from CICT to DOTC. The significance of which is that the

implementing arm of the broadband project would be DOTC-TELOF.

Also on February 13, 2007, The Joint NEDA-ICC (Investment Coordinating

Council) and Cabinet directed DOTC to sort out possible overlaps of proposed Cyber

Education Project of the Department of Education with existing and proposed projects of

similar nature on com~unications infr~~tr~cture backbone network.

Six days after, on February 19, 2007, a meeting was held at NEDA where

representatives of the DepED, NEDA, DOTC, TELOF, and CICT discussed the
;
proposals of the DepEd, ZTE and Orion Network for National Broadband Network.

The following day, on February 20, 2007, NEDA requests DOTC to reconcile

Cyber Education Program (CEP) of the Department of Education with NBN project as

financed by the People's Republic of China and the NBN project for Build Operate and

Own.

Immediately, the day following, on February 21, 2007, the TWG - ICT composed

of members from TELOF, NTC, CICT, and DOTC met and reviewed the project

proposals.

Page 25 of 127
 The TWG-ICT determined that the Department of Education's proposal for its

own broadband network directly overlaps the IP-based National Broadband Network.

Further, that the Orion proposal was an unsolicited proposal which aims to service both

private sector and government needs through a Build Operate and Transfer (BOT)

scheme, while ZTE "will establish a telecommunications network to service a single

platform for all ICT services which shall be financed through loans."

On February 27, 2007, NEDA again requests DOTC to submit a reconciled

project proposal on CEP - NBN projects.

The following day, on February 28, 2007 said TWG-ICT issues a Memorandum

for the BAC Chairman for ICT Projects of the DOTC recommending the establishment

of single national broadband network to cater to the needs of the government in VOIP,

e-Governance, e-Government services, and e-Learning services through the

Department of Education.

On the same day, February 28, 2007, DOTC TWG submits its report on the

evaluation it has conducted on the proposals of ZTE and AHI on the NBN project to

DOTC BAC.

On March 1,2007, ZTE submits its revised proposal to DOTC.

On the very same day, 6n March 1, 2007, The Bids and Awards Committee

(BAC) reviewed and evaluated the revised proposal and presented the conditions to

ZTE.

Page 26 of 127
 Also, on March 1, 2007, DOTC Secretary Mendoza and CICT Ramon Sales

write a joint letter to NEDA recommending the establishment of a single Broadband

Network.

DOTC and CICT said in the letter that the Bids and Awards Committee (BAC)

came up with the following conditions:

• The project should satisfy the network requirements of the various

government agencies for VOIP, e-Government and e-Education;

• The system should be designed and implemented considering the demands

in areas not covered by existing services. Corollarily, the system should take

into account and utilize and integrate, if possible, existing private and public

telecommunications infrastructure; and

• The funding should fully cover all requirements of the project including those

for its initial operation and maintenance.

'. I
Worth noting, however, is the fact that this letter of DOTC Secretary Mendoza

and CICT Secretary Sales of March 1, 2007 addressed to NEDA Chairman Neri comes

five days in advance of the BAC Resolution No. ICT 07-0002 dated March 6, 2007.

Resolution No. 07-0002 of the BAC-ICT of the DOTC is the document which formally
, ; : :~
" "

adopted the findings of the Technical Working Group (TWG) and recommended that the

findings be forwarded to the National Economic and Development Authority (NEDA).

It is to say the least, incredible how DOTC Secretary Mendoza and CICT

Chairman Sales can attach said BACResolution to their March 1,2007 letter to NEDA

Secretary Neri when the BAC for ICT only came out with its findings on March 6, 2007.

Further, Assistant Secretary Soneja's Memo of March 1, 2007 was stamped received ( ;

by the Office of the DOTC Secretary only on March 7, 2007. I

Page 27 of 127
 Clearly, this shows that there is an unbelievably hyper-efficient government at

work or a fast and speedy express to ensure the "commissions."

On March 29, 2007, NEDA Director Reynoso Jr. recommends the

implementation of the project provided that an EO be issued directing government

offices to utilize the NBN project and for DOTC to secure an ECC from DENR.

On the very same day, NEDA approves the NBN-ZTE project.

NEDA-ICC and NEDA Board approved the NBN project on the basis of its

technical and socio-economic merits and with DOTC as the implementing agency.

On April 3, 2007, NEDA Director and Board Secretary issued a certification that

NEDA approved'the NBN-ZTE project on May 29, 2007.

On April 10, 2007, BAC for Information and Communications Technology (ICT)

recommends that the procurement for the Supply and Equipment of the NBN project be

undertaken thrudiredcontracting.

Thereafter, on' April 16, 2007, the DOTC requested the opinion of the

Government Procurement Policy Board (GPPB) on whether or not the contract with ZTE

Corporation was exempted from Republic Act (RA) 9184 or the Philippine Procurement

Law. GPPB opined that since the procurement was premised on Section 4 of RA 9184,

the favourable opinion of GPPB was not required. It then suggested that instead, the

DOTC 'hoold get, DOJ Opioioo ,',"og 'h,' ,he "o'mct with ZTE CmpomU," W" "y
Page 28 of 127
 executive agreement and thus exempt from the requirements of RA 9184 or the

"Government Procurement Reform Act".

Also all on the same day, the following were accomplished by the Technical

Working Group (TWG)21 of DOTC:

• The TWG for ICT conducted an evaluation of the ZTE proposal.

• The TWG recommends signing of contract.

• The TWG recommends that DOTC legal review the contract.

• The TWG recommends that a DOJ opinion be sought on the mode of

procurement used.

• The TWG recommends that a Special Authority be granted to the Secretary

by the Office of the President allowing the latter to enter into a contract with

ZTE Corp.

On April 20, 2007, the eve of the signing of the Contract, President Arroyo

granted Secretary Mendoza full powers to sign the NBN project contract with ZTE

Corporation even without the aforesaid DOJ Opinion.

Also, on April 20, 2007, the following government agencies did the following:

• DOTC Legal Service issues a Memo to the Secretary stating that they have
, "'," ',;'" \'" 1'0 ; .>",. " ' +> •. ".. • '.',

reviewed ZTE contract and finds it in order.

• DOTC Legal Service opines that no public bidding is required on the NBN

project based on the exchange of notes between the GRP and PROC.

• NEDA sends letter to Minister Bo Xilai and Chair Li Ruogu of China Exim

Bank endorsing NBN project for loan financing of the PROC.

21 The DOTe Technical Working Group are composed of: Santiago O. Testor-Head; Artemlo P Anda- Assistant
Head;. Eulogi~ Aguila: Rolando M. Recio 1 J~se S..Tanqueco Jr Romeo T. Lalamunan, Norberta A Conti, Nemesio /
l

ClaudiO, Frorlan Jamlas, Manuellazam, Nlla Colmares, Armin Fabricante I and John Javinas as Members. ( /

. . Page 29 of 127 /
 Also on April 20, 2007, President Gloria Macapagal-Arroyo already knew that

there was something wrong with the NBN-ZTE deal. This was admitted by GMA on

February 23, 2008, in her DZRH interview. She said that she first learned of

irregularities in the US$ 329.48 million broadband contract with ZTE Corporation on the

eve of the signing of the Supply Contract in China on April 21,2007.

On April 21, 2007, the DOTC, through Secretary Leandro R. Mendoza, and

Zhong Xing Telecommunications Equipment (ZTE), through its Vice President Yu Yong,

executed in Boao, China, a "Contract For the Supply of Equipment and Services for the

National Broadband Network Project" worth US$329,481 ,290 (approx. Php16 Billion).

The signing was witnessed and attended also by President Gloria Macapagal-

Arroyo (PGMA), who took time out from her multifarious duties and pressing family
",'I( ,"

crisis; the First Gentleman was in hospital at that time. The ZTE contract was to be

financed through a loan that would be extended by the PRC, through the Export-Import

Bank (EximBank) of China .

. .

The original Supply Contract signed in Boao, China on 21 April 2007 was

thereafter (on the same day) lost by the Phil. Commercial Attache Mr. Emmanuel T.
. I.
Ang. Charges have reportedly been filed against Ang.

".,1,' '¥.

Then, on April 27, 2007, Philippine Star columnist Jarius Bondoc wrote in his

column that an unnamed Comelec official had a hand in the approval of the NBN deal,.A

which was supposedly overpriced. ~

Page 30 of 1Z7
 On May 28, 2007, DOTC requests the Department of Finance (DOF) to facilitate

the loan from EximBank of China.

Significantly, it was only on July 26, 2007 - or three months after the GRP had

already entered into the Supply Contract - when DOJ Opinion No. 46 (2007) was

issued, stating that: a) the exchanges and correspondence between then Presidential

Chief of Staff Defensor and Chinese Minister of Commerce Bo and Ambassador Li may

be considered an Executive Agreement between the RP and the PROC; b) the

designation of ZTE Corporation as the project's prime contractor in the exchange of

notes has to be observed pursuant to Section 4 of R.A. No. 9184 and the principle of

pacta sunt servanda; and c) the guidelines of China Exim Bank on procurement shall be

followed, unless the loan agreement with said institution is silent as to the governing

guidelines, in which case, the IRR-A of RA No. 9184 may apply.

On the issue of procurement, DOJ Opinion No. 46, series of 2007 expressly

mentioned the provision of Commonwealth Act No. 138 which states that:

Any treaty or international or executive agreement affecting the subject matter of thiS Act to
which the Philippine government is a signatory shall be observed.

DOJ Opinion No. 46 also classifies the Supply Agreement signed by Secretary

Mendoza on April 21, 2007 as an Executive Agreement.

Iloilo Vice Governor Rolex Suplico then filed before the Supreme Court, on

August 1, 2007, a Petition with Application for a Temporary Restraining Order (TRO)

and Writs of Permanent Injunction to stop the implementation NBN-ZTE deal. It alleged

f
the awarding of the contract to ZTE Corporation lacked transparency; was manifestly

disadvantageous to the government; was overpriced; and was shrouded with kickbacks.

Page 31 of 127
 Subsequently, on August 15, 2007 Secretary Neri, for reasons only known to

him and President Arroyo, was transferred from NEOA to the Commission on Higher

Education (CHEO).

On August 29, 2007, Representative Carlos Padilla identified COMELEC

Chairman Abalos as the officiClI who brokered the project.

On September 3, 2007, ZTE Corporation then issued a press statement that

there had been "complete transparency in the proposal, evaluation, and approval of

ZTE's application for the Philippines NBN contract."

However, the Supreme Court, acting on the Suplico petition, issued a TRO on

September 11, 2007 restraining the GRPfrom proceeding with the NBN-ZTE project.

On September 18, 2007, the Senate began its series of investigations. This

hearing was followed by the September 20, 26, 27, October 25 and November 20

hearings. In 2008, the Senate conducted hearings on January 30, February 8, 11, 18,

26 and March 11. The final hearing of the Senate was on September 1, 2009.

On September 22,2007, President Arroyo suspends the NBN-ZTE contract.

In the course of the investigations, on October 1,2007, then Chairman Benjamin

Abalos resigned from the Comelec.

Thereafter, on October 2, 2007, President Arroyo, while on a State Visit to

China, cancelled the NBN deal with ZTE Corporation.

Page 32 of 127
 On January 30, 2008, both Secretary Neri and Engineer Jun Lozada snub the

Senate subpoenas to testify before the Senate. Engineer Lozada allegedly flies to

London for a seminar.

After snubbing the January 31, 2008 hearing, the Senate ordered the arrests of

Secretary Neri and Engineer Jun Lozada.

On February 4, 2008, Speaker Jose De Venecia was ousted as the Speaker of

the House of Representatives.

On February 5, 2008, the Supreme Court granted Secretary Neri's request for

the issuance of a TRO to prevent the implementation of the Senate arrest order. On that

same day, Engineer Lozada arrived from Hong Kong but supposedly disappeared upon

his arrival.

On February 6; 2008, Violeta Lozada, the spouse of Engineer Lozada filed a writ

of habeas corpus before the Supreme Court. On the same day, the brother of Engineer

Lozada, Arturo Lozada, filed a writ of amparo also before the Supreme Court. Both

cases were later referred to the Seventeenth Division of the Court of Appeals.

Eventually, the Court Of Appeals denied Engineer Lozada's writ of amparo while the writ

of habeas corpus became moot.

On February 7, 2008, Engineer Jun Lozada resurfaces after evading the Senate

warrant of arrest issued on January 31, 2007. In subsequent Senate hearings, he

alleges that he was kidnapped by State agents to prevent him from testifying before the

Senate. He linked Comelec Chairman Abalos and First Gentleman Mike Arroyo to the

US$329.5~;lU," ",lioo,' bco,db"d ,,,' with ZTE Cmpornlioo f

Page 33 of 127
 On February 26, 2008, the Senate takes custody of Dante Madriaga. Mr.

Madriaga testifies that he was a consultant of Mr. Leo San Miguel and that he received

an e-mail from Leo San Miguel detailing the "tong pats" made in the project.

On March 11, 2008, Mr. Leo San Miguel testifies before the Blue Ribbon

Committee that he was just a consultant with ZTE and he did not know of any

anomalies in the transaction. In previous testimonies, Mr. Jose de Venecia III and Mr.

Dante Madriaga allege that Mr. Leo San Miguel was part of the Abalos group.

On March 25, 2008, The Supreme Court voted 9-6 in favor of Romulo Neri's

petition where the President invoked executive privilege in relation to three questions that

the Senate required him to answer during the hearings on the NBN-ZTE. The questions

were:

1) Whether the Presidentfollowed up on the NBN-ZTE project?

2) Whether Secretary Neri was instructed to prioritize the NBN-ZTE project?

3) Whether President Arroyo ordered Secretary Neri to go ahead and approve the

NBN-ZTE project even after being informed about the alleged bribe?

This judgment was later affirmed by the Supreme Court on September 4, 2008

after dismissing the Senate's

. .
Motion for Reconsideration .

The Supreme Court's affirmation of the President's claim of executive privilege

became a major stumbling block in the Committee's quest for truth.

Page 34 of 127
 On August 27, 2009, the Office of the Ombudsman ordered the filing of criminal

charges against former Comelec Chairman Benjamin Abalos and former NEDA

Secretary Romulo Neri in connection with the controversial NBN-ZTE broadband deal.

Finally, on September 1, 2009, Senator Richard J. Gordon conducts the 13th and

final hearing of the NBN-ZTE controversy to tie up loose ends and verify the veracity of

the data gathered.

In view of the foregoing indisputable facts, it is incumbent upon the Blue Ribbon

Committee now to analyze the events and the extent of participation and involvement of

the succeeding characters in the NBN-ZTE scandal.

2. THE MAIN CHARACTERS OF THE NBN-ZTE SCANDAL

Although the Blue Ribbon Committee invited around 43 personalities to its

hearings and around 22 resource persons to its Technical Working Groups, we have

chosen to focus on the these 12 personalities since they are the ones who, seem to us,

the main actors in the NBN-ZTE scandal.

2.1. Former COMELEC Chairman BENJAMIN S. ABALOS

The third NBN-ZTE public hearing on September 26, 2007 revealed the extent of

the role, interest and influence of former COMELEC Chairman Benjamin S. Abalos over

the NBN-ZTE deal controversy.

Chairman Abalos's alleged involvement in the subject controversy was

established and strengthened by the testimony of CHED Chairman Romulo L. Neri, the

former Director General of the NEDA. U

Page 35 of 127 /
 Chairman Neri affirmed having met and talked with Chairman Abalos on three

occasions.

The first was when Chairman Abalos visited Chairman Neri in the latter's office at

NEDA presumably to talk about the ZTE project; although, the latter could not recall
81
what they had specifically discussed

The second meeting was at the Makati Shangrila Hotel where Chairman Neri had

a lunch meeting arranged by the Chinese Embassy. In attendance were two officials of

the Chinese Embassy, ZTE officials and Chairman Abalos 82

The third meeting was in Wack Wack Golf and Country Club where Chairman

Abalos and Chairman Neri both played golf with Chairman Abalos acting as the "very

charming host,,83

Chairman Neri, together with his friends, was invited by Chairman Abalos to a

few rounds of golf. When the two of them were inside the golf cart, Chairman Abalos

said something that surprised Chairman Neri. Chairman Abalos said to Chairman Neri,

"Sec, may 200 ka dito".84

" TSN: GUINHAWA 111-1, September 26, 2007, 10:09a.m., p.7.

B2
TSN: GUINHAWA 111-1, September 26,2007, 10:09a.m., p.8.
83
TSN: GUINHAWA 111-1, September 26, 2007, 10:09a.m., p.8.
84
1/
p.9.
TSN: GUINHAWA 111-1, September 26, 2007, 10:09a.m., p.8; ADMaSicap IV-l, September 26, 2007, 10 19a m ,

r/
Page 36 of 127 I
 Chairman Neri was shocked upon hearing the said offer because he was not

used to being offered a bribe, and the bribe amount was "huge,,85

While no specific denomination was cited, Chairman Neri presumed that the

"200" meant 200 million pesos, considering the magnitude of the NBN-ZTE project,

which, they were discussing while playing golf86

Chairman Neri said he reported the attempted bribe offer to President Arroyo in a

phone conversation in which he specifically said, "Chairman Abalos offered me 200

million for this". President Arroyo replied, "Don't accept it,,87

Chairman Neri could not give an exact answer as to the role or participation of

Chairman Abalos in the NBN-ZTE deal. What Chairman Neri testified to was the fact
, , "(f""" """"'! ',1"''''''
that Chairman Abalos mentioned the project to him on several occasions. The clearest

indication was when they had lunch with the representatives of Zhong Xing

Telecommunication Equipment Company Limited [ZTE for short] at the Makati Shangri-

la Hotel upon the invitation of the Chinese Embassy.88

On the other hand, Chairman Abalos declared that his involvement with the
..
NBN-ZTE project had nothing to do with his official functions as COMELEC Chairman 8g

8S TSN: (tsotto V-I, September 26, 2007, 1O:29a.m., p.l:

86
TSN: (tsotto V-I, September 26, 2007, 10:29a.m., p.2.
87
TSN: (tsotto V-I, September 26, 2007, 10:29a.m., p.2.
8S
TSN: BRHGonzales VII-I, September 26, 2007, 10:49a.m., p.B.

89 TSN: PEGutierrez VIII-I, September 26, 2007, 10:59 a.m., p.5.

Page 37 of 127
 Chairman Abalos vehemently denied brokering the NBN project for his Chinese

businessmen friends. He said that there was no need for anyone to broker for ZTE

Corporation because it was designated by its own government. 90

With regard to the bribery issue, Chairman Abalos at first declared that he could

not comment on something he neither understood nor had knowledge of. Chairman Neri

stated that he himself did not know whether it was two hundred million, two hundred

thousand, or two hundred that Abalos was referring to. 91

Later, Chairman Abalos neither confirmed nor denied the allegations of Chairman

Neri with regard to the "200" offer. He stressed that he could not recall making the said

offer. 92

Finally, Chairman Abalos denied having approached and offered Chairman Neri

a bribe for he had no reason to do so. He said that it was Chairman Neri who was lying

under oath.93

However, Mr. de Venecia III admitted that Chairman Abalos offered him a U.S. $

10 million "bribe" in the private office of Chairman Abalos at the Wack Wack Golf and

Country Club. 94 be\len~~'ia III also described it as "suhoL,,95

90 TSN: PEGutierre, VIII-I, September 26,2007, 10:59a.m., p.6.

91 TSN: ADMasicap IV-I, September 26, 2007, 1O:I9a.m., p.3.

..
, ':'. , ,,",/.

" TSN: HSGayapa, VI-I, September 26,2007, 10:39a.m., p.8.

" TSN: BRHGonzales, VII-I, September 26, 2007, 10:49a.m., p.l; BRHGOnzales, VII-I. September 26. 2007.

V
1O:49a.m., p. 6.

94 TSN: PEGutierre" VIII-I, September 26, 2007, 10:59a.m., p.2; CFORIZ 111-2, September 18. 2007. 10:S3a.m .• p.4.
95
TSN of September 1. 2009.

Page 38 of 127
 Chairman Abalos also denied the allegation that he offered Mr. de Venecia III the

US$10 million bribe in exchange for the withdrawal of the latter's company from the

NBN project. 96

In his testimony, Mr. de Venecia III also revealed that it was Chairman Abalos

who was pushing for the ZTE proposal and who stood to receive for himself kickbacks

from the colossal overpricing of the NBN project. 97

Chairman Abalos never denied his close ties with the ZTE officials. His closeness

with the ZTE officials was the reason why Mr. de Venecia III wanted him to act as a

bridge between Mr. De Venecia III and ZTE officials. 98

Chairman Abalos admitted that he was present during the meeting between Mr.

de Venecia III and the ZTE officials at Kempinski Hotel in China 99 However, he

vehemently denied banging his fist on the table during the meeting or asking for any

commission in relation to the NBN-ZTE deal. 1OO

Chairman. Abalos admitted that ZTE officials requested him if they could have a

dinner meeting with Secretary Mendoza at the Wack Wack Golf and Country Club and

being a membe~ of that club, Chairman Abalos agreed to sponsor and host the dinner

meeting. 101

96 TSN: PEGutierrez VIlI-1, September 26,2007, 10:59a.m., p.2.

97 TSN: Solidum 11-2, September 18, 2007, 10:43a.m., p.5.

98
TSN: Ctsotto VI-1, September 26, 2007, 1O:29a.m., p.7.
99
TSN: CPMendoza, XI-2, September 26,2007, 2:33p.m., p.l.
100
TSN: CPMendoza, XI-2, September 26, 2007, 2:33p.m., p.2.
101
TSN: Amador X-1, September 26, 2007, 11:19a.m., pp.8-9.

Page 39 of 127
 Chairman Abalos confirmed that Secretary Teves attended the said dinner

meeting. However, Chairman Abalos pointed out that he did not attend the dinner

meeting and left after a brief exchange of pleasantries with Secretary Teves. 102

Chairman Abalos explained that it was Secretary Teves who talked with the

Chinese. 103

On the other hand, Secretary Teves, during the September 20, 2007 hearing

said: "What I did recall was my meeting with Chairman Abalos and Secretary Mendoza

in Wack Wack. That's what I did recall that the meeting was on Broadband. ,,104

'"" ' "'I "" e, ""'i "".<

Finally, Leo Sari Miguel testified that... "the participation of Chairman Abalos in

my vantage point of view, in some meetings of ZTE, Chairman Abalos is there,

together with Mr. Ruben Reyes xxx I know he's been helping ZTE." And, that he had

met with then Chairman Abalos about five times with regard to ZTE. 105

2.2. Mr. JOSE "Joey" DE VENECIA III

Mr. de Venecia III is the son of Representative Jose de Venecia, who was the

Speaker at the titTle Uietransaction took place.

102 " '

TSN: Amador X-l, September 26,2007, 11:19a.m., p.g.
103
TSN: Amador X-l, September 26, 2007, 11:19a.m., p.l0.
104
TSN: CGCastro XII-3, September 20,2007, 8:33a.m., p.3.
105
TSN: BRHGonzales IX-l, March 11, 2008, 12:00 p.m. piO' (tsotto X-l March 11I 2008 12'10 p. m ,p ..
' I I '
1

Page 40 of 127
 Mr. de Venecia III is one of the beneficial owners of AHI. In December 2006, AHI
106
filed its unsolicited proposal for the NBN project.

The DOTC and NEDA then considered AHI as the original proponent for the NBN

project. 107 This supposedly prompted Chairman Abalos, whom Mr. de Venecia III often

referred to as the "senior powerful person," to persuade the lalter to fly to China to

discuss a partnership with Zhong Xing Telecommunication Equipment Company Limited

[ZTE for shortj.108

It was at this meeting in China where Mr. de Venecia III allegedly found out that

the ZTE proposal was overpriced by 100 percent of the contract price, or by US$130
" 'n:" ",' 10g
million, to accommodate the advances and kickbacks of Chairman Abalos. However,

it is worth noting that in spite of this, Mr. De Venecia still met with ZTE in January 2009

at Diamond Hotel. Then Comelec Chairman Abalos was also within the premises of the

hotel. 11o
" ,

With this information about undisclosed advances and kickbacks, Mr. de Venecia

III avers that he informed his partners of his objection and refusal to enter into a

partnership with ZTE. 111

The intention of Mr. de Venecia III to pursue AHI's proposal allegedly on the

basis of its merits made Chairman Abalos furious. Thus, Secretary Mendoza arranged a

106 TSN: Lpamorca 1-2, September 18,2007, 10:33a.m., p.6.

m .
TSN: Lpamorca 1-2, September 18, 2007, 10:33a.m., p.6.

108 TSN: Solidum 11-2, September 18, 2007, 1O:43a.m. p.l.

109 TSN: Solidum 11-2, September 18, 2007, 10:43a.m., p.l.

l1O TSN : Jmbaisa VI-2 September 1, 2009,1:39 p.m., p. 6.

111 TSN: Solidum 11-2, September 18, 2007, 1O:43a.m., p.2.

Page 41 of 127
 "reconciliatory" meeting between Mr. de Venecia III and Chairman Abalos to seek to

reconcile their conflicting positions regarding the NBN deal and attempt to repair their

relationship.

In the said reconciliatory meeting which was held in the middle of March 2007 at

the Wack Wack Golf and Country Club, the ZTE broadband proposal was discussed

and AHI's unsolicited proposal was shelved in favor of the overpriced ZTE proposal. 112

Mr. de Venecia III revealed that it was Chairman Abalos who pushed for the ZTE

proposal and who stood to receive for himself any kickbacks from the colossal

overpricing of the NBN project. 113

Present during that reconciliatory meeting was a powerful person whose

participation in the NBN project or ZTE deal was unclear. Mr. de Venecia III then

testified that "I had previously mentioned to reveal the identity of the mystery man

under oath and in the proper forum. It is with a heavy heart that I cannot deny that it was

the First Gentleman Mike Arroyo at the reconciliatory meeting. ,,114

In that reconciliatory meeting, First Gentleman Mike Arroyo allegedly, pointed an

accusing finger at Mr. de Venecia III and shouted at him to "back Off."115

112 TSN: Solidum 11-2, September 18, 2007, 10:43a.m., p.4.

m TSN: Solidum 11-2, September 18, 2007, 1O:43a.m., p.S.

114 TSN: Solidum 11-2, September 18, 2007, 1O:43a.m., p.S; CFDRIZ 111-2, September 18, 2007, 1O:S3a m , p.5.
115
TSN: CFDRIZ 111-2, September 18, 2007, 10:53a.m., p.6.

Page 42 of 127
 These words uttered by the First Gentleman Mike Arroyo gave Mr. de Venecia III

the impression that he was being ordered by the former to withdraw his NBN project

application with the DOTC and that it was upon the prodding of Chairman Abalos.

In the words of Mr. de Venecia III: "I believe, sir, that the - my impression is that

Chairman Aba/os had asked him (referring to Mike Arroyo) to ask me to back off

because the Chairman himself could not convince me to back off. And giving - like all

men and boys when we were kids, normally when you have trouble in a fight you would

ask a heavier person to back you up in order to support you in whatever you're

asking. ,,116

Mr. de Venecia III pointed out that it was not his desire to bring down the Arroyo

administration and that his father was a staunch ally of President Arroyo and that his

NBN proposal was independent of that relationship.117 (Mr. de Venecia Ill's father,
,
former Speaker de Venecia, Jr. has since joined the ranks of the opposition against

President Arroyo, most believe as a result of Mr. de Venecia Ill's damaging testimony

regarding the NBN-ZTE controversy.)

Mr. de Venecia III subsequently filed a petition before the Supreme Court

seeking to compel the DOTC to reveal the terms of the ZTE deal contract on the

grounds of transparency and public information. 118

11'
TSN: CFDRIZ 111-2, September 18,2007, 10:53a.m., p.7.
117
TSN: CFDRIZ 111-2, September 18, 2007, 10:53a.m., p.5.

118 TSN: Solidum 11-2, September 18, 2007, lO:43a.m., p. 4.

Page 43 of 127
 2.3. First Gentleman: Atty. JOSE MIGUEL ARROYO

The first public hearing held on September 18, 2007 gave us a picture of the

extent of the involvement of First Gentleman Mike Arroyo in the NBN-ZTE deal

controversy.

His alleged involvement in the subject controversy was revealed by the testimony

of Mr. de Venecia III, son of Jose de Venecia Jr., who was the Speaker of the House of

Representatives'at the time the transaction took place.

As discussed earlier, Secretary Mendoza arranged a meeting between Mr. de

Venecia III and Chairman Abalos to seek to reconcile their conflicting positions
i'
regarding the NBN project and to attempt to repair their relationship. This meeting was

held in the middle of March 2007 at the Wack Wack Golf and Country Club.

Aside from the persons concerned, also in attendance was a powerful person
;1 :
whose participation in the NBN-ZTE project was not clear and who was later on

identified by Mr. de Venecia III as the First Gentleman Mike Arroyo.119

Mr. de Venecia III also narrated and demonstrated how First Gentleman Mike
'! r :) , ~

Arroyo pointed an accusing finger and shouted at him to "back Off".120

Moreover, the testimony of former Speaker de Venecia, Jr. before the House of

Representatives Justice Committee on November 24, 2008 confirmed that the First

Gentleman had a hand in the NBN deal and having played a golf game in Shenzhen,

119 TSN: Solidum 11-2, September 18, 2007, 10:43a.m., p.S; CFDRIZ 111-2, September 18, 2007, 10:53a.m., p.S.
120
TSN: CFDRIZ 111-2, September 18, 2007, 10:53a.m., p.6-7.

Page 44 of 127
 China sponsored by ZTE on November 2, 2006 where he, the President, the First

Gentleman and Comelec Chairman Abalos were all present:

Pray, tell me, what is the husband of the President of the Philippines doing there at
the ZTE headquarters, a company that is bidding for a massive project in the
Philippines? Pray, tell me, why the Chairman of the Commission on Elections would be
there at the ZTE headquarters? Why the Speaker of the House of Representatives, to my
surprise why I am there - on advice and on invitation of the President of the Philippines?
Very clear.

Mike Arroyo said yesterday when leaving the hospital that I am lying. Well, let me say to
you, my colleagues in the House of Representatives, that pictures do not lie. Repeat
pictures do not lie. Ang litrato po hindi nagsisinungaling. Very clear. There, al ... the talking
was done mostly by Chairman Abalos, the President was quiet. In fairness to Mike Arroyo,
he was quiet. I was quiet. And then we bade our farewells. We rode the coaster once
again.

And then when we arrived in Hongkong, before we disembarked, Mike Arroyo said,
"Perhaps it is best that this project be done on a government to government basis,"
that this project be undertaken by the Philippine government for 329 million dollars
at the government's own risk, at the Philippine government's expense, with ... 121

... the Philippine government's guarantv, with repayment to be done by the Philippine
government and by the Filipino people, as against other proposals which called for
no government expense, 100% private sector investment, 100% private sector
initiative,80T.122 (emphasis supplied)
• I' ,-

2.4. Former Speaker JOSE DE VENECIA, JR.

Mr. de Venecia 111 testified that when he joined Chairman Benjamin Abalos in

Shenzhen, China to meet with ZTE officials, the Chairman demanded from ZTE the

balance of his commission that were supposedly due President Arroyo and former
., , ,
: I '

Speaker de Venecia, Jc 123

'j!', ';"" ", I, l' >',c,,; - ., " " ", •

Former Speaker de Vehecia, Jr. confirmed news reports that President Arroyo

invited him to join her on a trip to China in November 2006, and that he did not know

1Z1
TSN of the House of Representatives Committee on Justice, 24 November 200S, WBC, IV-I.
122
1d .
123
TSN: Lpamorca, 1-4, September 18, 2007, 11:S3a.m., pA.

Page 45 of 127
 that they would play golf and have lunch with ZTE officials at the Chinese
124
telecommunications company's headquarters in Shenzhen, China.

Press Secretary and Presidential Spokesman Ignacio Bunye confirmed that

President Arroyo had a meeting with ZTE officials in November 2006.125

During the November 24, 2008 hearing of the Committee on Justice of the House

of Representatives, former Speaker de Venecia, Jr. testified that:

Having said that, let me say that during the last two days, the newspapers, radio and
television have made reference to why we were in Shenzhen across the border from Hong
Kong last All Saints Day, two years ago I was in Hong Kong with my wife Gina and the
President had just arrived in Hong Kong coming from a visit to many provinces in
China And she phoned me and she said, "Joe, can I invite you to play golf tomorrow
early in the morning?" I said, "Yes, I'll be honored, Madam President." She said,
"We will be playing with the First Gentleman". I said, "I will be honored, Madam
President". So I went to their hotel at about 7:00 or 7:30 in the morning. I didn't have any
golfing attire because I didn't know that we would be playing golf. I went to Hong Kong on
a small vacation. And when I reached the hotel we boarded a coaster and I thought we will
be playing golf in one of the golf course in Hong Kong then all of a sudden we were at the
border between Hong Kong and Shenzhen in South China .... 126

... started the conversation because I was reading the newspaper, And she said, "You
know, Joe", she said, "this ZTE project, let us consider it and approve it on the basis
of a Build-Operate-Transfer formula so that the Philippine government will have
no risk, will have no expense, will have no cost, and there will be no government
guaranty. And it will be purely a 100% private sector investment." And then she
started to praise my son who made the proposal to undertake the ZTE project on a
Build-Operate-Transfer basis as a 100% private sector investment without any cost
to the government, without any guaranty from the Philippine government, without
the Filipino people having to repay a massive loan ...

And then, fin(jIlY.'.vi:e.,anive9jn.Sh~nzhen and the coaster proceeded to the golf course in
Shenzhen and, 10 and behold!,my'biggest surprise was that Chairman Abalos was waiting
for us at the golf course. I did not expect... 127

... expecting the Chairman of the Commission on Elections, who is supposed to be

managing the elections of the nation and in a few months the election shall be held,
waiting for us there at Shenzhen. And so he was there with some ZTE executives. We

124
GMANEWS.TV, November 23,2008,9:45 PM.

125 Manila Bulletin Online, May 17, 2008.

126
TSN of the House of Representatives Committee on Justice, 24 November 2008, EAT, 111.2.
127
TSN of the House of Representatives Committee on Justice, 24 November 2008, EAT, 111.3

Page 46 of 127
 changed to golfing attire, and then after breakfast we proceeded to play golf. And after one
hour we joined by Chairman Abalos because the first threesome was the President, Mike
Arroyo and myself, then we were joined by Chairman Abalos who said "Madam President,
Mr. Speaker, please join us because we will have lunch at the headquarters of ZTE and
they are preparing a grand luncheon for us with Shanghai crabs which are in season at the
board room of ZTE". And this is very clear in my book, the picture of this meeting in this
book which was written by Brett Becker of the Wall Street Journal, former editor of the Wall
Street Journal, published in Washington D, C" shows the picture of President Arroyo, Mike
Arroyo, Chairman Abalos, myself and a Chinese official there at the golf course in
Shenzhen."

Mike Arroyo said yesterday when leaving the hospital that I am lying, Well, let me say to
you, my colleagues in the House of Representatives, that pictures do not lie, Repeat
pictures do not lie, Ang litrato po hindi nagsisinungaling, Very clear. There, al." the talking
was done mostly by Chairman Abalos, the President was quiet. In fairness to Mike Arroyo,
he was quiet. I was quiet. And then we bade our farewells. We rode the coaster once
again,

And then when we arrived in Hongkong, before we disembarked, Mike Arroyo said,
"Perhaps it is best that this 'project be done on a government to government basis" ,
that this project be undertaken by the Philippine government for 329 million dollars
at the government's own risk, at the Philippine government's expense, with .. ,128

",the Philippine government's guaranty, with repayment to be done by the Philippine

government and by the Filipino people, as against other proposals with called for no
government expense, 100% private sector investment, 100% private sector initiative, BOT,

And so remembering' the debates and' the allegations at the Senate Blue Ribbon
Committee, and let me apologize to the Senate Blue Ribbon Committee for not attending
their invitation because I was declared unconscious in Qatar for almost 24 hours when I
was stricken ill in Qatar, and on my way to deliver a speech in South Africa after I delivered
a speech in Qatar. And I was also invited by the Catholic Bishops, I was also invited by
the foreign correspondents to appear before them. But I said I would rather that I appear
before my peers in the House of Representatives, And that is why I have come here today,
Mr, Chairman, to tell you what had happened at Shenzhen and to discuss the other points
of the Impeachment Coinplaint... 129 (emphasis supplied)

Speaker de Venecia, Jr. also invited Secretary Mendoza to the former's home to

discuss the NBN project with Mr, de Venecia III, upon which Secretary Mendoza
: ,I, 1 ""_"~" >-' • ---,.-" " .... , - , , , ,

endorsed Mr. de Venecia III to the technical working group of the NBN project. 130

12'
TSN of the House of Representatives Committee on Justice, 24 November 2008, WBC, IV-1.
129

f
TSN of the House of Representatives Committee on Justice, 24 November 2008, WBC, IV-2.

130 TSN: ADMasicap 1-2, September 20,2007, 4:43p.m., pp.l0-11; PLMANUEL 11-2, September 20, 2007 4:53 pm, p.l

Page 47 of 127
 MR. MENDOZA. No, Your Honor. Actually, there was a previous meeting with the
Speaker, Your Honor, and this was held at his house. This was, I think, in the early part
of 2007 when I was invited by the Speaker to have some breakfast with him and there, he
introduced his son to me. And then ...

SEN. DEFENSOR SANTIAGO Oh, he invited you for breakfast and then he introduced
his son ...

MR. MENDOZA. Yes.

SEN. DEFENSOR SANTIAGO .... and then he just say, "This is my son ...

SEN. DEFENSOR SANTIAGO .. :.. "This is my son of whom I am well pleased," as they
say in the Bible. Was that all that he said?

MR. MENDOZA. No. The son has a - well- he is a proponent in a project at DOTe, Your
Honor.

SEN. DEFENSOR SANTIAGO. So, did you understand that this breakfast Introduction
was made in connection with the Amsterdam Holdings?

MR. MENDOZA. Well, there are other topics discussed, Your Honor, but the issue of
Amsterdam Holdings was discussed also.

While it may be argued that the above-mentioned incidents do not

constitute a violation of Sec. 3 of Republic Act 3019, nor can they be clearly

considered as direct evidence of guilt thereto, the same may be deemed as

being done in bad taste and could clearly be skirting close to being a violation

thereof.

2.5. Chairman ROMULO L. NERI

Chairman Neri testified that he and President Arroyo did not talk about his

attendance at the Senate hearing though he did not deny consulting some Palace

officials about it. He aiso clarified that he had not received any threats, to prevent him

from attending the Senate Blue Ribbon Committee hearings.

He also informed the Senate Joint Committees that his transfer from NEDA to

CHED had nothing to do with the ZTE broadband scandal. He explained that President

Arroyo wanted him to help address the problems of CHED where his unique talents and V
Page 48 of 127
 capabilities could provide some out-of-the-box solutions. Chairman Neri in fact claimed

that there was an agreement for him to return to the NEDA after six months, just like

when he was temporarily assigned to the DBM.131

During the September 26, 2007 hearing of the Blue Ribbon Committee,

Chairman Neri disclosed a su'pposed bribe offer from Chairman Abalos.

Chairman Neri narrated that he met Chairman Abalos thrice regarding the

project.

The first meeting was when Chairman Abalos came to his office at the NEDA but

Chairman Neri could not recall what they discussed. The second meeting was at the

Wack Wack Golf and Country Club where they played golf and Chairman Abalos played

the role of "the very charming host". It was during this meeting where Chairman Abalos

allegedly told Chairman Neri: "Sec, may 200 ka dito" an offer which surprised Chairman

Neri. And, the third meeting was a lunch meeting at the Makati Shangri-La Hotel

arranged by the Chinese Embassy and where two Chinese embassy officials, the ZTE
r .
officials and Chairman Abalos himself were present. 132
I"'"'' '

Chairman Neri further testified that in one of his conversations with President

Arroyo, he mentioned the alleged P-200 million bribe offer, and that President Arroyo
, ." 'J"f' . .....,..",.'-, . \ ' "" ~, y "V'

told him not to accept the money. Senator Pangilinan then asked him whether President

Arroyo followed up this matter with him after that conversation, upon which Chairman

Neri refused to answer the question on the ground of executive privilege. According to

V
131 TSN: Guinhawa 111-1, September 26, 2007, 1O:09a.m., pp.4.7.
132
TSN: CPMendoza XI-l, September 26, 2007, 11:29a.m., p.3.; Amador X·2, September 26,2007, 2:23p.m., p.7.

Page 49 of 127
 him, Senator Pangilinan's question involved conversations between him and President

Arroyo which was confidential in nature.

2.6. Engineer RODOLFO NOEL "Jun" I. LOZADA

Engineer Lozada said that his involvement in the NBN-ZTE deal started when

Secretary Neri introduced him to Chairman Abalos at the Wack Wack Golf and Country

Club where they. met with Ruben Reyes, Leo San Miguel and ZTE representatives Fan

Yang and Yu Yong. 142 However, prior to his involvement in NBN-ZTE deal, he admitted

that he was also working with Secretary Neri in the Department of Budget and

Management (DBM). ·In fact, he drafted a Memorandum for Secretary Neri directing all

government agencie·sfo s·ubmit their telecom expenses. 143

Engineer Lozada said that a few weeks after that meeting, the first NBN proposal

came through from CICT to NEDA.

He further testified that later, he was again invited to a meeting at the NEDA

where Mr. de Venecia ill was to present a competing proposal for the NBN broadband
project. Engineer Lozada explained that the difference between the two proposals was
,- t,,' .,~ \;" ,. -f " • ,

that AHI's was· to be' Undertaken on a BOT basis while that of ZTE and Chairman

Abalos' was to be financed by a loan to be incurred by the Philippine government.

:! . .. ,
Engineer Lozada testified further that Secretary Neri instructed him to reconcile the two

,;. . . .
proposals. He sought to accomplish this by proposing that AHI be awarded the project
~V

142 TSN: Aliccatimbang V-l, February 8, 2008, 10:S3a.m., p.5.

143 TSN, Aliccamtimbang, V-I, February 8,2008,10:53, pp 6-7.

Page 50 of 127
 on a BOT basis, with ZTE supplying AHI's needs through a supply agreement with

Engineer Lozada then said that trouble started when Chairman Abalos insisted

that his US$130 Million interest in the US$262 Million, which was the amount of the

NBN-ZTE projed 45 , be maintained.

Engineer Lozada explained that he relayed Chairman Abalos's demand to Mr. de

Venecia III who responded that that amount was too hard to justify and put in the books.

Engineer Lozada then said that he informed Chairman Abalos that the amount he was

asking for was too big considering that the project was to be undertaken on a loan basis

and further, that the instructions of Chairman Neri and President Arroyo indicated their

preference to undertake the NBN project on a BOT, and not a loan, basis. He then

suggested to Chairman Abalos if it can be reduced to sixty five (65) million dollars.

However, the latter did not accede to his suggestion. 146

Engineer Lozada then said that Chairman Abalos then called up First Gentleman
. . ,
Mike Arroyo. Thereafter, a letter arrived from the Chinese Ambassador stating the loan

availability to facilitate the NBN project. 147

Engineer Lozada also stated that ZTE representatives continued to meet with
, 'r I; ',' ,"",C, ,;,', ,', __

him over lunch and diriner where he assured them that the NBN project had already

y
144
TSN: RLTumampos V-l, February 8,2008, 11:03a.m., pp.1-2.

145
TSN: CFDRIZ Vll-l, February 8,2008,11:13 a.m., p.3.

146
TSN: RLTUMAMPOS, Vl-l, February 8, 2008, 11:03 a.m., p 3
147
TSN: RL Tumampos V-l, February 8, 2008, 11:03a.m., pp.2-4.

Page 51 of 127
 started moving despite their expressed worries and complaint that there seemed to be
148
no accomplishments-despite their prior advances to Chairman Abalos.

At one time, Engineer Lozada testified that Chairman Abalos invited him and Mr.

de Venecia III to dinner at the Makati Shangri-La Hotel because First Gentleman Mike

Arroyo was there. The group exchanged pleasantries.

After that meeting, the group went to China without Engineer Lozada. According

to Engineer Lozada, he was supposed to be part of the China trip but Chairman Neri

advised him not to gO.149

When they returned from China, Engineer Lozada and Chairman Neri met with

Chairman Abalos, ZTE representatives and the new commercial counselor of the

Chinese embassy at the Makati Shangri-La Hotel. Chairman Neri expressed the

preference to undertake the NBN project on a BOT basis, while ZTE representatives

insisted that they wanted to undertake the project on a loan basis. Engineer Lozada

testified that Chairman Neri left the meeting as disagreements between ZTE

representatives and Chairman Abalos continued. 15o

...
Engineer Loz~da also testified that on January 18, 2007, he received a call from

Chairman Abalos who allegedly threatened him because of the NBN project. After that

incident, he decided to lie low and limit his involvement in the project. According to

Engineer Lozada, he learned that sometime in February 2007, the NBN-ZTE project

was transferred from the CICT "to the DOTC. Engineer Lozada further said that ( '

148
TSN: RLTumampos V-I, February 8, 2008, 11:03a.m., p.5.
/
149
TSN: RL Tumampos VI-I, February 8, 2008, 11:03 a.m., p.S.
150
TSN: RLTumampos V-I, February 8,2008, 11:03a.m., pp.5-7.

Page 52 of 127
 sometime in April 2007, the National Economic and Development Authority (NEDA)

Investment Coordination Committee - Cabinet Committee (ICC - Cab Com) approved

the NBN project at a cost of US $329 Million.151

Mr. Lozada further admitted that he was not officially contracted as a consultant

of NEDA. He was just being treated to lunch or dinner as a fee for his services to

facilitate the project, 152The things he did for the project and other jobs were purely

based on his friendship whh Neri.

He also admitted that he told Secretary Atienza that he did not want to appear

and testify before this Committee. 153

2.7. Secretary LEANDRO R. MENDOZA

Secretary Mendoza said that the ZTE contract did not need GPPB approval

because it was covered by an executive agreement and that further, the system of

Chinese concessionary loans specifically designated the contractor. 154

: >( 1 " ' " ' ' ,,,

(According to Secretary Andaya, the supply contract that was signed by

Secretary Mendoza was merely a conditional contract and that if there was no loan

agreement and executive agre~ment subsequently executed, that supply contract would /

not then be perfected. 155) . . {/

lSI TSN: CFDriz VII-3, February 8, 2008, l1:13a.m., p.2.

152 TSN: Jmbaisa 1-3, February 8,2008,3:38 p.m., pp 5-6

153
TSN: LDGalapon 111-1, February 8, 2008, 10:33 a.m., p. 2
154
TSN: RLTUMAMPOS VIlI-1, September 20,2007, 3:53p.m., p.9.
ISS
TSN: mhSantos X-1, September 20,2007, 4:13p.m., pp, 3-4.

Page 53 of 127
 Secretary Mendoza also mentioned that there were two petitions filed before the

Supreme Court with respect to the NBN project. The first petition sought to prevent the

execution of the project; produce the contract; and, declare the contract null and void. 156

The second petition, which was filed by AHI, was a petition for Mandamus with

urgent application for temporary restraining order and/or with preliminary injunction. 157

There was also a complaint filed by Congressman Carlos Padilla before the

Ombudsman against himself, Messrs. Formoso and Soneja and ZTE officials. 158

Secretary Mendoza explained also to Senator Santiago that the Commission on

Information and Communications Technology's (CICT) recommendation was for the

government to deny the AHI's proposal for it could not bid for a US$500 million project

when it's authorized capital stock was only P-5 million of which only P-312,OOO was paid

Up.159

Secretary Mendoza was also invited by former Speaker de Venecia, Jr. to the

latter's home to discuss the NBN project with Mr. de Venecia III, upon which Secretary

Mendoza endorsed Mr. de Venecia III to the technical working group of the NBN

project. 160

MR. MENDOZA. NO, Your Honor. Actually, there was a previous meeting with the
Speaker, Your Honor" and this was held at his house. This was, I think, in the early part
of 2007 when I was invited by the Speaker to have some breakfast with him and there, he
introduced his son to me. And then ...

SEN. DEFENSOR SANTIAGO. Oh, he invited you for breakfast and then he introduced
his son ...

156
TSN: MELNovero V-I, September 20, 2007, 3:23p.m., ppA-S.
157
TSN: MELNovero V-I, September 20, 2007, 3:23p.m., p.S.
158
TSN: MELNovero V-I, September 20,2007, 3:23p.m., p.6.
159
TSN: PLMANUEL 11-2, September 20, 2007, 4:53 p.m., pp. 3-4.

160 TSN: ADMasicap 1-2, September 20,2007, 4:43p.m., pp.lO-11; PLMANUEL 11-2, September 20, 2007 4:53 pm, p.l

Page 54 of 127
 MR. MENDOZA. Yes.

SEN. DEFENSOR SANTIAGO .... and then he just say, "This is my son ...

SEN. DEFENSOR SANTIAGO. "" "This is my son of whom I am well pleased," as they
say in the Bible. Was that all that he said?

MR. MENDOZA. No. The son has a - well- he is a proponent in a project at DOTC, Your
Honor.

SEN. DEFENSOR SANTIAGO. So, did you understand that this breakfast introduction
was made in connection with the Amsterdam Holdings?

MR. MENDOZA. Well, there are other topics discussed, Your Honor, but the issue of
Amsterdam Holdings was discussed also.

Secretary Mendoza also claimed that Mr. de Venecia III owed ZTE US$12

miliion. 161

secretarY Me'nd6za also denied that he organized the reconciliatory meeting at

the Wack Wack Golf and Country Club. He also explained that after the meeting at the

residence of former Speaker de Venecia, Jr., Mr. de Venecia III went to his office

several times and that on several occasions, such as dinner with friends, he saw Mr. de

Venecia III hanging around the area. 162

2.8. Deputy Executive Secretary MANUEL HUBERTO B. GAITE

The extent of the participation of then Deputy Executive Secretary Gaite in the

NBN-ZTE deal controversy was clearly defined during the 9th and 11th public hearings

held on February 11, 2008 and February 26, 2008, respectively.

161
TSN: PLMANUEL 11-2, September 20, 2007, 4:53p.m. pp.5-5.
161
TSN: PLMANUEL 11-2, September 20,2007, 4:53p.m., p.8.; Lpamorea 111-2, September 20,2007, 5:03p.m., p.l.

Page 55 of 127
 Then Deputy Executive Secretary Gaite bared the fact that it was Chairman Neri

who requested him to assist Engineer Lozada with regard to the Senate hearings on the

NBN-ZTE deal controversy.

During their meeting on January 29, 2008, Lozada told Gaite: "Manny, I don't

want to go to the Senate. /don't want to attend the hearing. Is it possible that you can

find a way to challenge legally the subpoena?,,163

Gaite answered Lozada with: "You know, the only way that you can challenge a

subpoena is either you are sick, indisposed, or have a prior commitment that you cannot

cancel. Otherwise, you have to attend the Senate hearing. ,,164

Lozada then informed Gaite that he would travel to London to attend a

conference. 165

Gaite, in response to Lozada, said: "Okay, that is a valid excuse but provided you

have to inform the Senate about that, okay. ,,166

At this juncture, Gaite wanted to clear his name and correct the misconception

that it was he who pushed Engineer Lozada to travel abroad.

163 TSN: Aliccatimbang XII-l, February 11, 2008, 12:40p.m., p.2.

164TSN : Aliccatimbang XII-1, February 11, 2008, 12:40p.m., p.2.

165TSN : Aliccatimbang XII-1, February 11, 2008, 12:40p.m., p.2.

166TSN : Aliccatimbang XII-1, February 11, 2008, 12:40p.m., p.3.

Page 56 of 127
 Gaite said that Engineer Lozada might have misinterpreted the way he said it:

"You can go provided that you have to inform the Senate. But this will only mean that it

will just be postponing. When you come back, you have to attend. ,,167

Deputy Executive Secretary Gaite reiterated that, "I did not instruct him (Jun

Lozada) to go abroad. I did not instruct him to go to Hongkong ... He was the one who

informed me that he had this travel to London. I did not prepare his travel papers nor did

I prepare his flight arr~~g~ment. ,,168

Engineer Lozada on the other hand made it clear that he had to travel in order to

avoid the Senate hearing. His travel, the travel orders and certain arrangements were
I • , '

made in the furtherance of the plan to prevent him from attending the Senate hearing. In

fact, Engineer Lozada said: "Opo kaya nga po inantedate (antedate) pa yung aking mga

travel orders. ,,169

-. " 'r ,r

Gaite also clarified the issue regarding the ~500,OOO that he allegedly gave

Lozada while the latter was still in Hong Kong. During the February 26, 2008 hearing,

Gaite explained that that ~500,000 would not have been given to Lozada had the latter

not asked for funds by text message. 170

167TSN : Aliccatimbang XII-l, February 11, 2008, 12:40p.m., pA.

16BTSN : Aliccatimbang XII-l, February 11, 2008, 12:40p.m., p.4.

169
TSN: HSGayapa 1-3, February 26,2008,2:47 p.m., pp. 5-6.
170
TSN: CFDRIZ VIII-l, February 26, 2008, 11:S7a.m., p.l.

Page 57 of 127
 At 2:00 a.m. of February 3, 2008, explained that he received a text from Lozada

that the latter was feeling cold as he had with him no winter clothing and that he was

running out of funds. 171

At about 1:30 p.m. of February 4, 2008, Gaite further stated that he saw another

text from Lozada- which reminded him of Lozada's predicament. He then decided to

lend Engineer Lozada the amount of 12500, 000.172

Gaite then explained that he texted Lozada to ask the latter where the money

should be sent and Lozada replied that the money should be sent to Lozada's finance

office at the Philippine Forest Corporation and that Engineer Lozada's brother, Owe, will

call Gaite. 173

Gaite also explained that when Owe called up that same day of February 4,

2008, Gaite informed him about the money that Lozada was requesting 174 and that they

meet after office hours at the Shangri-La Mall where Deputy Executive Secretary Gaite

would give Owe the P500, 000.175

Gaite further testified that his meeting with Lozada's brother, Owe, at the Dome

Cafe in Shangri-la Mall lasted only for about ten (10) minutes and that he told Owe'

"Your brother texted me about his running out of cash. I have this money, I wanl 10 help

171
TSN: CFDRIZ VIII-l, February 26,2008, 11:57a.m., p.l:

172
TSN: CFDRIZ VIII-l, February 26, 2008, 11:57a.m., p.l.; CFDRIZ VIII-l, February 26, 2008, 11:57a m , p.2.

173
TSN: CFDRIZ VIII-l, February 26, 2008, 11:S7a.m., p.2.

174
TSN: CFDRIZ VIII-l, February 26, 2008, 11:57a.m., p.2.

175
TSN: CFDRIZ VIII-l, February 26, 2008, 11:57a.m., p.3.

Page 58 of 127
 him." However, it did not occur in Gaite's mind whether or not to treat the P500, 000 as

a loan because he pitied Lozada. 176

Before giving the money, Gaite also testified that he had Owe sign a receipt for

the P500, 000 and told him: "Ikaw na ang bahalang magpadala sa kapatid mo. ,,177

Gaite stated that the following day, February 5, 2008, he was surprised to receive

a text from Engineer Lozada that said: "I'm coming home". That made Gaite wonder:

"Why was he (Lozada) asking from me 500 - why was he asking from me money?

Kabibigay ko pa lang kahapon and then the fol/owing day he was now coming home.,,178

, .. ! "-

Gaite however made it clear that it was he who decided upon the amount of

P500, 000 to give Lozada as Engineer Lozada did not mention any amount.

Gaite further explained that he even expected or waited for Engineer Lozada to

mention the P500, 000 during the Senate hearing and did not want to bring it up himself

because he considered it a personal thing between him and Lozada.

Deputy Executive Secretary Gaite likewise made it clear that the P500, 000 was

partly sourced from~o~ey that his uncles intended for the renovation of their house.

With regard to the statement of Executive Secretary Ermita that the P500,000

176
TSN: CFDRIZ VIII-i, February 26, 2008, 11:57a.m., p.3.

177
TSN: CFDRIZ VIII-i, February 26, 2008, 11:S7a.m., p.3.

178
TSN: CFDRIZ VIII-i, February 26, 2008, 11:S7a.m., p.4.

Page 59 of 127
 latter said that " ... 1 do not know what he said about public donors .. No government

funds was used in the money that I gave to Mr. Lozada. ,,179

2.9. Mr. LEO SAN MIGUEL

Mr. San Miguel testified during the 1zth public hearing held on March 11, 2008.

Mr. San Miguel informed the Committee that he attended the hearing on the

basis of the subpoena issued by the Senate and that he was hired by ZTE as a

technical advisor/consultant for the NBN project. He added that he did not belong to the
180
group of Chairman Abalos and that, instead, he had a direct relationship with ZTE.

Moreover, he informed the Committee that there were only two groups that were

competing for the NBN project, that were AHI and ZTE.

Mr. San Miguel made it clear that he hired Mr. Dante Madriaga on the basis of

gathering more information about the Arescom proposal. However, the job assigned to

Mr. Madriaga did not materialize because the Arescom proposal was already dead in

the water before the proposals of ZTE and AHI were made. There was no need to

gather any more information about Arescom. The reason for the death of the proposal

was that the people behind it failed to secure the support of any sponsoring agency.181

179
TSN: CFDRIZ VIII-I, February 26, 2008, 11:57a.m., p.6.

180
TSN: CFDRIZ, V-I, March 11,2008, 11:20a.m., pp.8-9.
181
TSN: CFDRIZ V-I, March 11, 2008, 11:20a.m., pp.8-9.

Page 60 of 127
 He said that he dealt with ZTE Vice President Mr. Yu Yong, who was based in

Shenzhen and who was in charge of special projects outside of China. He further

informed the Committee that he had no written employment contract with ZTE.182

As regards the increase of the NBN-ZTE project cost, Mr. San Miguel testified

that the original ZTE proposal to the CICT had a project cost of US$262 million. He

explained further that based on the meetings with the CICT, there was a configuration of

electronic equipment requirement and the cost of the configuration was US$262
'j.

million.183

When the responsibility for the NBN project was transferred from the CICT to the

DOTC, Mr. San Miguel testified that they again had another meeting with the DOTC

who had a different requirement for configuration of electronic equipment than that of

the CICT, which led ZTE to withdraw the original electronic equipment configuration

they previously submitted. Thus, he pointed out, the final cost went up from US$262

million to US$329 million but that the number of barangays covered also increased from

1,733 to 25,000 barangays and that the configuration cost not only covered

transmission equipment, but also included the computer network (sometimes called, the

integrated data center). In summary, he explained that the cost increase was based on

the change of the requirement for configuration of electronic equipment. 184

Mr. San Miguel added that Mr. Madriaga's knowledge relative to the NBN-ZTE

project was limited only to the information about the original proposal submitted to the

CICT and that he did not have any complete knowledge of the final proposal submitted

'82 TSN: L. Sapida VI-l, March 11, 2008, 11:30a.m., p.4.

'83
TSN: CGCastro VII-l, March 11, 2008, 11:40a.m., p.4.

'84 TSN: CGCastro, VII-l, March 11, 2008, 11:40a.m., pp.4-S

Page 61 of 127
 to the DOTC. He added that he hired Mr. Madriaga only from August to November

2006. 185

Mr. San Miguel also confirmed that he met Chairman Neri, Engineer Lozada and

Mr. Madriaga but denied that he ever met President Arroyo of First Gentleman Mike

Arroyo. He likewise denied that he was present at the Wack Wack Golf and Country

Club meeting where First Gentleman Mike Arroyo allegedly told Mr. de Venecia III to

"back off". However, he did not deny the possibility that he could have been in the

vicinity during that incident since in most NBN meetings, he would generally be required

to standby should there be some technical questions regarding the project. 186

Mr. San Miguel stressed that his job in the ZTE was more on the technical aspect

of the project while a Filipino group was the one that facilitated and coordinated with the

Philippine government for the ZTE. In fact, Mr. San Miguel said that it was Mr. Ruben

Reyes, a non-government official, who'ledthis Filipino group as far as coordinating with

the Philippine government was concerned. It was also Mr. Reyes who introduced Mr.

San Miguel to the ZTE people. 187

Mr. San Miguel knew for a fact that Chairman Abalos was also communicating

with the ZTE and that Chairman Abalos and Mr. Reyes appeared to be friends. 188

Mr. San Miguel also pointed out that in some meetings with the ZTE, Chairman
. ,
, ,
Abalos was also present together with Mr. Reyes. With this scenario, Mr. San Mlguel/

185
TSN: CGCastro VII-1, March 11, 2008, 11:40a.m., pp.6. /
186
TSN: CGCastro VII-1, March 11, 2008, 11:40a.m., pp.6-7.
187
TSN: BRHGonzales IX-1, March 11, 2008, 12:00 p.m., pp. 2-3.
188
TSN: BRHGonzales IX-1, March 11, 2008, 12:00 p.m., p. 4.

Page 62 of 127
 could only assume the fact that Chairman Abalos was part of the Philippine or Filipino

group though he (Mr. San Miguel) did not have any first-hand knowledge or information

of what exactly was the status of such relationship.189

Mr. San Miguel said that the Philippine or Filipino group was helping the ZTE

because of friendship. He also confirmed the fact that Chairman Abalos was helping

ZTE.190

He also confirmed that he personally knew Mr. Reyes, Chairman Abalos, Mr.
191
Jimmy Paz, and General De La Torre.

He informed the Committee that he was not aware of any kickbacks received by

certain personalities but he added thatthe practice of giving commissions in exchange

for help securing a project would be a standard practice. However, he explained that he

had no knowledge as to how much such commissions were. 192

Mr. San Miguel testified that he did not know personally Mr. Madriaga outside of

the work but what he only knew was that Mr. Madriaga was capable of giving him (Mr.

San Miguel) information regarding broadband. 193 He also denied sending an e-mail

message to Mr. Madriaga about "tongpats".194

1
189 TSN: BRHGonzales IX-1, March 11, 2008, 12:00 p.m., p.10; Ctsotto X·l, March 11, 2008, 12:10 p.m., p.l.
190
TSN: Ctsotto X·l, March 11, 2008, 12:10 p.m., p.l.

191
TSN: BRHGonzales IX-l, March 11, 2008, 12:00p.m., p.4.
192
TSN: MDAbueg XI·l, March 11, 2008, 12:20p.m., pp.6-7.
193
TSN: Caturla XII-l, March 11, 2008, 12:30p.m., p.6.
19'
TSN: melNOVERO 111-2, March 11, 2008, 1:00p.m., p.8.

Page 63 of 127
 Lastly, Mr. San Miguel denied that he knew the costing of the ZTE proposal since

he was a mere technical consultant: "It is quite but prudent on ZTE that they should

keep their costing to themselves. And I would not want to also interfere because that's

their right. I am external to their organization. I just say that based on my work, I just

draw the framework of what the project.is al/ about, and it's all up to them to put the

costing. In a parallelism, I'm an architect; there's another builder. The builder should be

the one to put a pricing; the architect would just be interested to find out how much the

cost is because their compensation is based on the cost. ,,195

2.10. MR. MICHAEL T. DEFENSOR

The extent of the participation of Mr. Michael T. Defensor in the NBN-ZTE deal

controversy was revealed during the 9th public hearing held on February 11, 2008.

Mr. Defensor made it clear to the members of the Blue Ribbon Committee that he

and Engineer Lozada were friends long before the NBN-ZTE controversy and that

during histime as DENR Secretary, Engineer Lozada became the Chief of Staff of

General Victor Corpus after which, they formed the Philippine Forest Corporation,

where upon his recommendation, Engineer Lozada was appointed President of

196
Philippine Forest Corporation.

He informed the Committee that he did not have any knowledge that Engineer

Lozada left the country and .thatit was 'only on February 5, 2008 at around 5:00 p.m.,

when he received text messages informing him that Engineer Lozada had been

kidnapped that he received updates on Engineer Lozada. At first, he explained that he (

~/
195
TSN: BRHGonzales IX-2, March 11, 2009, 3:53p.m., pp.2-3.

196
TSN: Caturla IX-l, February 11, 2008, 12:10p.m., p.8.

Page 64 of 127
 ignored the messages but that he was alarmed when at about 6:00 or 6:30 p.m., he saw

the wife of Engineer Lozada on TV informing the public that Engineer Lozada was

missing. 197

He explained that he subsequently learned that Engineer Lozada was at the La

Salle Greenhills Dormitory through PNP-PSPO Col. Paul Mascarinas and that he visited

Engineer Lozada on February 6, 2008. He further disclosed that he asked Engineer

Lozada what happened and Engineer Lozada informed him of a 1:30 p.m. Senate

hearing the next day that he did not want to attend regarding which he was asking for

help so that he would not be obliged to attend. Mr. Defensor testified that he told

Engineer Lozada that he would relay Engineer Lozada's message but that Engineer

Lozada should tell the Senate Blue Ribbon Committee that he did not want to attend

that hearing. 19B

He added that when he asked Engineer Lozada about his needs at that moment,

Engineer Lozada told him that he did not have any money, which prompted Mr.

Defensor to offer some help. Mr. Defensor disclosed that at first, Engineer Lozada was

hesitant to accept the P50, 000 he offered but later on agreed when he said that the

help was perso(1al in nature. Mr. Defensor further disclosed that the P50, 000 came

y
from his wife, Julie who was with him at that time. He also clarified that he helped

Engineer Lozada out of the fear that something might have happened to him. 199

197 TSN: Solidum X-l, February 11, 2008, l2:20p.m., p.l.

198 TSN: Solidum X-l, February 11, 2008, l2:20p.m. p 8.

199
TSN: M.R. Catadman XI-l, February 11, 2008, l2:30p.m., pp.5-6.

Page 65 of 127
 2.11. MR. DANTE MADRIAGA

Dante R. Madriaga, in his Affidavie oo dated March 10, 2008, stated that he was

engaged as chief designer/consultant of the ZTE proposal and that his specific function

was to oversee and supervise the drafting, designing/re-designing, and drawing up of

plans for a complete nationwide Internet protocol network called the National

Broadband Network.

In his testimony during the February 26, 2006 public hearing, Mr. Madriaga

claimed that his involvement with the ZTE proposal began in 2003. He stated that he

was hired by Mr. San Miguel, whom he had worked with before and who was also his

"compadre". Mr. San Miguel was part of the group composed of Chairman Abalos, Mr.

Ruben Reyes and General Quirino De La Torre. 201

However, Mr. Madriaga later claimed that he was only a consultant of the NBN-

ZTE project from May 2006 up to March 26, 2007. 202

Mr. Madriaga said that he reported to work at ZTE almost every day and that he

was also a liaison officer of ZTE.203 He disclosed that he was paid allowance money

and the rest of his salary was to

approved. 204

200 Affidavit, par. 4.5, p.4.

201
TSN: Ctsotto X-3, February 26, 2006, 5:19p.m., p3.

202
TSN: RL TUMAMPOS XI-3, February 26,2008, 5:29p.m., p.1.
203
TSN: RL TUMAMPOS XI-3, February 26, 2008, 5:29p.m., p.2.
20'
TSN: RL TUMAMPOS XI-3, February 26, 2008, 5:29p.m., p.2.

Page 66 of 127
 Mr. Madriaga explained that as a consultant, he had a scope of work 205 and that

he reported to Mr. San Miguel but went to work at ZTE everyday, where they

conceptualized the project, and whose main office was located at the 2Sth Floor of

Pacific Star Building, Makati City.206

As to the issue of whether Mr. Madriaga asked for money in exchange for his

testimony, he stressed that he willingly appeared before the Senate hearing in order to

clear his name. He said there were some people who used his name to demand several

millions of pesos in exchange for his testimony.

Mr. Madriaga further stressed that it was Senator Lacson who spread the

information that he (Madriag~) ~as asking for PS million or P10 million and to belie all

the accusations, Mr. Madriaga in fact went to the office of Senator Lacson, without a

lawyer, to explain and signify his willingness to testify207

Mr. Madriaga ~as also asked whether he approached some personalities in the

Senate to facilitate his VOluntary testimony. Before his meeting with Senator Lacson, Mr.

Madriaga denied approaching anybody who could facilitate his testimony in the Senate.

He said, "I heard the same people offered for me to testify. Pero how can I testify hindi

ko naman kilala kung sino itong mga senators na ito? I never met any of you. ,,z08

Mr. Madriaga clarified however, that an outsider with the name of Archie Antonio

tried to facilitate his participation in the NBN-ZTE deal investigation. Mr. Madriaga said , /
.... . V
lOS
TSN: Ctsotto X-3, February 26, 2008, 5:19p.m., p. 6.
205
TSN: Ctsotto X-3, February 26, 2008, 5:19p.m., p. 7.
207
TSN: Ctsotto X-3, February 26,2008, 5:19p.m., p. 8.
208
TSN: RL TUMAMPOS XI-3, February 26, 2008, 5:29p.m., p. 4.

Page 67 of 127
 he did not know the people whom Archie Antonio approached to facilitate his (Madriaga)

testimony.209

When asked if he knew any of the witnesses or resource persons present In the

hearing, Mr. Madriaga mentioned columnist Jarius Bondoc. 21o Mr. Madriaga also

mentioned seeing EnQineer Lozada, whom he identified as the consultant of Chairman

Neri, at NEDA.211

Mr. Madriaga further testified that:

2.11.1. Mr. San Miguel was Mr. Madriaga's boss. It was Mr. San Miguel

who asked him about the project's development or progress. In tum, it was Mr.

San Miguel who would relay such development to Chairman Abalos, Mr. Reyes

and General De La Torre. 212

2.11.2. The cost of their project at first was about US$130 million. But

when they were about to start, the group could not survive on US$130 million

alone. Th~ splitting of the money was to be made as follows: US$40 million for

the Filipino group and another US$40 million for ZTE. Mr. Madriaga said: "So, in

the very beginning, maymon ng patong iyan. Da/awang patong yan. Patong ng

Pilipino, patongng Chinese.'~13

'09 TSN: Rl TUMAMPOS XI-3, February 26, 2008, 5:29p.m., p. 5.

'lOTSN: Rl TUMAMPOS XI-3, February 26, 2008, 5:29p.m., p. 6.

211
TSN: Rl TUMAMPOS XI-3, February 26, 2008, 5:29 p.m., p. 8.

212 TSN : Rl TUMAMPOS XI-3, February 26, 2008, 5:29 p.m., pp. 9-10.

213 TSN : Jmbaisa XII-3, February 26, 2008, 5:39 p.m., p. 1; p. 4.

Page 68 of 127
 2.11.3. In the original US$130 million cost, the commission was 80 million

U.S. dollars. In short, the real cost of the project was only US$50 million 214

2.11.4. The Filipino group was composed of Chairman Abalos, Mr. Reyes,

General De La Torre and Mr. San Miguel. Included also in the Filipino group

were President Arroyo and First Gentleman Mike Arroyo. As Mr. Madriaga said'

"Eh, from the vel)! beginning alam ko na iyan, eh, dahil sinasabi sa akin noong

aking mga amo, eh, na 'Protected tayo rito. Walang haharang sa atin. ,,215

2.11.5. When Assistant Secretary Formoso said that the cost of the project

was increased from US$130 million to US$329 million, there was an assumption

that the commission would also increase. Mr. Madriaga said: "Kasi, Senator,

pagka sa 130 mayroon ka ng patong, pagdating rna sa 329, iyong patong mo.

exponential, tataas din. ,,216

2.11.6. The Filipino group made some advances from ZTE worth US$41
217
million. It was Mr. San Miguel who informed Mr. Madriaga about these

advances.

2.11.7. The advances were allocated and given In three tranches, as

follows: Y

214 TSN : 1mbaisa XII-3, February 26, 2008, 5:39 p.m., p. 2.

215 T5N : 1mbaisa XII-3, February 26, 2008, 5:39 p.m., p. 5.

21'TSN: 1mbai,a XII-3, February 26, 2008, 5:39 p.m., p. 2.

2l7 TSN : 1mbaisa XII-3, February 26, 2008, 5:39 p.m., p. 6.

Page 69 of 127
 • The first was made on August 2006 worth US$1 million as

representation fees;218

• The second was made on March 2007 worth US$10 million as success

fee. 219

• The third, and last, advance that the Filipino group made was on April

2007 worth US$30 million to aid the administration during the 2007

elections. It was Fan Yang of ZTE who informed Mr. Madriaga about

this. 220

• (Another tranche worth US$5 million was allocated on December 2006

and was intended for Mr. de Venecia III but was not given because Mr.

de Venecia III walked out of a meeting in China;221)

2.11.8. The Chinese \(1Iill not give out any more money unless the

President of the Philippines would show up during the contract signing, which

was the reason why President Arroyo went to Boao, China. 222

2.11.9. The US$1 million and US$10 million tranches were received by

Mr. Reyes while the US$30 million tranche was coursed through Hong Kong to

the company of Mr. Reyes.223 y

21'TSN: Jmbaisa XII-3, February 26,2008,5:39 p.m., p. 6.

21'TSN: Jmbaisa XII-3, February 26, 2008, 5:39 p.m., p. 8.

220 TSN : Jmbaisa XII-3, February 26,2008,5:39 p.m., p. 11; HSGayapa 1-4, February 26, 2008, 5:49 p.m., p. 1.

"'TSN: Jmbaisa XII-3, February 26, 2008, 5:39 p.m., p. 7.

'"TSN: HSGayapa 1-4, February 26,2008,5:49 p.m., p. 1.

"'TSN: TJmbaisa XII-3, February 26, 2008, 5:39 p.m., p.9; HSGayapa 1-4, February 26, 2008, 5:49 p.m., p. 1.

Page 70 of 127
 2.11.10. Mr. Reyes left the country for the United States on October

2007. 224

2.11.11. The distribution or division of the advances from ZTE were as

follows:

• The US$1 million was divided only between Mr. Reyes and Chairman

Abalos while General De La Torre and Mr. San Miguel did not receive
, ' I'

any portion of this tranche. 225

• As regards the US$10 million tranche, half of that amount was

intended for the first couple while the other half was intended for

various government officers, particularly the Secretaries. As Madriaga

said: "Malaki yung kay Chairman Abalos at saka kay Ruben Reyes at

saka yung kalahati paghahatian ni Leo at saka ni ano. ,,226

• The entire US$30 million amount was allocated for the 2007 senatorial

and local election. 227

2.11.12. When asked if Fan Yang of ZTE confirmed to him the remittance

or the delivery of the US$30 million after President Arroyo went to Boao, China,

Mr. Madriaga said: "After the President went to Boao, about two weeks later

bumalik siya, she confirmed at saka nalaman ko rin na ... Kagaya nung mga ano

namin, lunch. She said hopefully everything will be smooth now because it's all (

done. ,,228 /

124
TSN: HSGayapa 1-4, February 26, 2008, 5:49 p.m., p. 2.
115
TSN: HSGayapa 1-4, February 26, 2008, 5:49 p.m., p. 4.
116
TSN: HSGayapa 1-4, February 26, 2008, 5:49 p.m., p. 5.
117
TSN: HSGayapa 1-4, February 26, 2008, 5:49 p.m., p. 5.

"'i-SN: HSGayapa 1-4, February 26, 2008, 5:49 p.m., p. 7.

Page 71 of 127
 2.11.13. The reason for Mr. Madriaga's testimony was, as follows:

"Actually, matagal na akong gustong mag-testify kaya lang I'm hindered by the

fact na wala naman akong kila/ang mga senador eh. Isang senador lang na

kaki/a/a ko rito na kaibigan ko hindi pa member dito ... Oo, I'm not afraid na

magsabi ng tatoo or to· face the senator. I have seven children. ,,229

,
2.11.14. A person named Steven Li offered the NBN contract to ZTE. ZTE

then looked for a powerful backer in the govemment so the project could move

on. Mr. Madriaga said: "Ang nangyari, they contacted the daughter of Chairman

Abalos. Tapas si Chairman Abalos ang kinontak nila. Si Chairman Abalos - kasi

kapitbahay niya si Ruben Reyes - si/a ang ana, sila ang nag-contact kay General

dela Torre who was a friend of Leo San Miguel. ,,230

2.11.15. The NBN contract was first offered to the CICT. The Chinese

govemment came much later. In fact, ZTE made a representation that their

concession loan was 3 percent, 15 years to pay, 10 years grace period. 231

2.11.16. Unlike in Japan where the loan agreement first has to be signed,

to be then follo.:ved by the supply contract, it was the reverse in China. Mr.
.
Madriaga explained that in China, an approved project or supply contract must

first be secLlreCi'tb~·-be· followed by a negotiation or signing of the loan

agreement.
232
0/
'"TSN: HSGayapa 1-4, February 26, 2008, 5:49 p.m., p. 9.
130
TSN: LDGalapon 11-4, February 26, 2008, 5:59 p.m., p. 1.

231
TSN: LDGalapon 11-4, February 26, 2008, 5:59 p.m., pp. 2-3.

m
TSN: LDGalapon 11-4, February 26,2008,5:59 p.m., p. 2.

Page 72 of 127
 2.11.17. Regarding the Wack Wack Golf and Country Club incident where

Mr. de Venecia III was told by First Gentleman Mike Arroyo to "back off": "Doon

lang ako sa malayong lugar. Pero hindi ko nakita sila Joey dahil nasa private

room sila. I am sure he can back it up. Narinig ko lang nuong nang umalis na

'yan si FG, nagmumura. Marami. kasing babae rito so I invoke the .. Blank, blank

na blank na bata ito, hirap na pakiusapan. ,,233 Mr. Madriaga insisted that he saw

First Gentleman Mike Arroyo, who was wearing a barong tagalog, storming out of

the room while uttering the words "P_ ____ 1__ ".234

2.12. President GLORIA MACAPAGAL ARROYO

The picture will never be complete without examining the participation of the

highest ranking official of the Republic, President Gloria Macapagal-Arroyo.

Mr. de Venecia III testified that President Arroyo had no involvement with the

NBN-ZTE transaction as it was Chairman Abalos who was negotiating with him. He

reiterated that although Secretary Mendoza is the alter ego of the President, the

President was still not there during the negotiations or when First Gentleman Mike

. , ~'back-off" and that the President may not even have known of
Arroyo uttered the woeds
" .
that situation. He likewise testified that the President wanted the contract reviewed and

evaluated. 235 , ' .. . . . .

0!

233
TSN: LOGalapon 11-4, February 26, 2008, 5:59 p.m., pp. 4-5.
234
TSN: LOGalapon 11-4, February 26, 2008, 5:59 p.m., pp. 5-6.

235 TSN: Solidum 11-3 September 18, 2007, 11:23 AM, pp. 4-6.

Page 73 of 127
 When Senator Madrigal asked Mr. De Venecia III if he was aware of the

Shenzhen, China golfing holiday taken by President Arroyo, First Gentleman Mike

Arroyo and Chairman Abalos together with ZTE officials, Mr. de Venecia III answered

that he was aware of that trip though he pointed out that President Arroyo only attended

because she was invited there by ZTE officials and that President Arroyo even advised

Chairman Abalos to consider instead the proposal of AHI because it had no guarantee,

no debt, and no risk t() the government (as described by Speaker de Venecia, Jr. when

he came back to Manila).236

Secretary Mendoza testified that the supply contract was signed in Boao, China
•• i ., •

on April 21, 2007 and was witnessed by President Arroyo.237

Chairman Neri also mentioned that in one of his conversations with President

Arroyo, he mentioned the alleged bribe money of ~200 million and that President Arroyo
j. ", ¥. ' "'"!" ~,'

told him not to accept the money. (However, as regards his further conversations with

President Arroyo in relation to the NBN-ZTE deal, executive privilege was invoked.)

Former Speaker de Venecia Jr. also mentioned the extent of President Arroyo's

participation iii the NBN-ZTE deal. In the House of Representatives impeachment

proceedings, he said that:

,.
Having said that, let me say that during the last two days, the newspapers,
radio and television have made reference to why we were in Shenzhen
across the border from Hong Kong last All Saints Day, two years ago I
was in Hong KorJ9,wit~,.my .wife Gina .and the President had just arrived in
Hong Kong coming from a visit to many provinces in China. And she
phoned me and she said, "Joe, can I invite you to play golf tomorrow
early in the morning?" I said, "Yes, I'll be honored, Madam
President." She said, "We will be playing with the First Gentleman". I
said, "I will be honored, Madam President". So I went to their hotel at
about 7:00 or 7:30 in the morning. I didn't have any golfing attire because I

236
TSN: Lpamorca, 1-5, September 18, 2007, 12:33 PM, p. 6.
m
TSN, MHBalagne, VI-2, September 20,2007,5:33 PM, p. 4.

Page 74 of 127
 didn't know that we would be playing golf. I went to Hong Kong on a small
vacation. And when I reached the hotel we boarded a coaster and I
thought we will be playing golf in one of the golf course in Hong
--
Kong then all of a sudden we were at the border between Hong Kong
and Shenzhen in South China. And we gave our passports. It's a
good thing my aide had my passport with him and we were finally
given clearance to proceed. I was with the President and the First
Gentleman and the security assistant in the coaster going to
Shenzhen. And President Arroyo mentioned ... 238

... started the conversation because I was reading the newspaper,

And she said, "You know, Joe", she said, "this ZTE project, let us
consider it and approve it on the basis of a Build-Operate-Transfer
formula so that the Philippine government will have no risk, will
have no expense, will have no cost, and there will be no government
guaranty. And it will be purely a 100% private sector investment."
And then she started to praise my son who made the proposal to
undertake the ZTE project on a Build-Operate-Transfer basis as a
100% private sector investment without any cost to the government,
without any guaranty from the Philippine government, without the
Filipino people having to repay a massive loan.

And then there is a second point there, that if the government takes over
this project, the government will still have to manage and operate this
project at another large cost way beyond the ordinary or way beyond the
proposed contr.act at .,30,O.anc(3Q,.miliion dollars. So I said, "Madam
President, I think, as the original proponent of the Build-Operate-Transfer
Law which has become a model for the Third World - I filed this bill
together with Tong Payumo and Victor Ortega, and it has now become a
model for the T~ird World - I said, "This is the way to do it, without any
expense on the part of the Philippine government, without any expense on
the part of the Filipino people." And then, finally, we arrived in Shenzhen
and the coaster proceeded to the golf course in Shenzhen and, 10 and
behold!, my biggest surprise was that Chairman Abalos was waiting for us
at the golf course. I did not expect... 239

... expecting the Chairman of the Commission on Elections, who is

supposed to be managing the elections of the nation and in a few months
the election shall be held, waiting for us there at Shenzhen. And so he
was there with ,some ZTE executives. We changed to golfing attire, and
then after, breakfast we proceeded to play golf. And after one hour we
joined by 'C.h,~.ipl}an ..,6~alp.specause the first threesome was the
PreSident, Mike ,Arroyo and myself, then we were JOined by Chairman
Abalos who said "Madam President, Mr. Speaker, please join us because
we will have lunch at the headquarters of ZTE and they are preparing a
grand luncheon for us with Shanghai crabs which are in season at the
board room of ZTE". And this is very clear in my book, the picture of this
meeting in this book which was written by Brett Becker of the Wall Street
Journal, former editor of the Wall Street Journal, published in Washington
D. C., shows the picture of President Arroyo, Mike Arroyo, Chairman (I
23'
TSN of the House of Representatives Committee on Justice, 24 November 2008, EAT, 111.2
239
TSN of the House of Representatives Committee on Justice, 24 November 2008, EAT, 111-3.

Page 75 of 127
 Abalos, myself and a Chinese official there at the golf course in
Shenzhen.

Now, pray tell me, Mr. Chairman, Members of the House, what is the
President of the Philippines doing there at the ZTE headquarters?
Pray, tell me, what is the husband of the President of the Philippines doing
there at the lTE headquarters, a company that is bidding for a massive
project in the Philippines? Pray, tell me, why the Chairman of the
Commission on Elections would be there at the lTE headquarters? Why
the Speaker of the House of Representatives. to my surprise why I am
there - on advise and on invitation of the President of the Philippines?
Very c1ear. 24o (emphasis supplied)

Thus, there are at least five things that are definite as to the extent of knowledge

and involvement of President Arroyo:

• First, she was in Shenzhen, China on November 2, 2006 for a golfing holiday
, _ • • _. ,. • L _

upon the invitation of ZTE officers. With her were First Gentleman Mike

Arroyo, former Speaker de Venecia, Jr. and former Comelec Chairman

Abalos.

• Second, she )NaS ,aware of the?2,OO million alleged bribe offered by Chairman

Abalos to Chairman Neri.

• Third, she went all the way to Boao, China on April 21, 2007 in spite of a

family crisis just to witness the signing of the Supply Contract between the

GRP and lTE.

• Fourth, President Arroyo admitted in a DlRH interview on February 23, 2008

that she firsf learned of irregularities in the US$329.48 million ZTE broadband

contract on the eve of the signing of the Supply Contract on April 21, 2007.
, ,

• Fifth, she invoked executive privilege on all communications she had with

Chairman Neri regarding the NBN-lTE project. In other words, it would seem

that she did not want the public to know how much importance she placed on

240
TSN of the House of Representatives Committee on Justice, 24 November 2008, WBC, IV-l.

Page 76 of 127
 having the project with ZTE approved as well as how much she knew about

the anomalies surrounding its negotiations.

3. THE ALLEGED KIDNAPPING OF JUN LOZADA

The alleged kidnapping of NBN-ZTE witness Engineer Lozada on February 5,

2008 presented a new twist to the NBN-ZTE deal investigations.

On February 5, 2007 at approximately 4:40 p.m., Engineer Lozada deplaned

from Cathay Pacific Flight CX919 at the NAIA Terminal Gate 7. What transpired next

has been a matter that has been debated in the halls of the Senate and the courts of

justice.

The following general facts are not disputed: Upon the arrival of Engineer

Lozada at Gate 7 of the NAIA, he was immediately met by Rodolfo Valeroso (PNP-

Aviation Security Group), Gen. Angel G. Atutubo (Assistant General Manager for

Security and E~ergehcy Services of the Manila International Airport Authority) and
Octavio Una (Terminal Manager, Terminal I of Ninoy Aquino International Airport). All

four then proceeded to take the stairs going up to the 3rd floor - departure area of the

building and took the elevator from the 3rd floor, going down to the VIP parking area of
"' -I - . '.' ~<'> ·h! ,~~jr".':' t'·~I·,'I),"r ").'M", "",'~ ",' "
the terminal. Mr. Valeroso and Engineer Lozada then boarded a waiting vehicle.

The vehicle then exited Gate 2 of the NAIA terminal, proceeded to Fort Bonifacio

and exited at C5 going northbound. Upon reaching Kalayaan Avenue/C5, the vehicle

took a U-turn and proceeded southbound reaching the South Luzon Expressway. They

then proceeded to Sta. Rosa all the way to Susana Heights before they turned back and

proceeded northbound once more towards Libis in Quezon City. By this time, it was

Page 77 of 127
already approximately 9:30 p.m. Engineer Lozada and Mr. Valeroso proceeded to the

Outback Restaurant where they met up with Atty. Antonio Bautista and PNP-PSPO Sr.

Sup!. Mascarinas (Deputy Director, PNP-PSPO). At 10:30 p.m., Engineer Lozada was

brought to De La Salle Greenhills Dormitory where he was finally reunited with his wife

Violeta Lozada.

At 10:00 a.m., of February 6, 2008, Engineer Lozada was then accompanied by

PNP-PSPO Sr. Supt. Mascarifias to the office of Atty. Bautista. By 3:30 p.m., Lozada

returned to the De La Salle Greenhills Dormitory, having stayed at the office of Atty.

Bautista the entire time.

On the same day, Violeta Lozada, the spouse of Engineer Lozada filed a writ of

habeas corpus before the Supreme Court. Shortly thereafter, Arturo Lozada, the

brother of Engineer Lozada filed a writ of amparo before the same court.

On February 7, 2008 at 2:00 a.m., Engineer Lozada held a press conference at

the De La Salle Greenhills Dormitory. Immediately thereafter, he proceeded to the

Senate under the control of the Senate Sergeant At Arms.

While the above enumerated general facts are uncontroverted, the details of

what actually happened "behind the scenes," remain an issue.

In his testimony before the Blue Ribbon Committee, Engineer Lozada alleges

that from the time he set foot on the tube of Gate 7 of the NAIA, he was already

accosted and kidnapped by people who were at that time unknown to him

(subsequently identified as Valeroso, Atutubo and Lina). These men, according to

r
I;

Page 78 of 127
 Engineer Lozada, did not identify themselves but merely said: "eto na, eto na subject,,358

and took hold of him by the arm, grabbed his bag and took his passport.

From this point on, he alleged that he was no longer in control of his actions.

While still at the airport, he was supposed to proceed to the Immigration Area as

instructed by Secretary Atienza. He was instead led up the stairs to the 3'd floor

departure area. When he previously protested and said: "Teka, teka, teka. May mga

sasalubong saken dito':, one of the men merely said: "Hindi, hinde. Pinakukuha ka sa

amin.,,359

Thereafter, they led him up the stairs. When they stepped off the elevator at the

VIP parking area, he was ordered to board a car with Mr. Valeroso and an unidentified

driver. When he asked where they were bringing him, all they said was: "Sir, relax lang,

relax lang. Wala kami gagawin sa iya. ,,360 All this time the people who were with him

never identified themselves and ignored all his requests for them to bring him home to

Pasig,

Up until the time he was finally brought to the De La Salle Greenhills Dormitory to

meet up with his wife at 10:30 p.m., Engineer Lozada was allegedly taken to Quezon

City - C5 KalayaanAve.; driven back south all the way to Los Banos, Laguna;
" '.: ,"-'

35. Tapos pag apak na pag apak ko, they grabbed me by the arms, they said "Eto na, eto na subject." (LDGalapon III_
1 Feb. 8,2008 10:33am p.S)

359 Kinuha ho ako. Nilabas ako dun sa tube. Sabi ko ''Teka, teka, teka. May mga sasalubong sa akin ditto. Atsaka sabl
sa akin ni Secretary, I have to go to Immigration." "Hindi, hindi, hindi. Pinakukuha ka sa amin." (LDGalapon 111-1
Feb. 8,2008 1O:33am p.5)

360 So nilihis ho nila aka, ina kyat ako sa departure; tapas sinakay aka ulit sa elevator, binaba na aka ulit pa baba sa
tarmac. Sinakay ho nila ako sa sasakyan. Nagtanong ako kung saan ako dadalhin, saan ako dadalhin. "Hindi, basta
may ... Sir, relax lang, relax lang. Wala kami gagawin sa iyo." (LDGalapon 111-1 Feb. 8,2008 10'33am p.6)

Page 79 of 127~
 reprimanded for sending out text messages 361 to his worried wife and brother; ordered

to cease said activity and turn off his cellular phone 362 ; ordered to write a letter

addressed to the PNP allegedly asking for protection 363 ; driven back again to Libis,

Quezon City where he was made to meet up with Atty. Bautista and PNP-PSPO Sr.

Supt. Mascarinas. 364 Afterwards, he was allegedly made to board a van with 6 or 7

armed men and was subsequently taken to De La Salle Greenhills as he requested. At

the De La Salle Greenhills Dormitory, he was finally reunited with his family. He
, ~'"

however was still under the custody of PNP-PSPO Sr. Supt. Mascarinas and his men.

The following day, PNP-PSPO Sr. Supt. Mascarinas allegedly ordered him to

sign a typewritten letter addressed to PNP Chief Avelino Razon allegedly asking for

protection. He was also allegedly ordered by PNP-PSPO Sr. Supt. Mascarinas to have

his sister sign another letter which had a similar content. 365 Thereafter, PNP-PSPO Sr.

Supt. Mascarinas allegedly ordered Engineer Lozada to accompany him to meet up with

Atty. Bautista again. While there, he was presented with an affidavit that he never asked

to be made. When he raised his concern over certain statements contained in the

361 Tapos sinabihan ho nila ako, "Sir, tumigil na kayo ng ka tetext, na kukuha lang naman naming e." (LDGalapan 111_
1 Feb. 8,2008 1O:33am p.7)

362 X x x a man who introduced himself to him as Jorge who tald him "ang hirap naman sa iya, kung anu-ana pa
pinag tetext mo." Jorge also,saiq, upwede ba tigilan rna na yan!" x x x after that conversation with jorge, they
asked him to turn off the phone. (CA G.R. SP Nos. 00017 and 102251 Decision p. 44)

363 "Sir gumawa ka na ng sulat na nag rerequest ka ng security sa 'amin." (meINOVERO IV-1 February 8, 2008
10:43am p.1)

364 $0 dinala po aka sa outback sa Ubis. Nandun na si Atty. Bautista x x x Atty. Bautista was asking me kung ana _
obviously he knows me already - certain questions because he Will prepare my affidavit. (meINOVERO IV-1
February 8, 2008 10:43am p.2-3)

365 Col. Mascarinas brought a printed letter already and he said, "Pirmatfan rna to. Pa plrmahan rna rin yun isa sa

ate mo." (CA G.R. SP Nos. 00017 and 102251 Decision p. 48)

Page 80 of 127 / '

,V
 affidavit, Atty. Bautista allegedly said: "pirmahan mo na yan, para sa comfort ng

Malacanang yan.,,366

While the Blue Ribbon Committee does not take lightly the facts as alleged by

Engineer Lozada in his testimony, the Blue Ribbon Committee feels that to get a proper

perspective of the whole incident, the antecedent facts which led to his flight to Hong

Kong and even the facts surrounding his stay there, should also be taken into

consideration.

In his testimony before the committee, Engineer Lozada admitted that he sought

the guidance of Secretary Atienza 367 when he was being summoned to testify before the

Blue Ribbon Committee. By his own admission he said that he told Secretary Atienza

that he did not want to appear and testify before the Blue Ribbon Committee 368 He

further admitted that he then met with Deputy Executive Secretary Gaite in Malacanang

to seek his advice and help in trying to evade the Blue Ribbon Committee's invitation 369

Because of this, he was then issued an ante-dated travel order for him to attend a

366 At after nun, sabi niya pirmahan ko nay un affidavit ko. Sabi k okay Atty. Bautista, "Atty. Bautista, I have some
reservations about this affidavit, dun sa ana .. ," sabi niya lIok lang van Jun. You just sign it. Para sa comfort na rin ng
Malacanang yan." (meINOV~RO IV-1 February 8,2008 1O:43am pAl

367 Nuong pumunta po aka rOOl:\."sa Office nj $ec. Atienza x x x tinanong po niya aka x x x "Jun, ana ba ang
kinalaman mo rita?" sabi ko,;"$ec:~no' ba 'ang gusto niyong kwento? Yung salient points lang a from the top?" sabi
niya, IiFrom the top. I kwento mo lahat." Kinwento ko ho sa kanya lahat. At nung na laman nlya lahat, sabl niya,
"Pag kinwento mo sa public ito, magagalit sila. I bibigay mo itong gobyernong ito sa oposisyon." (LDGalapon 111-1
February 8, 2008 10:33am p.l)

368,/1 X X x Sabi niya "0 sige, tignan natin ma gagawa natin. Huwag ka - na di ka makarating duon. Ana ba ang gusto
rna?" Sabi ko, "Ito lang ho ang gusto ko mangyari sana, huwag niyo na akong paratlngln sa senado." (LDGalapon
111-1 February 8, 2008 10:33am p.2)

36'
Nuong martes pumunta ako kay Dep. Exec. Sec. Manny Gaite because nobody knew my role. X x x 50
pinaliwanag pa rin aka ulit nina - mga tao ni Manny Gaite at nuong nandun na siya, tapas sabi nila, ganan ullt
"Anong gusto mo?" x x x So ganun na rin, inulit ko na naman sa kan;la, "Huwag niyo na ho ako paratlngln sa d/
Senado. x x x" (LDGalapon 111-1 February 8, 2008 lO:33am p.2) V
Page 81 of 127
 meeting in the United Kingdom. 37o In truth however, it was agreed that he will only go as

far as Hong Kong where he would await further instructions.

Engineer Lozada further testified that while in Hong Kong, he used his credit card

to pay for his food, hotel accommodations and even shopping. When he maxed out his

credit limit, he then called Secretary Atienza and Chairman Neri to explain his

predicament. Engineer Lozada further testified that he texted Deputy Executive

Secretary Gaite to tell him that he was running out of money. Deputy Executive

Secretary Gaite, in turn, texted Engineer Lozada back and told him to have somebody

pick up the money he had promised him.

While in Hong Kong, he even received a phone call from Chairman Nen who

advised him to write a letter to Senator Enrile to ask his help to lift the order of arrest

issued by the Senate against him.371 All this time, Engineer Lozada testified that he was

in constant communication with Secretary Atienza and that he continuously received

instructions from him.

Secretary, Atienza called him in Hong Kong and told him to stay put since the

issue was still' hot. E~e~tually, Secretary Atienza instructed him to come home on

February 5 instead of the 7th (or earlier than planned) to avoid media and the Senate. 372

He further narrated that before that fateful day he was to return home, he asked

370 So they decided right then and there x x x "Kailangan lumabas si Jun." So inayos ho nlla yang mga travel
documents ko, pinagawa aka ng'mga .. tfavel;·requestS, pina ante-date at pina alis ha aka papuntang Hong Kong.
(LDGalapan 111-1 February 8, 2008 10:33am p.2)

371 Tinawagan ha aka ni Sec. Neri, kausap raw ha niya si Medy at gumawa raw po aka ng sulat para kay senadar
Enrile para raw rna withdraw yata yung motion na arestuhin aka dahil pinapa aresto na raw aka. X x x E ayaw ko
pong ana, kasi hindi ka naman kilala si Sen. Enrile, baka mag taka ho yon at hindi rin niya aka kilala. (LDGalapon 111_
1 February 8,2008 10:33am pA)

372 So last week ho tinawagan aka ni Sec. Atienza. Sabi niya "kalian ka ba dapat umuwi, Feb. 7? Sige, umuwi ka na
ng Feb. 5. Don't take yang ana, yung maraming tao. Yung alanganing aras ka umuwi." (LDGalapon 111-1 February
2008 10:33am p.5) ~
8/1
Page 82 of 127
 Secretary Atienza "Sec. papaano yong arrest warrant sa akin?" To which Secretary

Atienza answered: "Nakausap na namin si Libanan, okay ka na sa Immigration. Basta

dumeri-derecho ka lang, hindi ka I hohold ng Immigration, tapos pa salubong ka na

lang, okay ka na."m

By his own testimony, Rodolfo Noel "Engineer" Lozada Jr. admitted that it was

his intention not to testify before the Blue Ribbon Committee. 374 With this in mind, he
375
actively sought the help of his superior DENR Secretary Lito Atienza and even

Deputy Executive Secretary Gaite. 376 They hatched a plan 377 , and they executed it with

success. Engineer Lozada was able to evade the invitation sent by the Senate and

subsequently, the order for his arrest.

Up and until the time Engineer Lozada decided to come back to the country, he

was still trying to evade the Blue Ribbon Committee summons. Again he and Secretary

373 Sabi ko uS ec. papaano yang arrest warrant sa akin?/I Sabi niya, "Nakausap na naming si Libanan, okay ka na sa
Immigration. Basta dumire-derecho ka lang, hindi ka I ho-hold ng Immigration, tapos pa salubong ka na lang, okay
ka na." (LOGalapon 111-1 February 8,2008 10:33am p.5)

374 Atienza: x x x Sabi- niya I/O isige; tignan natin rna gagawa natin. Huwag ka - na di ka makaratmg duon. Ana ba
ang gusto mo?" Sabi ko, "Ito lang ho ang gusto ko mangyari sana, huwag niyo na akong paratingin sa Sen ado."
(LOGalapon 111-1 February 8, 200810:33am p.2)

Nuong martes pumunta ako kay Dep. Exec. Sec. Manny Gaite because nobody knew my role X x x So
pinaliwanag pa rin aka ulit nina - mga tao ni Manny Gaite at nuong nandun na siva, tapas sabi nila, ganon ubt.
"Anong gusto mol" x x x So
ganun na rin, inulit ko na naman sa kanila, "Huwag niyo na he aka paratingm sa
Sen ado. x x x" (LOGalapon 111-1 February 8, 2008 10:33am p.2)
.". ,"r' " {
375 Atienza: x x x Sabi niya "0 sige, tignan natin ma gagawa natin. Huwag ka - na di ka makaratlng duon"

(LOGalapon 111-1 February 8, 2008 10:33am p.2)

376 So they decided right then and there x x x

"Kailangan lumabas si Jun." (LDGalapon 111-1 February 8, 2008
10:33am p.2)

"'s· h
o Inayos 0 nil a yong mga travel documents ko, pinagawa ako ng mga travel requests, pin a ante-date at plna
alis ho ako papuntang Hong Kong. (LDGalapon 111-1 February 8,2008 1O:33am p.2)
'l
1I

Page 83 of 127
 Atienza devised a plan on how he could sneak back inside the country without being
378
detected by the media, and ultimately the Senate

Lozada: "Sec, papaano yong arrest warrant sa akin?"

Atienza: "Nakausap na naming si Libanan, okay ka na sa Immigration, Basta
dumeri-derecho ka lang, hindi ka I hohold ng Immigration, tap os pa salubong
ka na lang, okay ka na,"379

This testimony as given by Engineer Lozada before the Blue Ribbon Committee

on Feb, 8, 2008, is foretelling of what really happened,

Secretary Atienza in his testimony before the Blue Ribbon Committee admitted

that he personally sought the assistance PNP Chief Avelino Razon 38o to secure

Engineer Lozada upon his arrival from Hong Kong. Granting for the sake of argument

that Lozada neither personally requested police protection nor knew that Secretary

Atienza requested one for him, his being "secured" by these men do not constitute

kidnapping, illegal detention nor arbitrary detention,

It should be kept in mind that this was still part of a grand scheme; a scheme in

which Engineer' Lozada himself was an active participant. A plan he and Secretary

378 So last week ho tinawagan aka ni Sec, Atienza. Sabi niya "kalian ka ba dapat umuwi, Feb, 7? Sige, umuwi ka na
ng Feb, 5, Don't take yang ana, yung maraming tao. Yung alanganing oras ka umuwi." (LDGalapon 111-1 February 8,
2008 10:33am p,5)

379 Sabi ko IISee. papaano yong

,
arr'est warrant sa akin?" Sabi niya, "Nakausap na naming si Libanan, okay ka na sa
Immigration, Basta dumire-derecho ka lang, hindi ka I ho-hold ng Immigration, tapas pa salubong ka na lang, okay
ka na," (LDGalapon 111-1 February 8,2008 10:33am p,S)

380 Sen, Biazon: x x xMr. Secretary humingi kayo ng formally sa Philippine National Police para ma blgyan ng
security?

Mr, Atienza: Opo,

x x x

Mr. Atienza: Opo, Ang akin lamang po e hindi ko naman po mapapatawad ang sarili ko kung hindi ko siya b,nlgyan
ng seguridad at may nangyari sa kanya, (MHBALAGNE VIII-1 Feb, 11, 2008 12pm p.5-6)

Page 84 of 127 V
 Atienza agreed to, for him to be able to sneak inside the country without being detected

and evade being arrested by the Senate Sergeant at Arms.

In a testimony given by Engineer Lozada at the Court of Appeals, he said that

when he was being driven around Metro Manila from the airport, Secretary Atienza

spoke to him over the phone and allegedly said "sumama ka lang dyan, mag uusap pa

kami ni ES at ni ma'am.,,381 and that from that point on, he understood that those men

were under Secretary Atienza's control and supervision. 382

All these testimonies coupled by photographs and video shown before the Blue

Ribbon Committee 383 do not support the assertion of Engineer Lozada that force was

imposed upon him during the time he was under the "custody" of the PNP-PSPO Sr.

Sup!. Mascarinas and his men. At no point during the entire incident did Engineer

Lozada shout for help from anybody -- not when he was allegedly "taken" at the airport,

not when they stopped at a Jollibee Fastfood outlet at Sta. Rosa, Laguna and not even

when he was already inside and under the protection of the Brothers of De La Salle

Greenhills. Neither was his cellular phone taken from him. For this after all was not a

case of kidnapping or arbitrary detention, but merely a grand plan of deceit gone wrong;

evasion gone awry.

Perhaps some sectors would argue that if Engineer Lozada was not kidnapped,

why then would his 'relatives file petitions for a writ of habeas corpus and writ of

381 X X x when he spoke with Sec. Atienza,.he;was. toldove, the phone that"sumama ka lang divan. Mag uusap pa
kami ni ES at ni Ma'am." Referring to the Executive Secretary and President Gloria Macapagal·Arroyo. ICA G.R. SP
Nos. 00017 and 102251 Decision p. 43)

382 The talk with Sec. Atienza happened when they were at C5 near Market Market at or before 5:00 o'clock, he
understood that those men were under Sec. Atienza's control and supervision .. ICA G.R. SP Nos. 00017 and
102251 Decision p. 44)

383 Annex 8

Page 85 of 127
amparo? To our mind, the answer is clear: there was already a brewing distrust with

the administration on the part of the Lozadas. They were not sure if indeed the

administration would protect Engineer Lozada from the Senate and so as a safety net,

they had to make sure that they had something to fall back on. They were anticipating a

possible double-cross.

Engineer Lozada never really wanted to go to the Senate. Up until two hours

before his press conference, he was still trying to avoid telling the truth.

Transcripts of Engineer Lozada's February 8, 2008 testimony about what

transpired on the eve on February 6, 2008 reveal:

Nung gabi pong yon, binisita rin aka ni Mike, ni Mike Defensor. Makaibigan po kami non.
Binisita po aka ni Mike. At-meron po 'ata akong nakalimutan-nung nandan ho pala si
Col. Mascarinas, tinawagan din po pal a nya ako-- gusto ho akong makausap ni Gen.
Razon. Nakikila kong hirap na hirap si Gen. Razon kaya sabi ko sa kanya, "Gen,
pasensiya na po kayo, pati kayo nadadamay pa sa akin." Kasi nakikita ko na nag-aano
sila sa media, eh. He was forced to say a lie, 'no. So naawa ako sa kanya, actually. I
know he is a good man. Bul napipililan pa siyang magsinungaling.

So nung pumunta ho si Mike nung gabi na yon, ang sabi ni Mike, "Pare, these thing has
grown out of way, way out of proportion na 'to." Sabi ko, "00 nga eh, hirap na hirap na aka
rita. I thought, sinabi ko naman sa inyo mulat-sapul, 'Ayaw kong ma-involve-involve dyan,
eh.'" So sabi nya, "Di bale, di bale, gagawan natin ng paraan yan. Puwede bang tumawag
ka na ngayon sa media either si Mike Enriquez 0 si--", sino pa ba yung babaeng
broadcaster, di ko malandaan-"Tumawag ka na. Just make a statement na hindi ka
naman kinidnap at wala ka naman talagang alam dilo." Sabi ko, "Mike, ayaw ko nang
gumawa ng mga-{!adagdag pa 'ko 'ka ko sa gulo, eh. Puwede bang 'di na ko
magsasalita?" And he was so gracious, sabi niya, "Eta, pang-gastos-gastos."

So kaibigan ko po yun si Mike. Sabi nya, "Puwede bang bukas mag-press conference ka
naT Kaya yung preSS conference na yan idea po ni Mike yun, eh. Kasi po-- sabi ko nga
kay Mike, "Mike,lahat naman "g inuutos nyc sa akin ...384 sinusunod ko kava lang
sabog nang saboq eh. Sabi n'yo sa akin dati umalis ako, pumuntang Hong Kong,
dahil tapos na ito, closure report na. Hindi, pinaaresto ako. Kaysa maayos, mas
lalong lumala. Pinaaresto ako. Sabi 'ka ko ni Secretary Atienza umuwi na ako, 'yun
pang hapon, sinunod ko, umuwi naman ako, nagkagulo pa rin. Sabi ko nga, wala
naman ako sa inyong ano. 0 ganito na lang, Jun ... Sabi ko, wala kayong timon, 'ka ko.
So... "\
V
38'
TSN: melNOVERO IV-l, February 8,2008, 10:43a.m., pp. 5-6.

Page 86 of 127
 But, sabi n'ya, mag-press conference ka na lang bukas, sabihin mo na hindi ka kinidnap,
wala kang kinuhang ano. So pagpasok ko, sabi ko, Mike, ang hirap-hirap na nito 'no.
Nagmama-- So pagbalik ko po sa kuwarlo ko, kinuwento ko sa asawa ko 'yung ano, sinabi
ko nga. Tumawag pa rin ho 5i Secretary Neri, sabi n'ya, Jun ... Sabi ko, Rom, hirap na
hirap na ako sa kalagayan ko. Sabi ko mayroon na akong ano sa labas, mayroon na
akong maraming problema sa labas, on the domestic front nagkakaproblema na
ako. Kasi 'yung asawa ko is a wreck already; mawala lang ako natatakot na kasi
hindi alam kung saan ako dadalhin. Sabi ko nga sa kanya, hirap na hirap na-- sa
domestic front, 'ka ko, mas mahirap because I'm the only one who has to work on
her. Sa external front, marami tayo.

Nu'ng gabi pong 'yun, pagbalik ko roon, kinuwento ko sa asawa ko 'yung plano na mag-
aano na ako, na magpi-press conference ako. Sabi ko nga kay Mike, Mike kayo na ang
mag-ayos nU'ng statement. My wife then, sabi niya, puwede bang tawagin na nalin sin a
sister, hindi· ko na kaya itong pinaggagagawa mo? Tinawag ho namin sin a sister, mga
kaibigan naming madre, sinabi nga ng asawa ko 'yung predicament namin. Tapos
kinuwento ko rin doon sa mga brothers at saka doon kina Bishop 'yung kinalalagyan na
namin, na tuluy-tuloy na ito.

Sabi ko, if I'll do this, I'll get suck into this already. Tuluy-tuloy na; kasali na ako rito.

Sabi po nu'ng mga madreng kausap namin at nu'ng mga pari, sabi n'ya, Jun wala nang
katapusan 'yan, let's pray over it, and after prayer, magdesisyon ka kung sasama ka na
diyan, irerespeto natin 'yan, 0 you will stick with the light. Medyo tumagos sa puso ko
'yung sinabi nu'ng pari.

We prayed oyer it; mQa alas-dose na po 'yun. Nagdesisyon po ako, which really
made my wife freak out, na I will just go to the Senate na lang. I will submit myself
to the Senate, 'ka ko, enough of this, sabi ko. Hindi na ako makikisali roon sa mga
pinapipirmahan sa akin, ganoon. So noong gabing 'yun, noong after nu'ng prayer,
natatakot ang asawa kung anong mangyayari. Nagdesisyon na po 'yung mga madre at
mga pari na para sa ikabubuti ng buhay mo, proteksiyon ng buhay mo, mag-press
conference na tayo. Sabi ko po, Susmaryosep! Alas-dose y media na po 'ata 'yun a ala-
una na, mag pi-press con... Sabi ko, may tao bang pupunta sa atin? Sabi n'ya, hayaan
mo na, basta may-- on record lang na sinabi mo na 'yung gusto mo. Kasi baka doon sa
baba, 'yung mga pulis, nandoon pa eh. So 'yun po, kaya aka nag-press conference
kahapon, na nadesisyunan na that I will stick to the truth and I will come, submit myself to
the Senate,kaya p? ako nandito. 385 (emphasis supplied)

Thus, Engineer Lozada only decided to come out with the truth after he prayed

with the religious for discernment and guidance. It is undoubted that Engineer Lozada

had a change of heart that is why he found the courage and the strength to come before

the Senate.

y
385 TSN: Aliccantimbang V-1, February 8. 2008, 10:53a.m., pp. 1-3.

Page 87 of 127
 It is safe therefore to say that up until two hours before Engineer Lozada's press

conference, he was a conflicted man. He was dealing with an internal conflict whether

or not to evade testifying before the Senate; whether or not to tell the truth and implicate

many of his friends; whether or not to risk his career and family life; and whether or not

to subject himself to the scrutiny of the Filipino nation.

Kidnapping and Serious Illegal Detention as provided in Article 267 of the

Revised Penal Code is a very serious charge that we are not prepared to rule on given

the present set of facts. The Court of Appeals' denial of Engineer Lozada's writ of

amparo casts serious doubts as to the veracity of his claims.

However, should Engineer Jun Lozada have other more convincing evidence to

SUbstantiate his claims, it would be best that he should present it befo re the Department

of Justice where he currently has a pending case of Kidnapping and Attempted Murder

charges that he filed against Environment and Natural Resources Secretary Lito

Atienza, former Philippine National Police (PNP) Chief Avelino Razon and three others,

on February 22, 2008.

Moreover, it is also very telling that the whole government machinery was

mobilized just to prevent Engineer Lozada from testifying before the Senate. This only

means one thing: Engineer Lozada knows too much and he will have difficulty in lying

before the Senate; andhi.stestimony is something that has to be prevented at all costs. ~

Page 88 of 127
4. FINDINGS OF THE BLUE RIBBON COMMITTEE

In the midst of conflicting testimonies, the Blue Ribbon Committee has arrived at

the following findings:

4.1 President Gloria Macapagal-Arroyo allowed ZTE to win the NBN

project, even if at the initial stages she spoke as if she wanted a
private Build Operate and Transfer (BOT), no sovereign guaranty,
"pay as you use" broadband.

It must be borne in mind that the acts of all of President Arroyo's alter egos:

Former Presidential Chief of Staff Michael Defensor, Chairman Neri and Secretaries

Favila and Mendoza are within her complete control and supervision. Moreover, the

direction that NEDA took in approving the NBN-ZTE contract was also under her control

as Chairperson of NEDA.

In spite of the fiflct that she knew about the P200 million bribe offer related to her

by Secretary Neri and in spite of the fact that she knew that there were anomalies in the

contract the night before the signing with ZTE, she proceeded to China to witness the

signing of the contract. It is worth noting however that the contract was not government

to government but was merely a contract with a private company. Why did she have to

go? What compelled her to go?

Moreover, she claimed executive privilege with regard to the details of her

instructions to Chairman Neri regarding the approval of the contract. The mere act of

claiming executive privilege meant that she had a presidential communication with

Chairman Neri regarding ZTE; otherwise, there would be nothing to invoke. This shows

that she had a hand in its approval. She knew what was going on. And she invoked

Page 89 of 127
 executive privilege because there was something that she wanted to hide from the

Filipino people.

Also, it seems that the whole executive department was mobilized to prevent

Engineer Lozada from testifying. While most of her Cabinet officials claimed that they

were acting on their own, it boggles the mind why all the President's men were falling

over each other to prevent a mere bureaucrat from testifying before the Senate. The

operations to help stop Engineer Lozada from testifying did not only involve the DENR

and the Office' of the President; it even had the indispensable cooperation of the PNP,

NAIA and the Bureau of Immigration. It even resurrected the services of a former

Presidential Chief of Staff, Michael Defensor. If the whole operation did not have the

blessings of the President, then whose hand would have the power to make all these

government operatives do what they did? What can make Deputy Executive Secretary

Gaite issue ante-dated travel documents to Engineer Lozada? What kind of compelling

force can make him give P500,OOO to someone he hardly knew because the latter was

merely feeling cold in Hong Kong?

It was also not proper for the President to be playing golf in the ZTE Shenzhen

headquarters when she knew that ZTE was lobbying for a contract with her government.

Clearly, this act is ano~her lapse in judgment- at the very least.

She definitely condoned the corruption. If not for the public uproar brought about

by the NBN-ZTE investigations, she would not have cancelled that contract.

As the chief administrative officer of the government, President Arroyo should

explain why:
V'
Page 90 of 127
 • She did not do anything actively after Chairman Neri told her of the alleged

P200 Million bribe offer by Chairman Abalos;

• She still went to China to witness the signing of the Supply Contract with ZTE

when the night before, she knew that there were anomalies surrounding the

contract; and

• She went to play golf in Shenzhen, China upon the invitation of ZTE in spite

of the fact that she knew that ZTE was lobbying for a contract with her

government. The President should have been more careful and circumspect

in her actuations.

, ~,. ,,' ' J, •

4.2 Former Comelec Chairman Benjamin Abalos shamelessly brokered

the approval of the ZTE contract. His lobbying efforts were
confirmed by Chairman Neri, Mr. de Venecia III, Engineer Lozada,
Secretary Teves, Secretary Mendoza, and Mr. Leo San Miguel.

While Chairman,.Abalos's alleged. attempt to bribe Chairman Neri may be, for

some, a case of one's word against the other, it is an established fact that Chairman

Abalos was pulling all the strings in government for ZTE to secure the NBN contract.

Chairman Abalos was hosting meals and golf games at the Wack-Wack Golf and

Country Club and even meeting with Chairman Neri, Engineer Lozada and ZTE officials

at the Makati Shangri-la Motel.. He. also orchestrated meetings with the First Gentleman

in connection with the ZTE contract at least twice. First, in Wack Wack Golf and
,
Country Club and second; in Shangri-la.

But more than what he did, the more pertinent issue is why he did it. What was

Chairman Abalos' business with broadband technology? Why did he brazenly pull

strings in government in favor of ZTE? Why did he risk getting into a fight with Mr. de

Venecia III, the son of the 4th highest official in the country at that time, just for ZTE to

Page 91 of 127
 get the deal? He could not have been so presumptuous to make the demand at

Shenzhen, in front of De Venecia 111- the Speaker's son- if he was not so sure of himself

and his connections. What was a COMELEC chairman doing, delving in matters of

telecommunications- while there was a very important election that he had to prepare

for?

It is also worth noting that the filing of the certificates of candidacy in the May 14,

2007 midterm elections started as early as January 2007. The filing of certificate for

candidacy for Senators in the 2007 elections was from January 15 - February 12,

2007 395 and the campaign period for national elective positions was from February 13 -

May 12, 2007. 396 Therefore, then COMELEC Chairman Abalos was so busy during that

period not because of the elections but because of his acting as a broker for ZTE.

Clearly, Chairman Abalos had a big stake in the NBN deal and it could only have

been financial or pecuniary in nature. The fact that he was the head of an independent

constitutional body which was supposed to be preparing for the holding of an upcoming
, ,. ,I "'.', , ,., ,~

election, but was instead prioritizing peddling his influence in government to intervene in

a government contract can lead to no other conciusion. He was more interested in

getting the contract than in doing his COMELEC duties. This is a pure case of graft and

corruption.

Chairman Abalos was unabashedly influence-peddling in violation of Sections 3

(a) and (h) of RA 3019. If found that he really offered a bribe of P200 Million to

395 Section 5, Comelec Resolution No. 7799, Guidelines on the Filing of Certificates of Candidacy and Nomination of
Official Candidates of Registered Political Parties in Connection with the May 14, 2007 Synchronized National and
Local Elections,S January 2007.

396 Section 3, Comelec Resolution No. 7767/ Rules and Regulations Implementing Republic Act No. 9006 otherwise
known as the "Fair Election, Act," in Relation to the May 14, 2007 Synchronized National and Local Elections 30
November 2006. ' ~
/II
(j
Page 92 of 127
Chairman Neri, then he should also be charged with violation of Article 212 of the

Revised Penal Code on Corruption of Public Officials.

4.3 Mr. Jose de Venecia III is bound by the prohibition in Section 5 of

Republic Act No. 3019 prohibiting a relative of the Speaker of the House
up to the 3rd civil degree from intervening directly or indirectly in any
business, transaction, contract or application with the Government.

Admittedly, the law provides an exception for those relatives who have been

dealing with the government along the same line of business prior to the official's

assumption of office and Mr. de Venecia III claimed that he had already been dealing in

telecommunications matters with the government even before the assumption by his

father of the Speakership in 1992. But apart from his bare and naked assertion, he

failed to substantiate this claim and cite specific instances to convince the Blue Ribbon

Committee that he was dealing in telecommunications matters with the government

before 1992.

He even asked his general manager at AHI, Ernesto Garcia, to draft a letter of

endorsement for Secretary Mendoza to sign- so that AHI could secure the contract. Mr.

de Venecia III w~s a rent-seeker clearly using with impunity, the influence of his father's

office as leverage in order to win a lucrative government contract.

Mr. de Venecia III spilled the beans regarding the NBN-ZTE scam, Chairman

Abalos' influence peddling, and First Gentleman Arroyo's improper intervention not

because he was a patriot but because he was vengeful. He even admitted that there

could have been a partnership between AHI and ZTE. It only fizzled out because of the ~

alleged US $ 130 Million over price.

Page 93 of 127
 Moreover, Mr. Jose de Venecia Ill's non-reaction or lack of righteous indignation

when then Comelec Abalos' demanded the balance of his commission, and the

commission supposedly for the Speaker and for the President, in Kempinski Hotel in

China, is quite suspect, if not revealing. If indeed his father was not part of the

transaction- or had no part in it at all- the natural reaction of a son would be to dispute

or object to the assertion in front of those upon whom commissions were being

demanded. That would have been the most normal thing to do in the face of an

allegation of corruption being thrown at one's father. He, after that incident, could have

told his father ab(JUt'it, and he could have instituted impeachment proceedings against

Mr. Abalos. He could have asked his father to report the incident to the President. Why

didn't he? What was he afraid of, considering his father was the Speaker of the House?

His testimony at'the last hearing of the Senate Blue Ribbon Committee is very

telling:

THE CHAIRMAN. So dalawa langkayong nagpunta?

MR. DE VENECIA. Hindi po--dalawa po. Kaya lang I took my own flight and I
paid for my own airfare, and I met him in Shenzhen at the Kempinski Hotel. He,
apparently, came from Hong Kong and went to the Kempinski Hotel to meet the
ZTE officials. So that's where the meeting happened at the Kempinski Hotel.

THE CHAIRMAN. So, dalawa kayo doon, dalawa lang kayo?

MR. DE VENECIA. Dalawa lang po kami doon.

THE CHAIRMAN. . Doon humingi siYil ng pera allegedly, sabi mo, for the
, "1. "'Presiaenf,fofSpeaker de Venecia?

MR. DE VENECIA. Yes, yes.

THE CHAIRMAN. The balance of his commission and that of the President
GMA and Speaker de Venecia?

MR. DE VENECIA. Ang sabi niya po exactly is that iyong komisyon niya, at
sabi niya, hinihintay din daw ito ng Presidente at ni Speaker de Venecia. lyon po
ang sinabi niya. Kaya po, 1-

(At this juncture, Senator Lacson joined the paneL)

Page 94 of 127
 MR. DE VENECIA. ... If I can continue, sir, ang sabi niya hinila ko ngayon si
Chairman Abalos sa labas ng business center, At sinabi ko sa kanya, "Sir, I
mean, you cannol -firstly, you cannot be demanding these commissions from the
Chinese," And then .. ,

THE CHAIRMAN. In front of the Chinese sinabi mo 'yon?

MR. DE VENECIA. Yeah - hindi, Sa labas po, sa labas po nag-usap po

kami ni Chairman Abalos at sinabiko sa ,kanya, "And please do not use the name
of the President and Speaker de Venecia saying that they are waiting for this
money, Kasi they are both well-respected in China," So, I - you know, kaya ako
nagalit ng kaunti kay Chairman Abalos kasi ginagamit niya 'yong pang alan ni GMA
at ni JDV para doon sa commission na hinihingi niya at - so bumalik po kami doon
sa kuwarto uli at doon po, inulit niya uli po, sabi niya, "Where is the - where can
we get the commissions?" Because by January 15 po magiging very busy na siya,
So tumayo po 'yong government sales nila, si Ms, Fan Yang, saying, "But what
about the advances, Mr. Chairman?" Tapos si Chairman Abalos ay tumahimik na
lang and at the same time ZTE was also pressuring Chairrnan Abalos to stop this
meeting because their Chairman Wu was waiting at the restaurant in the hotel.
So, 'yon po ang nangyari doan,

THE CHAIRMAN. So, doon lang nanghingi? Wala nang iba? Doon sa
lounge, hindi na naghingi?

MR. DE VENECIA. Doon po siya nanghingi. Hindi. There was a dinner,

That was before dinner. The meeting started at about 4 o'clock and the dinner
was at 6 o'clock, So mayroon ho akong meeting between 4 to 6, At doon po niya
hinihintay 'yong commission, Sinabiniya na kailangan nag komisyunan ito kasi I
will be very busy and I will be the mostpowerful man, Sir, I already said this in the
last hearings,

THE CHAIRMAN. You know, I just - Yes, I know that.

MR. DE VENECIA. Yes, but I can conveniently that that's when he asked for
his commission kasi he will be very busy by January 15 and the President and the
Speaker are waiting for these commissions,397

And, after the supposed unpleasant meeting in China, why would he still meet

with Abalos? They met at least two more times after the Kempinski Hotel incident. The

first time was on January 2097 at the Diamond Hotel when then Comelec Chairman
"', 1

Abalos allegedly insisted that Mr. Jose De Venecia III meet again with ZTE 398 The

second time was sometime on February 2007 at Wack wack Country Club where he

397
,:~2 Jm
b'
alsa VI-1 September 1,2009 11:39 a,m, 7-8; and SNTUPAZ VII-1 SEPTEMBER 1, 2009 1149 A M -'i
Paragraph 23, Affidavit of Jose De Venecia III dated September 10, 2007, submitted on September 19, 2007

Page 95 of 127
 and then Comelec Chairman Abalos met with DOTC Assistant Secretary Elmer Soneja

to talk about the NBN project. 399

Was the business proposition or profit motivation weightier than honor and pride?

The only plausible answer to all these is either that he was also out to get a

commission himself, or corner the contract by himself, or that he knew that his father

was part of the whole scheme.

Mr. Jose De Venecia III had so many chances to blow the whistle but did not. He

could have blovJn the whistle after then Chairman Abalos offered him US $10 Million.

He could have blown the whistle after the Kempinski Hotel incident. He could have

blown the whistle after his alleged encounter with the First Gentleman in Wack Wack.

Why did it have to take him more than six months to come to the Senate and spill the

beans on hi~ cohorts'ih theNBN deal? Vvhy? The only reasonable answer is that he

was part of the stinking deal. He only spoke out because he was not happy with his

share or that he had lost his share.

Mr. de Venecia III did not come to the Senate with clean hands.

i U , '

4.4 First Gentleman Arroyo intervened- improperly- when he allegedly told

Mr. de Venecia III to back off from the NBN project.

First Gentleman Mike Arroyo, as the President's spouse, is prohibited by Section

5 of Republic Act No. 3019 from .intervening directly or indirectly in any business,

transaction, contract or application with the Government. By attending that meeting at

399 Paragraph 26, Affidavit of Jose De Veneeia III dated September 10, 2007, submitted on September 19,2007.

Page 96 of 127
the Wack Wack Golf and Country Club and telling Mr. de Venecia III to back off, he

actively intervened in a government contract in violation of this prohibition.

It was also alleged by Mr. de Venecia III and Engineer Lozada that the First

Gentleman was to receive a kickback from ZTE in the amount of US$70 million. If true,

First Gentleman Mike Arroyo, as well peddled influence and violated Section 4 of

Republic Act No. 3019, which penalizes any person having family or close personal

relation with any public official who takes advantage of such family or close personal

relation by directly or indirectly requesting or receiving any present, gift or material or

pecuniary advantage from any other person having some business, transaction,

application, request or contract with the government, in which such public official has to

intervene.

And what was Mr. Arroyo doing in Wack Wack, in the middle of a supposed

reconciliatory meeting?'He says that when he was introduced to Jose de Venecia III, he

merely advised him of a probable violation of RA 3019? What was his business in doing

so, to a person whom he has supposedly met for the first time?

A question pops in one's mind: Why would these people converge in Mr. Arroyo's

presence, and why would he be in a meeting where the ZTE contract was being

discussed? Why was he the "watering hole," why was he the converging point? Was the

meeting a compromise convention?

More than these violations of law, First Gentleman Mike Arroyo would do well to

remember that Caesar's wife must be above suspicion. Alas, he was not and thus did

not pass the test.

Page 97 of 127
 4.5 There are badges of irregularity in the acts of Secretary Mendoza as
well as in the acts of his two Assistant Secretaries, Soneja and
Formoso.

DOTC Secretary Mendoza's signature can be found in a document that endorsed

the project to NEDA. This signature in that same document pre-dates the receipt of his

office of the memo being quoted and adverted to.

Worth repeating is what we have earlier written on the indisputable facts of the

controversy. We earlier said:

On March 1, 2007, ZTE submits its revised proposal to DOTC.

On the very same day, on March 1, 2007, The Bids and Awards Committee

(BAC) reviewed and evaluated the revised proposal and presented the conditions to

ZTE.

Also, on March 1, 2007, DOTC Secretary Mendoza and clcr Ramon Sales

wrote a joint letter to NEDA Secretary Romulo Neri recommending the establishment of

a single Broadband Network.

';, , :'v"i'" '~""1>~" '

DOTC & CICT said in the letter that the Bids and Awards Committee (BAC) came

up with the following conditions:

i' '
• The project should satisfy the network requirements of the various

government agencies for VOIP, e-Government and e-Education;

• The system should be designed and implemented considering the demands

in areas not covered by existing services. Corollarily, the system should take

(!
Page 98 of 127
 into account and utilize and integrate, if possible, existing private and public

telecommunications infrastructure; and

• The funding should fully cover all requirements of the project including those

for its initial operation and maintenance.

The fact is: this letter of DOTC Secretary Mendoza and CICT Secretary Sales of

March 1, 2007 addressed to NEDA Chairman Neri comes five days in advance of the

BAC Resolution No. ICT 07-0002 dated March 6, 2007. Resolution No. 07-0002 of the

BAC-ICT of the DOTC is the document which formally adopted the findings of the

Technical Working Group (TWG) and recommend that the findings are forwarded to the

National Econo~ic and "Development Authority (NEDA).

How can it be possible to attach the said BAC Resolution to their March 1, 2007

letter to NEDA Secretary Neri when the BAC for ICT only came out with its findings on

March 6, 2007?

Furthermore, Assistant Secretary Soneja's Memo as the Chairman of the BAC

of March 1, 2007 was stamped received by the Office of the DOTC Secretary only on

March 7, 2001. How then can there be now an attachment of a March 1, 2007 letter to

NEDA?

Secretary Mendoza also talked with Mr. Jose de Venecia III in the Speaker's
I

house about the NBN project. This is at the very least improper considering he knows

his department is primarily responsible for the NBN. However, it also indicates that he

was in it too. Finally, he was in the reconciliatory meeting at Wack Wack showing that

he has an interest in the contract. It suggests that he was acting as a mediator which

Page 99 of 127
 should not really be his job. It seemed like all the most important characters in this

controversy were in Wack Wack at that time.

All these individuals were in Wack Wack to converge in Mr. Arroyo's presence, to

converge in their "watering hole".

Assistant Secretary Soneja as head of the BAC bears responsibility too. He was

in many meetings; he endorsed the Memo and was part of the overzealous process of

the BAC.

Finally, Assistant Secretary Formoso seems to have a very prominent hand in

the controversy. He can be seen in the COMELEC office with then Chairman Abalos 4oo

Moreover, the September 1 testimony of Engineer Jun Lozada is quite revealing:

THE CHAIRMAN. Mr. Lozada, kanina sinabi mo meron talagang October

28. You agreed with the opinion of Mr. Neri?

MR. LOZADA. Ang ano ho kasi - maybe si Mr. Sales hindi niya naanong lahat
kasi ... Actually, si Amboy Formoso ang kausap ng - nina Chairman Abalos
diyan eh. So, I may understand Mr. Sales not being able to remember all.

THE CHAIRMAN. Asec, Asec. Amboy Formoso?

MR. LOZADA. Yes. Siya po iyong ano - siya ang talagang kumakausap doon sa
grupo ni Chairman Abalos through kay Leo San Miguel. Sila ho iyong nagha-
handle .k<\y; Formoso. So anything that this group needs from CICT, all they have
to do is tell Formoso and Formoso delivers it. So I may understand because as
Mr. Sales said, we never actually met. The only person na naano diyan sa CICT
is si Asec. Formoso. So, siya ho lahat ang ano - ang lahat ng kailangan
document-wise or para ana siya ho iyong ...

THE CHAIRMAN. DOTC siya, si Formoso, di ba?

MR. LOZADA. Sa CICT ho siya.

THE CHAIRMAN. Hindi niyo ba kilala itong si Amboy Formoso po?

400
TSN: Amador X-2, September 26, 2007, 2:23 p.m., pp. 6-7.

Page 100 of 127

 MR. SALES. Well, he was the head of TELOF and he was .. As a
commissioner, he was reporting to the Chairman of CICT.

THE CHAIRMAN. So he was reporting to you.

MR. SALES. Yes. And then he was transferred to DOTC.

THE CHAIRMAN. Later?

MR. SALES. Later, yes.

THE CHAIRMAN. So, what are we saying here then that ... ?Jun, ana iyong
sinasabi mo ngayon?

MR. LOZADA. Ang sinasabi ko ho na hindi si - wala ho talagang masyadong

visibility iyong project na ito kay Chairman Sales dahil nga hindi ho nila tantiyado
raw si Chairman Sales, kung baga, they felt that. ..

THE CHAIRMAN. Is that your opinion or is that. .. ?

MR. LOZADA. No, no, sa usapan. Kaya nga inalis ako.

THE CHAIRMAN. Sino ang nagsabi?

MR. LOZADA. Iyong grupo ho nila.

THE CHAIRMAN. Because you just cannot say that. You have to quote
somebody.

MR. LOZADA.' I'm sorry. Kaya nga ho that's the very reason why there
was an EO na inalis itong implementation ng project from CICT to DOTC
because they are not sure, sina Chairman Abalos, if Chairman Sales would play
ball with them. 401

Thus, Formoso should therefore answer the charges of Engineer Lozada in the

proper forum.

4.6 The averments of Engineer Lozada.

, i

Engineer Lozada made the 'statements of Mr. de Venecia III and Chairman Neri;

in fact, Engineer Lozada said things that that Chairman Neri was not willing to say.

401 TSN: Solidum 1-2 September 1, 2009,12:49, pp. 6-8.

Page 101 of 127

 However, the Committee refuses to rule on his allegations of kidnapping We

encourage him instead to present more substantive evidence before the Department of

Justice (DOJ) which is investigating his kidnapping case so that they may rule on

whether or not there is probable cause to file a kidnapping case against Secretary

Atienza and his alleged cohorts.

Yet, it should be noted that Engineer Lozada knew a lot regarding the

transaction of the NBN-ZTE contract because from the start, he was part of the grand

scheme to defraud the govemment. He is not innocent; in fact, he was conspiring with

Secretary Nerl and the group of Mr. Jose de Venecia III and then Comelec Chairman

Benjamin Abalos on how to protect their "tong-pats". Therefore, he should be

investigated and or charged together with then Chairman Romulo Neri as principal by

indispensable cooperation with whatever charges that then Chairman Neri are charged

with.

It should be remembered that Engineer Lozada said that his involvement in the

NBN-ZTE deal startep when Secretary Neri introduced him to Chairman Abalos at the

Wack Wack Golf and Country Club where they met with Ruben Reyes, Leo San Miguel

and ZTE representatives Fan Yang and Yu Yong 402 However, prior to his involvement

in NBN-ZTE deal, he admitted that he was also working with Secretary Neri in the

Department of Budget and Management (DBM). In fact, he drafted a Memorandum for

Secretary Neri directing all government agencies to submit their telecom expenses. 403

Therefore, Engineer Lozada is no saint. He was a co-conspirator from the start who

chose to confess and tell what he knows when things got to hot to handle.

402 TSN: Aliccatimbang V-I, February 8,2008, 1O:53a.m., p.5.

4O'TSN, Aliccamtimbang, V-I, February 8,2008,10:53, PP 6-7.

Page 102 of 127

 However, due to his cooperation in the hearings and as evidence provides that

he seems to be not the most guilty, it will be up to the Ombudsman if it sees it fit to give

Engineer Lozada immunity. He may also apply as a State Witness.

A State Witness is defined by Section 10 of RA 6981 or the Witness Protection

Act as:

Section 10. State Witness. - Any person who has participated in the commission
of a crime and desires to be a witness for the State, can apply, and if qualified as
determined in this Act and by the Department, shall be admitted into the Program
whenever the following circumstances are present:

(a) the offense in which his testimony will be used is a grave felony as defined
under the Revised Penal Code or its equivalent under special laws;

(b) there is absolute necessity for his testimony;

(c) there is no other direct evidence available for the proper prosecution of the
offense committed:

(d) his testimony can be substantially corroborated on its material points;

(e) he does not appear to be most guilty; and

(D he has not at any time been convicted of any crime involving moral turpitude.
(emphasis supplied)

4.7 Secretary Neri was lobbying for the BOT of Mr. Jose de Venecia III

Former CICT Chairman Sales said that Secretary Neri made calls to him, asking

him to endorse one, then two projects. The testimony of Mr. Sales is very revealing in

V
spite of the repeated denials of Secretary Neri that he had nothing to do with the

agencies involved:

Mr. SALES. The December 8 letter is a response to Secretary's verbal request

that we endorse AHI. This was what I was referring to earlier.

THE CHAIRMAN. So the NEDA requested na your endorse AHI.

Page 103 of 127

MR. SALES. AHI.

THE CHAIRMAN. Si Secretary Neri may verbal request so inyo na i-endorse iyong
AHI?

MR. SALES. Yes. So, this was written when we again enumerated what AHI was
going to do. So that's page 1 up to 3.

And then, we gave our comments, and one of the comments is at 3.3. we said,
"We cannot opine on the capability of the proponent to undertake the project
financially and technically as due diligence on the proponent Amsterdam Holdings,
Inc. has not been undertaken, neither has proponent identified its strategic
partners, if any, Thus, similarly, no due diligence on them can be undertaken."

And then in page 3, 3.4, we said, "We further note that while the project may be
reasonably sound, we nevertheless hereby reserve the right to provide a detailed
engineering analysis on the project subject to the submission by the proponent of
final technical specifications."

THE CHAIRMAN. Okay. I just wanted to be sure I understood you correctly.

I'm trying to be fair here to everyone.

MR. SALES. Yes.

THE CHAIRMAN. Ang sabi ninyo, you were requested ...

MR. SALES. Verbally.

THE CHAIRMAN. ... verbally by Neri to endorse the AHI proposal.

MR. SALE.S. Yes. That was by phone.

THE CHAIRMAN. By phone. Kailan ho nangyari iyon?

MR: SALES. This was probably a day or two before December 8.

THE CHAIRMAN. All right. Hindi kayo nagtaka bakit niya pinapa-
endorse?

MR. SALES. I was confused because there was a prior request for
endorsement on ZTE. but then what I was thinking of was probably they
thought our endorsement was negative, which it was because -

THE CHAIRMAN. Whois "they"?

MR. SALES. NEDA

THE CHAIRMAN. Pero ang sinabi ninyo ZTE, bakit naging NEDA?

MR. SALES. In the October 20, it was again a response to Secretary Neri's (/
phone call asking for the endorsement of ZTE. This was October 20 as a II
letter.

Page 104 of 127

 THE CHAIRMAN. So, ang sinasabi ninyo tumatawag palagi si Secretary
Neri sa inyo na i-endorse iyong ZTE proposal at saka ngayon tumawag naman na
i-endorse naman iyong AHI proposal favorably?

MR. SALES. It is only two calls.

THE CHAIRMAN. Two calls?

MR. SALES. Yes, I think.

THE CHAIRMAN. The first one was about ZTE.

MR. SALES. ZTE. Well, I was new in government, and I was wondering
whether he was preparing his documentation or his justification and that's why it
was changing from one to the other. But we made sure that our opinion was stated
at the end. And in the case of ZTE, we said we were not sure of the price because
it appeared to us as sole source 404

Moreove'r, instead' of stopping the project as a responsible public officer would

have done, Secretary Neri instructed Engineer Jun Lozada to "moderate the greed" or

"alagaan mo yang mga yan kasi may political sponsors."

4.8 Secretary Atienza and then Deputy Executive Secretary Gaite

conspired with Engineer Jun Lozada to prevent the latter from
testifying in the Senate.

Both Secretary Atienza and then Deputy Executive Secretary Gaite conspired

with Jun Lozada'to prevent the latter from testifying in the Senate.

Deputy ExecutiVe Secretary Gaite even generously gave P500, 000 of his

alleged "personal" money so that Mr. Lozada will have something to spend in Hong

Kong.

404)
mb'
alSa V1-1 September 1, 2009, 11:39 a.m. pp. 3-5.

Page 105 of 127

 4.9 RA 9184 is regularly circumvented in cases of foreign loans. In this
particular instance, not only did the Philippine government allow the
Chinese government indicate a single supplier, this supplier also
dictated a price that was overpriced by US$130 Million compared to
the unsolicited proposals of other suppliers.

The Official Development Assistance (ODA) Act of 1996 expressly states that the

President of the Philippines may, when necessary, agree to waive or modify the

application of any provision of law granting preferences in connection with, or imposing

restrictions on, the procurement of goods or services. Thus, it can make anything that

deals with foreign loans beyond the ambit of RA 9184.

The NBN-ZTE investigations revealed that the root of the problem was not only

the procurement of supplies and services but the contract as well. As a result of the

present ODA Act, lending countries earns twice from us: First, through the interest of

the loan for a particular project; second, through supplies and services rendered for

such project, which they exclusively supply.

In this case, the Chinese government did not only specify that the supplier is from

China but it names the supplier. The Philippine government, even if forced with this

situation should' have suggested that different suppliers be mentioned so there is a

choice. It should not have just accepted the designation lock, stock, and barrel.

Moreover, as shown by the NBN-ZTE scandal, even foreign funded projects are
, 11 ". " ".
not free from corruption. Some high ranking officials are able to manipulate government

contracts and make a fortune, if not a golden parachute out of it.

Page 106 of 127

 4.10 The NBN Project is not exempt from competitive bidding required by
Section 4 of RA 9184 even if the Supply Contract is classified as an
Executive Agreement.

We fully agree with the Dissenting Opinion of Justice Carpio in the case of

Suplico vs. NEDA, et ai, G.R. No. 178830, July 14, 2008.

The Government Procurement Reform Act requires public bidding In all

procurement of infrastructure, goods and services. Section 10, Article IV of the

Government Procurement Reform Act provides: "Section 10. Competitive Bidding - All

procurement shall be done through Competitive Bidding, except as provided for in

Article XVI of this Act." (Emphasis supplied)

In addition, Section 4 of the Government Procurement Reform Act provides that

the Act applies to government procurement "regardless of source of funds, whether

local or foreign." Hence, the requirement of public bidding applies to foreign-funded

contracts like the ZTE Supply Contract.

The Executive Department admits that there was no public bidding for the ZTE

Supply Contract. They claim that the ZTE Supply Contract, being part of an executive

agreement, is exempt from public bidding under the last sentence of Section 4 of the

Government Procurement Reform Act. Quoting Justice Carpio:

This argument will hold water if an executive agreement can amend the
mandatory statutory requirement of public bidding in the Government
Procurement Reform Act. In short, the issue turns on the novel question of
whether an executive agreement can amend or repeal a prior law. The
obvious answer is that an executive agreement cannot amend or repeal a
prior law.

Admittedly, an executive agreement has the force and effect of law, just like
implementing rules of executive agencies. However, just like implementing rules
of executive agencies, executive agreements cannot amend or repeal prior
la~~ bu.t must comply with the laws they implement. Only a treaty, upon
raliflcalion by the Senate, acquires the status of a municipal law. Thus, a

Page 107 of 127

 treaty may amend or repeal a prior law and vice-versa. Hence, a treaty may
change state policy embodied in a prior law,

In sharp contrast, an executive agreement, being an exclusive act of the

Executive branch, does not have the status of a municipal law, Acting alone, the
Executive has no law-making power, While the Executive does possess rule-
making power, such power must be exercised consistent with the law it seeks to
implement.

Consequently, an executive agreement cannot amend or repeal a prior law. An

executive agreement must comply with state policy embodied in existing
municipal law, This Court has declared: International agreements involving
political issues or changes of national policy and those involving international
arrangements of a permanent character usually take the form of treaties. But
international agreements embodying adjustments of detail carrying out
well· established national policies and traditions and those involving
arrangements of a more or less temporary nature usually take the form of
executive agreements,

The Department of Justice in its DOJ Opinion No. 46 further argues that the ZTE

Supply Contract is part of the executive agreement between China and the Philippines.

This is erroneous, An executive agreement is an agreement between governments.

The Executive branch has defined an "international agreement," which includes an

executive agreement,~9 ~E'>fer t9 C) contract or an understanding "entered into between

the Philippines and another government."

That the Chinese Government "designated" the ZTE Corporation to supply the

goods and services to, the Philippine Government does not make the ZTE Supply

Contract an executive agreement. ZTE Corporation is not a government or even a

government agency performing governmental or developmental functions like the

Export-Import Bank of China or the Japan Bank for International Cooperation, or a

multilateral lending agency organized ,by governments like the World Bank, ZTE

Corporation is a business enterprise performing purely commercial functions. ZTE

Corporation is publicly listed in the Hong Kong and Shenzhen stock exchanges, with

individual and juridical stockholders that receive dividends from the corporation.

Page 108 of 127

 Moreover, an executive agreement is governed by international law. However,

the ZTE Supply Contract expressly provides that it shall be governed by Philippine law.

Thus, the ZTE Supply Contract is not an executive agreement but simply a commercial

contract, which must comply with public bidding as mandated by the governing law,

which is Philippine law.

Finally, as aptly stated in Justice Carpio's dissent:

An executive agreement, being an exclusive act of the Executive branch,

cannot amend or repeal a mandatory provision of law requiring public
bidding in government procurement contracts. To construe otherwise the
second sentence of Section 4 would constitute an undue delegation of
legislative powers to the President, making such sentence
unconstitutional. There are no standards prescribed in the Government
Procurement Reform Act that would guide the President in exercising
such alleged delegated legislative power. Thus, the second sentence of
Section 4 cannot be construed to delegate to the President the legislative
power to amend or repeal mandatory requirements in the Government
Procurement Reform Act.

Second, under Section 10 of the Government Procurement Reform Act,

the only exceptions to mandatory public bidding are those specified
in Article XVI of the Act. These specified exceptions do not include
purchases from foreign suppliers handpicked by foreign
governments, or from suppliers owned or controlled by foreign
governments. Moreover, Section 4 of the Government Procurement
Reform Act mandates that the "Act shall apply to the Procurement of
Infrastructure Projects, Goods and Consulting Services, regardless of
source of funds, whether local or foreign x x x."

4.11 The NEDA served as a mere rubber stamp to the wishes of the
President.

Since the NEDA is chaired by the President and its board members are the

President's men, the NEDA's economic planning functions can easily be manipulated

and subverted to serve other, oftentimes corrupt, considerations - as the NBN-ZTE deal

demonstrated. V

Page 109 of 127

 Section 9 Article XII of the Constitution provides that: "The Congress may

establish an independent economic and planning agency headed by the President,

which shall, after consultations with the appropriate public agencies, various private

sectors, and local government units, recommend to Congress, and implement

continuing integrated and coordinated programs and policies for national development."

Executive Order 230 promulgated on July 22, 1987 otherwise known as the

Reorganization Act of the National Economic and Development Authority has limited the

membership of NEDA Board to the President, the NEDA Director-General, the

Executive Secretary, and to some members of the Cabinet. However, the President

may revise the membership of the NEDA Board whenever the same is deemed

necessary to discharge its responsibilities as called for the President. 405

ThUS, it is necessary to change or create a law changing the composition of the

NEDA to ensure plurality iriopiriion"by 'infusing private sector participation in the

economic development board.

The President would be better served and protected if she does not use the

NEDA as her rubber stamp. As it is, the NEDA appeared to have acted as a rubber
. J, , ,
stamp. It failed to protect the integrity of the process.

5. RECOMMENDATIONS

5.1 In view of the above-mentioned conclusion and findings, we recommend that the

following be further investigated for possible violations of hereafter stated

provisions, where warranted; or, be asked to explain satisfactorily to the public / /

their lack of participation: ~

405
5ect'Ion 4,Executive Order 230, July 22, 1987.

Page 110 of 127

 5.1.1 H.E. Gloria Macapagal- Arroyo

• The Ombudsman erred in its hasty dismissal of the

complaint against the President.

The Ombudsman is wrong in merely dismissing the case against the

President on the mere pretext of presidential immunity from suit.

Section 22 of Republic Act 6770 (Ombudsman Act of 1989) provides:

The Office of the Ombudsman shall have the power to investigate any serious
misconduct in office allegedly committed by officials removable by impeachment,
for the purpose of filing a verified complaint for impeachment, if warranted.

In all cases of conspiracy between an officer or employee of the government and a

private person, the Ombudsman and his Deputies shall have jurisdiction to include
such private person ·in the investigation and proceed against such private person
as the evidence may warrant. The officer or employee and the private person shall
be tried jointly and shall be subject to the same penalties and liabilities.

It is the duty of the Ombudsman to investigate "impeachable" officers. No

exemption is provided in Section 22. What the Office should have done was to

investigate and make findings for transmittal to the House, if an impeachment would

have been warranted,' rather than a blanket statement or eXCUlpation because of

supposed immunity. It is not for the Ombudsman to make a ruling as to immunity, but

for the House todecideiwhat to do once it receives the transmittal. Neither was it for the

Ombudsman to say that there is no more impeachment process to be had because of

the one-year bar. It is: for'the House to make that ruling. Private persons such as the

First Gentleman could have been covered in this provision, as well.

Further, the Constitution in Article VII, Section 5 provides that the President

"preserve and defend its Constitution, execute its laws, do justice to every man."

Page 111 of 127

 Also, Article VII, Section 17 of the Constitution provides that: "The President

shall have control of all the executive departments, bureaus, and offices. He shall

ensure that the laws be faithfully executed."

Her acts in this case reveal that her performance of presidential duty has been

wanting.

5.1.2 FORMER COMELEC CHAIRMAN BENJAMIN S. ABALOS

• Violation of Section 3 (a) and (h) of Republic Act 3019 otherwise

known as ANTI-GRAFT AND CORRUPT PRACTICES ACT

Section 3. Corrupt Practices of Public Officers. - In

addition to acts or omissions of public officers already
penalized by existing law, the following shall constitute
corrupt practices of any public officer and are hereby
declared to be unlawful:

(a) Persuading, inducing or influencing another public

officer to perform an act constituting a violation of rules
and regUlations duly promulgated by competent authority
or an offense in connection with the official duties of the
,latter, or allowing himself to be persuaded, induced, or
influenced to commit such violation or offense.

xxx

(h) Directly or indirectly having financial or pecuniary

interest in any business contract or transaction in
connection with which he intervenes or takes part in his
official capacity, or in which he is prohibited by the
Constitution or by any law from having any.

Page 112 of 127

 • Violation of Article 212 of the Revised Penal Code otherwise known

as Corruption of Pubic Officials.

Article 212. Corruption of Public Officials. - The same

penalties imposed upon the officer corrupted, except those
of disqualification and suspension, shall be imposed upon
any person, who shall have made the offers or
promises or given the gifts or presents as described
in the preceding articles. (emphasis supplied)

5.1.3 MR. JOSE "JOEY" DE VENECIA III

• Violation of Section 5 of Republic Act No. 3019, otherwise known as

the ANTI-GRAFT AND CORRUPT PRACTICES ACT. The law

specifically provides:

Section· 5. Prohibition on certain relatives. - It shall

be unlawful for the spouse or for any relative, by
consanguinity or affinity, within the third civil
degree, of the President of the Philippines, the Vice-
President of the Philippines, the President of the Senate, or
the Speaker of the House of Representatives, to
intervene, directly or indirectly, in any bUsiness,
transaction, contract or application with the
Government: Provided, That this section shall not apply to
any person who, prior to the assumption of office of any of
the above officials to whom he is related, has been already
dealing with the Government along the same line of
business, nor to any transaction, contract or application
already. existing or pending at the time of such assumption
of public office .... xxx (emphasis supplied)
·r ·1' .::.

5.1.4 FIRST GENTLEMAN JOSE MIGUEL ARROYO

• Violation of Sections 4 (a) and 5 of Republic Act No. 3019, otherwise

known as the ANTI-GRAFT AND CORRUPT PRACTICES ACT. The

law specifically provides:

Section 4. Prohibition on private individuals. - (aJ It

shall be unlawful for any person having family or close

Page 113 of 127

 personal relation with any public official to capitalize
or exploit or take advantage of such family or close
personal relation by directly or indirectly requesting
or recetvtna any present, gift or material or
pecuniary advantage (rom any other person having
some business. transaction, application. request or
contract with the government, in which such public
official has to intervene. Family relation shall include
the spouse or relatives by consanguinity or affinity in the
third civil degree. The word "close personal relation" shall
include close personal friendship, social and fraternal
connections, and professional employment all giving rise to
intimacy which assures free access to such public officer.

(b) It shall be unlawful for any person knowingly to induce

or cause any public official to commit any of the offenses
defined in Section 3 hereof

Section 5. Prohibition on certain relatives. - It shall

be unlawful for the spouse or for any relative. by
consanguinity or affinity, within the third civil
degree. of the President of the Philippines, the Vice-
President of the Philippines, the President of the Senate, or
the Speaker of the House of Representatives, to intervene,
directly or indirectly, in any business, transaction, contract
or application with the Government: Provided, That this
section shall not apply to any person who, prior to the
assumption of office of any of the above officials to whom
he is related, has been already dealing with the
Government along the same line of business, nor to any
transaction., contract or application already existing or
pending at the time of such assumption of public office ....
xxx (emphasis supplied)

5.1.5. FORMER NEDA SECRETARY ROMULO NERI

• Violation of Section 3 (a) and (h) of Republic Act 3019 otherwise

known: as the ANTI-GRAFT AND CORRUPT PRACTICES ACT. The

law specifically provides:

Section 3. Corrupt Practices of Public Officers. -

In addition to acts or omissions of public officers
already penalized by existing law, the following shall
constitute corrupt practices of any public officer and are
hereby declared to be unlawful:

Page 114 of 127

 (a) Persuading, inducing or influencing another public
officer to perform an act constituting a violation of roles
and regulations duly promulgated by competent
authority or an offense in connection with the official
duties of the latter, or allowing himself to be persuaded,
induced, or influenced to commit such violation or
offense.

xxx

(h) Directly or indirectly having financial or pecuniary

interest in any business contract or transaction in
connection with which he intervenes or takes part in his
official capacity, or in which he is prohibited by the
Constitution or by any law from having any.

5.1.6 FORMER SPEAKER JOSE DE VENECIA, JR.

• Violation of Section 5 of Republic Act 3019 otherwise known as ANTI-

GRAFT AND' CORRUPT PRACTICES ACT

Section 5. Prohibit,ion on certain relatives. - It shall

be unlawful for the spouse or for any relative, by
consanguinity or affinity, within the third civil
degree, of the President of the Philippines, the Vice-
President of the Philippines, the President of the Senate, or
the Speaker of the House of Representatives, to intervene,
directly or indirectly, in any business, transaction, contract
or application with the Govemment: Provided, That this
section shall not apply to any person who, prior to the
assumption of office of any of the above officials to whom
he is, related, has been already dealing with the
Govemment along the same line of business, nor to any
,transqction, contract' or application already existing or
pending at the time of such assumption of public office ....
XXX (emphasis supplied)

• Violation of Republic Act No. 6713 otherwise known as Code of Conduct

and Ethical Standards for Public Officials and Employees

Section 7. Prohibited Acts and Transactions. - In

addition to acts and omissions of public officials and
employees now prescribed in the Constitution and existing
laws, the following shall constitute prohibited acts and
Page 115 of 127
 transactions of any public official and employee and are
hereby declared to be unlawful:

xxx

(d) Solicitation or acceptance of gifts. - Public officials

and employees shall not solicit or accept, directly or
indirectly, any gift, gratuity, favor, entertainment, loan
or anything of monetary value from any person in the
course of their official duties or in connection with any
operation being regulated by, or any transaction which
may be affected by the functions of their office.

5.1.7 SECRETARY LEANDRO MENDOZA, ASSISTANT SECRETARY LORENZO

FORMOSO AND ASSISTANT SECRETARY ELMER SONEJA

• Violation of Section 3 (h) of RA 3019 otherwise known as the ANTI-

GRAFT AND CORRUPT PRACTICES ACT. The law specifically

provides:

Section 3. Corrupt Practices of Public Officers. -

In ,addition to acts or omissions of public officers
already penalized by'existing law, the following shall
constitute corrupt practices of any public officer and are
hereby declared to be unlawful:

xxx

(h) Directly or indirectly having financial or pecuniary

interest in any business contract or transaction in
connection with which he intervenes or takes part in his
official capacity, or in which he is prohibited by the
Constitution or by any law from having any.

5.1.8 SECRETARY JOSE "LITO" ATIENZA, JR. AND FORMER DEPUTY EXECUTIVE
SECRETARY, MANUEL HUBERTO GAITE

• Violation Article 150 of the Revised Penal Code

Article 150. DisObedience to summons issued by the

National Assembly, its committees or subcommittees, by
the Constitutional Commissions, its committees,

Page 116 of 127

subcommittees or divisions. - The penalty of arresto mayor
or a fine ranging from two hundred to one thousand pesos,
or both such fine and imprisonment, shall be imposed upon
any person who, having been duly summoned to attend as a
witness before the National Assembly, (Congress), its speciaJ
or standing committees and subcommittees, the
Constitutional Commissions and its committees,
subcommittees, or divisions or before any commission or
committee chairman or member authorized to summon
witnesses, refuses, without legal excuse, to obey such
summ0l1.s, or being present before any such legislative or
constitutional body or official, refuses to be sworn or placed
under affirmation or to answer any legal inquiry or to
produce any books, papers, documents, or records in his
pOi'session, when required by them to do so in the exercise
of their functions. The same penalty shall be imposed
upon any person who shall restrain another from
attending as a witness, or who shall induce disobedience
to a summon or refusal to be sworn by any such body or
official. (highlighting ours)

5.1.9· ENGINEER RODOLFO NOEL LOZADA

• Violation of Sections 3 (a) and (h) of RA 3019 otherwise known as

the ANTI-GRAFT AND CORRUPT PRACTICES ACT. The law

specifically provides:

Section 3, Corrupt Practices of Public Officers. -

In addition to acts or omissions of public officers
already penalized by existing law, the following shall
constitute corrupt practices of any public officer and are
her:eby dec/ared to be unlawful:

(a) Persuading, inducing or influencing another public

officer to perform an act constituting a violation of rules
and regulations. duly promUlgated by competent
authority or an offense in connection with the official
duties of the latter, or allowing himself to be persuaded,
induced, or influenced to commit such violation or
offense.

xxx

(h) Direct.ly or indirectly having financial or pecuniary

znterest zn any business contract or transaction in
connection with which he intervenes or takes part in his

Page 117 of 127

 official capacity, or in which he is prohibited by the
Constitution or by any law from having any.

• Violation of Civil Service Law, Book V, Executive Order No.

292, Administrative Code of 1987

Chapter 7
PROHIBITIONS
SEC. 54. Limitation on Appointment. - (1) No
elective official shall be eligible for appointment or
designation in any capacity to any public office or position
during his tenure.
(2) '.No candidate who has lost in any election shall,
within one year after election, be appointed to any office in
the Government or any government-owned or controlled
. corporations or in any of its subsidiaries.
(31 Unless otherwise allowed by law or by the
primary functions of his position, no appointive official
shall hold any other office or employment in the
Government or 'any' subdivision, agency or
instrumentality thereof, including government-owned or
controlled corporations or their subsidiaries. (emphasis
supplied)

5.1.10 ZTE Corporation

, must be done on the ZTE Corporation, as well, in order to

An investigatior)

determine its role in the whole mess. While we must, the government must, encourage

the influx of foreign investors and corporations in order to contribute to employment, and

wealth creation in the count;Y: these corporations must be warned not to participate in

illegal transactions. These companies must not contribute or encourage the corruption

of public officers.

Page 118 of 127

5.2. The following law reform are also proposed:

5.2.1 An Amendment to the NEDA Law. Copy of the proposed law is

attached as Annex B.

The amendatory law is entitled AN ACT AMENDING EXECUTIVE ORDER NO.

230 ALSO KNOWN .AS THE REORGANIZATION ACT OF THE NATIONAL

ECONOMIC AND DEVELOPMENT AUTHORITY. Copy of the proposed law is

attached as Annex C.

Section 9 Article XII of the Constitution provides that: "The Congress may

establish an independent economic and planning agency headed by the President,

which shall, after consultations with the appropriate public agencies, various private

sectors, and local government units, recommend to Congress, and implement

continuing integrated and coordinated programs and policies for national development"

This bill proposes an amendment to Section 4 of Executive Order 230 of July 22,

1987 by including representatives from the private sectors to the composition of the

National Economic and Development Authority (NEDA) Board. This amendment will
'! <, ., ,,~,-.,

ensure that the interest of the private sector and major key players of the economy will

be considered.

Furthermore, the Blue Ribbon Committee came up with this bill for two reasons:

(1) to prevent another NBN-ZTE project that has not been thoroughly studied and

scrutinized; and (2) to prevent collusion among members of the board in approving a

project.

Page 119 of 127

 5.2.2 An Amendment to Section 5 of RA 3019. Copy of the proposed law is

attached as Annex C.

The bill is entitled as AN ACTAMENDING SECTION 5 OF RA 3019 ALSO

KNOWN AS THE ANTI-GRAFT AND CORRUPT PRACTICES ACT.

Section 27, Article II of the Constitution provides that "The State shall maintain

honesty and integrity in the public service and take positive and effective measures

against graft and corruption."

As an effective measure against graft and corruption, this bill seeks to amend

Section 5 of Republic Act No. 3019 (The Anti-Graft and Corrupt Practices Act) by

imposing an absolute prohibition on certain relatives of the President of the Philippines,

: '. I . j'" .~, r

the Vice-President of the Philippines, the President of the Senate or the Speaker of the

House of Representatives to intervene, directly or indirectly, in any business,

transaction, contract or application with the Government.

This bill ~ims to ensure that said public officials and their relatives always act in

the best interest of the country and must not be motivated by personal considerations

and relationships which could interfere with their independent judgment.

'n ' :

Page 120 of 127

 5.2.3 WHISTLEBLOWER PROPOSED STATUTE. Copy of the

proposed law is attached as Annex D.

Section 27, article II of the 1987 Constitution provides that as a State Policy, "The

State shall maintain honesty and integrity in public service and take positive and

effective measure against graft and corruption."

Furthermore, Section 1, Article XI of the 1987 Constitution provides that, "Public

office is a public trust Public officers and employees must at all times be accountable

to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act

with patriotism and justice, arid lead modest lives."

It is the intent of this bill to encourage citizens to stand up and report alleged

violations of law, improper use of govemmental office, gross waste of funds, or any

other abuse or gross neglect of duty on the part of an agency, public officer or

employee, and private entity, Furthermore by protecting citizens who disclose

wrongdoing from retaliatory acts, we hereby strengthen accountability and reduce

corruption in the public and private sectors.

5.3 The Ombudsman should not shirk from its responsibility in investigating

the possible'~iolatior'isof tile President of the Philippines.

I
Section 22 of the Ombudsman Act provides:

The Office of the Ombudsman shall have the power to investigate any
serious misconduct in office allegedly committed by officials
removable by impeachment, for the purpose of filing a verified
complaint for impeachment, if warranted.

In all cases of conspiracy between an officer or employee of the

government and a private person, the Ombudsman and his Deputies shall
have jurisdiction to include such private person in the investigation and

Page 121 of 127 (

vi
 proceed against such private person as the evidence may warrant. The
officer or employee and the private person shall be tried jointly and shall
be subject to the same penalties and liabilities. (emphasis supplied)

In the case of Estrada v Desierto and Estrada v Macapagal-Arroy0 406 the

Supreme Court properly discusses the issue of executive immunity. It elucidates:

Indeed a critical reading of current literature on executive immunity will

reveal a judicial disinclination to expand the privilege especially when it
impedes the search for truth or impairs the vindication of a right... The US
Supreme Court... concluded that "when the ground for asserting privilege
as to subpoenaed materials sought for use in a criminal trial is based only
on the generalized interest in confidentiality, it cannot prevail over the
fundamental demands of due process of law in the fair administration of
criminal justice." In the 1982 case of Nixon v Fitzgerald, the US Supreme
Court further held that the immunity of the President from civil damages
covers only "official acts." Recently the US Supreme Court had the
occasion to reiterate this doctrine in the case of Clinton v Jones, where it
held that the US President's immunity from suits for money damages
arising out of their official acts is inapplicable to unofficial conduct.

There are more reasons not to be sympathetic to appeals to stretch the

scope of executive immunity in our jurisdiction. One of the great themes of
the 1987 Constitution is that a.public office is a public trust. It declared as a
state policy that "the State shall maintain honesty and integrity in the public
service and take positive and effective measures against graft and
corruption." It ordained that "public officers and employees must at all times
be accountable to the people, serve them with utmost responsibility,
integrity, loyalty, and efficiency, act with patriotism and justice, and lead
modest lives." It set the rule that "the right of the State to recover properties
unlawfully acquired by public officials or employees, from them or from their
nominees or transferees, shall not be barred by prescription, laches or
estoppel.' It maintained the Sandiganbayan as an anti-graft court. It created
the office of the Ombudsman and endowed it with enormous powers,
among which, is to 'investigate on its own, or on complaint by any person,
an/act or omission
I
'of any public official, employee, office or agency, when
such act or omission appears to be illegal, unjust, improper, or inefficient."

."
It is therefore the duty of the Ombudsman to investigate impeachable officers. No

exemption is provided in Section 22. What the office should have done was to

investigate and make findings foFtrah'smittal to the House if an impeachment would

have been warranted, rather than a blanket statement or exculpation because of

supposed immunity. It is not for the Ombudsman to make a ruling as to immunity, but

406 Estrada v Desierto and Estrada v Macapagal-Arroyo , 353 SeRA 452 ( 2001)

Page 122 of 127 1J

for the House to decide what to do once it receives the transmittal. Neither was it for the

Ombudsman to say that there is no more impeachment process to be had because of

the one-year bar, it is for the House.

6. CONCLUSION

This has been a long, agonizing, and arduous task. The Committee had to deal

with thousands of pages of transcripts, documents and other submissions. We are glad

we have seen the termination of the task at hand.

The NBN-ZTE scandal has shown to us the coarseness of our pOlitical culture.

Even if our laws are in' place, it has' shown how the most powerful public officers and

their families took advantage of their influence to try to cash in from government. It is a

pure case of naked abuse of power.

Philippine laws have always upheld the dignity and importance of public office.

No less than Article XI of the Constitution on the Accountability of Public Officers; the

Anti-Graft and Corrupt Practices Act (RA 3019); and Code of Conduct and Ethical

Standards for Public Officials and Employees (RA 1379) have set clear cut guidelines

on how public officers and even their families and relatives should behave in order to

protect the interest of the nation.

Page 123 of 127

 We find in this scam former Comelec Chairman Abalos who had to add to his

long line of sins this hubris. Not being satisfied with his abuse of power and grave abuse

of discretion in the Mega Pacific deal,407 he has to add to his wall of shame the

rescinded NBN-ZTE contract.

Alas, it is indeed true that we cannot legislate morality; neither can we legislate

love of country. The problem therefore is not in the laws but those individuals who

should be following the laws.

It is also very interesting how this present Administration rewards loyalty. What

did Gaite and Defensor

• ":
get
>.,
from, their' •generosity to Lozada? Both have been promoted .

Gaite has just replaced recently embattled- and now deceased- SEC Commissioner

Martinez; Defensor is now Chairman of Philippine National Railways. Perhaps that is

how this administration rewards blind loyalty.

As one columnist properly puts it: The moral of the story is an immoral one: "If

you must lie, lie to protect the administration. If you must steal, make certain some of it

goes to the administration. If you must cheat, cheat in favour of the administration. You

will be assured of protection and you may not see the inside of a courtroom. Like Gaite,

you might even be rewarded.''408

, 'l',

4071n Information Technology Foundation vs. COMELEC, et aI., G.R. No. 159139, June 15, 2005 also known as the
Mega Pacific case, the Supreme Court held that: "Recall that our Decision declared Comelec to have acted with
grave abuse of discretion when, by way of its Resolution No. 6074, it awarded the Contract for the supply of
automated counting machines (ACMs) to private respondents. It did so, not only In clear Violation of law and
jurisprudence, but also with inexplicable haste and reckless disregard of its own bidding rules and procedures;
particularly the mandatory financial, technical and legal requirements. It further manifested such grave abuse of
discretion when it accepted the subject computer hardware and software even though, at the time of the award,
these had patently failed to pass eight critical requirements designed to safeguard the integrity of the elections."

408 Editorial, Inquirer, citing the March 17, 2008 column of Ramon Farolan, March 18, 20GB, A14.

Page 124 of 127

 It is also worth mentioning that ZTE should be warned in the manner that it

conducts its business in the Philippines. While we welcome foreign investment, we only

welcome investors who are willing to abide with the laws of the Philippines and will not

foment graft and corruption in government. ZTE should be mindful of its dealings with

government officials and must act above suspicion that it is involved in any form of

bribery.

At the end of the day, there are two words that could be used to all the characters

in this scandal: BACK OFF! Back off from government contracts if you are a relative

up to the 3'd degree of affinity or consanguinity of the President or the Speaker of the

House! Back off from government contracts if you enjoy a close personal

relationship with any government officer who has something to do with that contract!

Back off from doing ariytliing that taintinhe integrity of public office!

Perhaps some people have grown cynical to Senate investigations for nothing is

changing and nothing is happening. We beg to disagree. Truth seeking and truth

telling will always amount to something; if not today, perhaps through the power of the

ballot; if not the ballot, through the people.

History has a wflY of judging people and events. This Committee Report is the

Respectfully Submitted:

hairman:

~'",uRDON
nA untability of Public Officers
rJi.fuw;5'stigations (Blue Ribbon)
Page 125 of 127
 Members:

GR ORIO B. HONASAN II

~_ ~ ~~ ~ '. (..JJ--.
MIRIAMfoEFENSOR SAirlAG6

ANTONIO "SONNY" F. TRILLANES IV

LOREN B. LEGARDA MANUEL "LITO" M. LAPID

~ ---"':£~
W) ('I/I.(JJ.>~"f ~ o\"(j<~ -
' " W\~,""", ~ "'-
~ do< \I ~ __ '\\~
FRANCIS "CHIZ" G. ESCUDERO ANGILINAN

RODOLFO G. BlAZON

?~
JOKER P. ARROYO ALAN PETER "COMPANERO" S. CAYETANO

Page 126 of 127

 ~ Ex-Officio Members:

< ~/' tyrVJ

1~ iJvy'y' C<
. t I >

JUAN MIGUEL F. ZUBIRI

Majority Floor Leader

~~.
~,>,~/
AQUILINO Q. PIMENTEL JR.
~. Minority Floor Leader

HaN. JUAN PONCE ENRILE

President
Senate of the Philippines
Pasay City

Page 127 of 127

 }~epubli( of t!le lJl)ilippinc%

~enate
;jJ)usup

JOKER P. ARROYO
SENATOR

Capsulized Separate Concurring and Dissenting Opinion'

PROLOGUE

This hearing is unprecedented - possibly the longest inquiry. two years, that a

Senate committee or a tri-committee have ever undertaken.

The transcript alone of the stenographic notes on the hearing is 1 Y, feet high.

The exhibits presented consist of 18 folders.

41 witnesses testified in 13 sessions.

On and off, the hearings started on September 18, 2007 and was terminated on

September 1, 2009.

While the investigation was going on, incidental matters were elevated to the

Supreme Court when the executive and the Senate were deadlocked on the extent and

limit of each other's reach and power.

Pursuant to section 22 of the Rules of Procedure

1
 To complicate matters, there was a change in leadership in the Senate and

consequently, the chairmanship of the lead committee, the Blue Ribbon, likewise

changed.

Hearing is the easy part of an inquiry. The committee members ask questions. If

the answer of the resource person does not please the interpeliator, he scolds the

witness and in extreme instances, threatens him with contempt if he does not reshape

his answer that would suit the interpeliator.

Sen. Richard Gordon, who chaired the lead committee only at the tail-end of the

investigation, should be commended for going over the supervoluminous transcripts and

evidence in order to come-up with a belated committee report, the most difficult and

laborious aspect of an investigation.

PRECIS

The broadband project, subject of the investigation, was doomed to fail at its

inception.

Original Sin

Before the imposition of martial law, the government implemented a

communication project involving a telephone system, the Government Telephone

System, which was intended to connect the government offices in the entire country. It

was a colossal failure and the government maintained it for years even after losing so
much money.

2
 Despite that monumental blunder, Congress, as if it had not learned any lesson,

enacted in 1989 the Municipal Telephone Act of 1989, RA 6849, again to connect, as

the bill stated, the Municipal to International, Municipal to Metro Manila, Municipal to

Provincial Capital, Municipal to Municipal. It was later expanded to connect to the

barangays. That is why it was labelled as the Telepono sa Barangay later on.

That folly, like the failed one before it, cost the government billions before the

government abandoned it. This too was referred for investigation under P. S.

Resolution No. 528 in the 13th Congress.

These two telephone projects, the Government Telephone System and Telepono

sa Barangay constituted the original sin.

Subsequent Sin

Despite the empirical history of the government's dismal failure in its two simple

telephone systems in the past, the DOTC foolhardedly embarked on the sophisticated,

complicated, very expensive and constantly changing technology of the broadband

network, subject of this inquiry.

This was the subsequent sin, which was followed by a string of ancillary sins in

the attempt to make it take-off.

For a project of this size and proportion, its nature, its technology, and more

importantly, the financing aspect, had to be pre-screened and approved by the NEDA

and its cabinet-level screening committee.

3
 What did NEDA do?

NEDA just glossed over it, gave a perfunctory review and allowed the DOTC to

run the show.

Questions arose as to the nature of the funding: whether loan or BOT, executive

agreement or treaty. NEDA and DOJ said it was a loan.

The contract was awarded to ZTE, a big company by international standards,

wholly owned by a Chinese government subsidiary.

The newly-minted Government Procurement Act, RA 9184 was enacted on Jan.

10,2003 or only six years ago precisely to prevent irregularities in awards and bidding.

It was not applied to the ZTE contract.

The President no less went to China to witness the signing of the loan

agreement, not with the Peoples Republic of China, but with ZTE, a Chinese

government corporation. The President's presence triggered questions of propriety

because the contract was not between the Republic of the Philippines and the People's

Republic of China, but a commercial transaction.

US Ambassador Kristie Kenney, forgetting protocolar channels joined the fray, by

writing directly NEDA Secretary Romulo Neri and DOTC Secretary Leandro Mendoza

that ARESCOM, an American company and an interested bidder, was prejudiced by the

awarding process adopted. Ms. Kenney's complaint helped provoke this investigation.

Joey de Venecia, president of Amsterdam Holdings which also lost, complained

thru media.

4
 While Amsterdam Holdings participated from the beginning to the end in the

investigation, ARESCOM, intriguingly, neither appeared nor participated in any hearing.

ARESCOM helped stoke the fire, and after igniting it, left it.

ZTE, which bagged the contract, has a Metro Manila office. It was summoned

but they did not appear at all.

The tri-committee did not press the presence of these two foreign firms, ZTE and

ARESCOM, while it bullied Filipino witnesses summoned to appear.

Joey de Venecia, because he happens to be the son of the Speaker of the

House of Representatives, got entangled in some ethical question because it was a

government contract involved. But he kept the investigation alive with his commendable

presence in every session

The President, because of the outcry caused by the investigation, cancelled the

ZTE contract to the serious consternation of the officialdom of the People's Republic of

China. ZTE, after all, for all corporate intents and purposes, is a wholly-owned

government subsidiary, not unlike our NDC, Napocor or the like.

The Supreme Court likewise dismissed the petition to void the ZTE contract after

the President's action because there was nothing more to void.

That left the Filipinos to quarrel among themselves in the marathon hearings.

The First Gentleman Mike T. Arroyo, Esq., was sideswiped during the hearings for

being involved in the irregularities of the transaction.

5
 From then on, the thrust and direction of the inquiry concentrated on linking the

President to the ZTE scandal. The principal and original issues were sidelined.

I had urged that interim committee reports be prepared and released considering

that the hearings had digressed to other issues.

Mysterv of the Broadband Project

Why the government ventured into the broadband project remains a mystery. To

begin with, government has a terrible track record of failure in two instances,

operationally and financially, in running telecommunications.

What is incontrovertible is that the proponents and the promoters of the project

were up to no good. They cast a moist eye on the financing, $329 million (gargantuan

P16 billion), not really on the project itself.

What started as a BOT project ended as a loan. A neat shift. The Government

Procurement Act does not apply to loans, insisted the executive department!

What was clear, even during the hearings, was that it would be a lot cheaper for

the government were it to just subscribe to broadband connection put up by the private

sector instead of installing and operating one itself.

6
 EPILOGUE

SCORE SHEET

On the plus side

The indefensible ZTE contract was aborted, the consequence of this

investigation lead-chaired by Senator Allan Peter Cayetano, who painstakingly heard

and dissected the very complex and complicated factors involved.

The government did not lose any money.

After all, a government broadband project is not an indispensable component in

the government operation, the private sector could do it.

On the minus side

It stabs at the moral fabric of very high officials whose eyes were riveted to the

$329 million (P16 billion) loan package.

The Philippines-China relations, not apparent but very real, was impaired as a

consequence of the investigation.

7
 WHA1NOW?

The Committee Report recommends the indictment of top officials and persons

for this mess.

Sadly, the eerie fate of this inquiry is that after the Committee Report is adopted

by the Senate in plenary, it will again be just another episode that would find its way in

the racks of Blue Ribbon Committee archives alongside a plethora of committee reports

on the misdeeds in the past of other wrongdoers who were never prosecuted by the

executive or the Ombudsman.

This malpractice cannot go on. It must be corrected. Otherwise, the inutility of

these investigations will become more and more apparent and the public will lose faith

in its usefulness and will look at it only for entertainment value.

However, it is rather late in the day to address this hostility between the current

Executive and the Senate. Come July next year, we would have the next President and

the incoming Senate. They can agree on the ground rules for future investigations.

This will be for the good of all.

Respectfully submitted,

/~
JOKER P. ARROYO

8
•
 ~nex f
,

FOURTEENTH CONGRESS OF THE REPUBLIC)

OF THE PHILIPPINES )
Second Regular Session )

SENATE
S.B. No.

Introduced by Senator Richard J. Gordon, Chairman and members of the

Committee on.Accountability of Public Officers and Investigations

EXPLANATORY NOTE

Section 9 Article XII of the Constitution provides that: "The Congress

may establish an independent economic and planning agency headed by the
President, which shall, after consultations with the appropriate public
agencies, various private sectors, and local government units, recommend to
Congress, and implement continuing integrated and coordinated programs and
policies for national development"

This bill proposes an amendment to Section 4 of Executive Order 230 of

July 1987 by including representatives from the private sectors to the
composition of the National Economic and Development Authority (NEDA)
Board. This amendment will ensure that the interest of the private sector and
major key players of the economy will be considered.

Furthermore, the Committee on Accountability of Public Officers and

Investigations came up with this bill for two reasons: (1) to prevent another
NBN-ZTE project that has not been thoroughly studied and scrutinized, (2) to
prevent collusion among members of the board in approving a project.

R~GORDON
Chairman
 •
•
•
, , • •

Members:

GREGORIO B. HONASAN II RAMON "BONG" REVILLA JR.

EDGARDO J. ANGARA PANFILO M. LACSON

M.A. MADRIGAL MIRIAM DEFENSOR SANTIAGO

MAR ROXAS ANTONIO "SONNY" F. TRILLANES IV

LOREN B. LEGARDA MANUEL "LITO" M. LAPID

FRANCIS "CHIZ" G. ESCUDERO FRANCIS N. PANGILINAN

COMPANERA PIA S. CAYETANO RODOLFO G. BlAZON

JOKER P. ARROYO ALAN PETER "COMPANERO" S. CAYETANO

 Ex-Officio Members:

JINGGOY EJERCITO ESTRADA JUAN MIGUEL F. ZUBIRI

President Pro-Tempore Majority Floor Leader

AQUILINO Q. PIMENTEL JR.

Minority Floor Leader

HON. JUAN PONCE ENRILE

President
Senate of the Philippines
Pasay City
 FOURTEENTH CONGRESS OF THE REPUBLIC)
OF THE PHILIPPINES )
Second Regular Session )

SENATE
S.B. No.

Introduced by Senator Richard J. Gordon, Chairman and members of the

Committee on Accountability of Public Officers and Investigations

AN ACT
AMENDING EXECUTIVE ORDER NO. 230 ALSO KNOWN AS THE
REORGANIZATION ACT OF THE NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY

Be it enacted by the Senate and the House of Representatives of the

Philippines in Congress assembled:

SECTION 1. Section 4 of Executive Order No. 230 of 1987, also known as the
Reorganization Act of the National Economic and Development Authority is
hereby amended to read as follows:

Section 4. Composition of the NEDA Board shall be composed of the

following:

The President - Chairman

Director-General of the NEDA Secretariat - Vice Chairman
Secretary of Budget and Management - member
Secretary of Finance - member
Chairman of the Senate Committee on Economic Affairs - member
Chairman of the House Committee on Economic Affairs - member
Four (4) members from the Business/Private Sector - member

The four members from the private sector shall each be chosen by
the following organization or center itself: (1) Philippine Chamber of
Commerce, (2) Employees Confederation of the Philippines, (3) Asian
Institute of Management Policy Center, (4) University of the Philippines
Economic Center.

The NEDA Board shall meet at least once a month or as frequently as

necessary to discharge its responsibilities as called for by the President. In
cases where the President is unable to attend a meeting, the Director General
of the Secretariat may preside as Chairman, in the absence of any Presidential
preference. The President, however, continues to have the power to designate
from the members of the NEDA Board the Chairman that can appropriately
represent the President, to preside over specific meetings.

SECTION 2. Repealing Clause. - Any law, presidential decree or issuance,

executive order, letter of instruction, administrative order, administrative

memorandum, rule or regulation contrary to or inconsistent with the

provisions of this Act is hereby repealed, modified or amended accordingly.

SECTION 3. Effectivity Clause. - This Act shall take effect fifteen (15) days after

its publication in at least two (2) newspapers of general circulation.

Approved,
FOURTEENTH CONGRESS OF THE REPUBLIC )
OF THE PHILIPPINES )
Third Regular Session ) .

SENATE
S.B.No. _ __

Introduced by Senator Richard 1. Gordon, Chairman and members of the

Committee on Accountability of Public Officers and Investigations (Blue Ribbon)

EXPLANATORY NOTE

Section 27, Article II of the Constitution provides that "The State shall maintain

honesty and integrity in the public service and take positive and eilective measures

against graft and corruption."

As an effective measure against graft and corruption, this bill seeks to amend

Section 5 of Republic Act No. 3019 (The Anti-Graft and Corrupt Practices Act) by

imposing an absolute prohibition on certain relatives of the President of the Philippines,

the Vice-President of the Philippines, the President of the Senate or the Speaker of the

House of Representatives to intervene, directly or indirectly, in any business, transaction,

contract or application with the Government.

This bill aims to ensure that said public officials and their relatives always act in

the best interest of the country and must not be motivated by personal considerations and

relationships which could interfere with their independent judgment.

For this reason, passage of this bill is earnestly sought.

/ /l L--------)
// I

ICHA J.GORDON
Chairman
 , .. . .,
,,' .
Members:

GREGORIO B. HONASAN II RAMON "BONG" REVILLA JR.

EDGARDO J. ANGARA PANFILO M. LACS ON

M.A. MADRIGAL MIRIAM DEFENSOR SANTIAGO

MAR ROXAS ANTONIO "SONNY" F. TRILLANES IV

LOREN B. LEGARDA MANUEL "LITO" M. LAPID

FRANCIS "CHlZ" G. ESCUDERO FRANCIS N. P ANGILINAN

COMPANERA PIA S. CAYETANO RODOLFO G. BlAZON

JOKER P. ARROYO ALAN PETER "COMP ANERO" S. CAYETANO

Ex-Ofjicio Members:

JINGGOY EJERCITO ESTRADA JUAN MIGUEL F. ZUBIRI

President Pro-Tempore Majority Floor Leader

AQUILINO Q. PIMENTEL JR.

Minority Floor Leader

HON. JUAN PONCE ENRILE

President
Senate of the Philippines
Pasay City
 FOURTEENTH CONGRESS OF THE REPUBLIC )
OF THE PHILIPPINES )
Third Regular Session )

SENATE
S.B.No. _ __

Introduced by Senator Richard J. Gordon, Chairman and members of the

Committee on Accountability of Public Officers and Investigations (Blue Ribbon)

AN ACT
AMENDING SECTION 5 OF RA 3019
ALSO KNOWN AS THE ANTI-GRAFT AND CORRUPT PRACTICES ACT

Be it enacted by the Senate and the House of Representatives of the Philippines in

Congress assembled:

SECTION 1. Section 5 of Republic Act No. 3019, also known as the Anti-Graft

and Corrupt Practices Act is hereby amended to read as follows:

Section 5. Prohibition on certain relatives. - It shall be unlawful for

the spouse or for any relative, by consanguinity or affinity, within the third
civil degree, of the President of the Philippines, the Vice-President of the
Philippines, the President of the Senate, or the Speaker of the House of
Representatives, to intervene, directly or indirectly, in any business,
transaction, contract or application with the Government. [Provided, That
this section shall not apply to any person who, prior to the assumption of
office of any of the above officials to whom he is related, has been already
dealing with the Government along the same line of business, nor to any
transaction, contract or application already existing or pending at the time
of such assumption of public office, nor to any application filed by him the
approval of which is not discretionary on the part of the official or officials
concerned but depends upon compliance with requisites provided by law,
or rules or regulations issued pursuant to law, nor to any act lawfully
performed in an official capacity or in the exercise of a profession.]

SECTION 2. Repealing Clause. - Any law, presidential decree or

issuance, executive order, letter of instruction, administrative order, administrative

memorandum, rule or regulation contrary to or inconsistent with the provisions of

this Act is hereby repealed, modified or amended accordingly.

SECTION 3. Effectivity Clause - This Act shall take eftect fifteen (15)

days after its publication in at least two (2) newspapers of general circulation.

Approved,
FOURTEENTH CONGRESS OF THE REPUBLIC)
OF THE PHILIPPINES )
Third Regular Session )

SENATE
S.B. No.

Introduced by Senator Richard J. Gordon, Chairman and members of the

Committee on Accountability of Public Officers and Investigations

EXPLANATORY NOTE

Section 27, article II of the 1987 Constitution provides that as a State

Policy, "The State shall maintain honesty and integrity in public service and
take positive and effective measure against graft and corruption."

Furthermore, section 1, article XI of the 1987 Constitution provides that,

"Public office is a public trust. Public officers and employees must at all times
be accountable to the people, serve them with utmost responsibility, integrity,
loyalty, and efficiency, act with patriotism and justice, and lead modest lives."

It is the intent of this bill to encourage citizens to stand up and report

alleged violations of law, improper use of governmental office, gross waste of
funds, or any other abuse or gross neglect of duty on the part of an agency,
public officer or employee, and private entity. Furthermore by protecting
citizens who disclose wrongdoing from retaliatory acts, we hereby strengthen
accountability and reduce corruption in the public and private sectors.

Hence, in the best interest of the Republic, the immediate approval of

this bill is urgently sought.

~GORDON

1
 •
.. '

FOURTEENTH CONGRESS OF THE REPUBLIC)

OF THE PHILIPPINES )
Third Regular Session )

SENATE
S.B. No.

Introduced by Senator Richard J. Gordon, Chairman and members of the

Committee on Accountability of Public Officers and Investigations

AN ACT PROVIDING FOR WHISTLEBLOWER BILL OF RIGHTS

Be it enacted by the Senate and the House of Representatives of the Philippines

in Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the "Whist1eblower Protection
Act of 2009."

SECTION 2. Definitions of Terms. - As used in this act and unless otherwise

specified, the following words or terms shall have the meaning indicated:

(a) A "Whistle blower" is a person who publicly reveals a concealed misconduct or a

commission or attempted commission of a crime by a person, employer,
employee, or an agency whether of a public or private entity. Provided, however,
that said person has not participated or has refused to participate in the
misconduct or the violation or attempted violation of law.

(b) "Whistle blowing" is the disclosure, making public, giving evidence to, an
information that a whistle blower reasonably believes constitutes:
(i) a violation oflaw, rule, regulation, policy,
(ii) gross mismanagement,
(iii) gross waste of funds,
(iv) abuse of authority,
(v) threat to public interest such as fraud and corruption,
(vi) or a substantial and specific danger to public health or safety;

(c) "Employer" is any individual, partnership, association, corporation, or any

person or group of persons who has the power and right to control and direct
the employee in the material details of how the work is to be performed, which
includes any public or privately owned corporation, branches of government, or
any other political subdivision, authority, commission, or board, or any other
agency or instrumentality thereof;

(d) "Superior / Supervisor" is an individual having authority, in the interest of the

employer, to hire, transfer, suspend, layoff, recall, promote, discharge, assign,
reward, or discipline other employees, or responsibly to direct them, or to adjust

2
 their grievances, or effectively recommend such action, if in connection with the
foregoing the exercise of such authority is not a merely routine or clerical
nature, but requires the use of independent judgment;

(e) "Retaliatory Action" is the discharge, suspension, transfer, or demotion of any

employee / whistleblower or the withholding of bonuses, reduction in salary or
benefits, or any other action that may adversely affect his rights and mterests
taken by his employer, superior, supervisor or head of agency;

(f) "Gross Mismanagement" is the continuous pattern of managerial abuses,

wrongful or arbitrary and capricious actions, or fraudulent or criminal conduct
which may have a substantial adverse economic impact;

(g) "Gross Waste of Funds" means to spend or use funds or to allow funds to be
used without valuable result in a manner grossly deviating from the standard of
care or competence that a reasonable person would observe in the same
situation.

SECTION 3. Actions Prohibited.

It shall be unlawful for any Employer, Superior, Supervisor or Head of Agency

to retaliate or perform such acts which can be deemed as "Retaliatory Acts" as
defined in this code against an employee / whistle blower.

SECTION 4. Nature of Information Disclosed. The information disclosed under this

section must include:

(a) Any violation or suspected violation of any law, rule, or regulation committed by
an employee or agent of government agency or private entity which creates and
presents a substantial and specific danger to the public interest, safety, or
welfare.
(b) Any act or suspected act of gross mismanagement and misconduct,
malfeasance, misfeasance, non-feasance or gross neglect of duty, gross waste of
public funds committed by an employee or agent and public officials of a
government agency.

SECTION 5. To Whom Information Disclosed.

The information disclosed under this section must be made to his superior /
supervisor or any other person in authority who has the power to prevent, remedy,
correct the wrongdoing or any government agency having the authority to investigate,
prosecute the violation or act, including, but not limited to, the Philippine National
Police, The National Bureau of Investigation, the Office of the Ombudsman and the
Department of Justice.

SECTION 6. Whistleblowers and Persons Protected.

Legal protections accorded under this Act to employees / whistleblowers and their
spouse ~~/or any .member of the family within the first (I") civil degree by
consangmmty or afflmty who:

3
 (a) disclose information on their own initiative in a written and signed complaint
or affidavit; or
(b) are requested to participate in an investigation, hearing, or other inquiry
conducted by any agency or national government agency; and,
(c) refuse to participate in any retaliatory action prohibited by this section; or who
initiate a complaint against or testify regarding an illegal act.

SECTION 7. Remedies.

(a) Any whistle blower or employee of or applicant for employment with any
government agency, who is discharged, disciplined, or subjected to other
retaliatory action, or denied employment, because he or she engaged in an
activity protected by this section may file a complaint without need of
exhausting all available contractual or administrative remedies, before a court
of competent jurisdiction within one (1) year after the action prohibited by this
section is committed.

SECTION 8. Relief. - In any action brought under this section, the relief must include
the following:

(a) Reinstatement of the whistleblower or employee to the same position held before
the retaliatory action was commenced, or to an equivalent position or
reasonable front pay as alternative relief;
(b) Reinstatement of the whistle blower or employee's full fringe benefits and
seniority rights, as appropriate;
(c) Compensation, if appropriate, for lost wages, benefits, or other lost
remuneration caused by the retaliatory action;
(d) Payment of reasonable costs, including attorney's fees, to a substantially
prevailing employee, or to the prevailing employer if the whistleblower or
employee filed a frivolous action in bad faith;
(e) Issuance of an injunction, if appropriate, by a court of competent jurisdiction;
(f) Temporary reinstatement to the whistleblower or employee's former position or
to an equivalent position, pending the final outcome on the complaint, if an
employee complains of being discharged in retaliation for a protected disclosure
and if a court of competent jurisdiction or the Commission on Human Rights,
as applicable, determines that the disclosure was not made in bad faith or for a
wrongful purpose or occurred after an agency's initiation of a personnel actIOn
against the whistleblower or employee which includes documentation of the
employee's violation of a disciplinary standard or performance deficiency.

SECTION 9. Preemption. Nothing in this Act shall be deemed to diminish the rights,
privileges, or remedies of any whistleblower or employee under any law or regulation
or under any collective bargaining agreement or employment contract. No
whistle blower or employee may waive through the private contract any right set forth
in thi~ Act, except as set forth in Section 7, and no employee may be compelled to
adJudlcate hls or her nghts under this Act pursuant to a collectivc bargaining
agreement or any other arbitration agreement.

SE~TION 10. Settlement. - The rights afforded employees under this Act may not be
Waived or modlfied

4
SECTION 11. Penal Clause. - Any person who violates any provision of this Act shall
suffer pay a fine of not less than two hundred thousand pesos (P200,OOO) but not
more than five hundred thousand pesos (P500,OOO) and suffer an imprisonment of not
less than two (2) years but not more than six (6) years.

Upon filing of an appropriate complaint, and after due notice and hearing, the
proper authorities may also cause the cancellation or revocation of the business
permit, permit to operate, franchise and other similar privileges granted to any private
entity that fails to abide the provisions of this Act.

SECTION 12. Separability Clause. - If any provision, or part hereof, is held invalid
or unconstitutional, the remainder of the law or the provision not otherwise affected
shall remain valid and subsisting.

SECTION 13. Repealing Clause. - Any law, presidential decree or issuance, executive
order, letter of instruction, administrative order, rule or regulation contrary to or
inconsistent with, the provisions of this Act is hereby repealed, modified, or amended
accordingly.

SECTION 14. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
publication in at least two (2) newspaper of general circulation.

Approved,