Warning: Do not take hook, line, and sinker
EVERYBODY seems to be taking Engr. Dante Madriaga's Senate testimony with caution. Well I guess that's better than all of us falling into a possible trap.
While at it, maybe it's best if we learn more about him. Mala-CSI ba.
Here's Madriaga's sworn testimony as submitted to the Senate:
I, *DANTE R. MADRIAGA*, Filipino, of legal age, with postal address at 13
Cairo St. BF Homes Paranaque City, after having been duly sworn in accordance with law hereby depose and state:
1. Introduction
1.1. credentials I attended 1st and 2nd and half of 3rd year at UP. I transferred to Texas A&M and obtained my Bachelor of Science in Mechanical Engineering degree ("BSE") from Texas A&M in 1969.
1.2. professional experience Since then, I have been employed in various capacities by a number of companies, local and foreign, that specialize in computers and telecommunications. My duties in these companies entailed my expertise in the field of design, costing and implementation of computer and telecommunications networks.
Due to my long experience in the field of telecommunications, I have gained expertise in the formulation and design of telecommunications networks, as well as trading in pertinent and related equipment. My expertise in this field has also helped me build a competent proficiency in the costing of these networks
In 1999, engaged by DOTC as consultant for Telepono sa Barangay project. With the change in administration, we resigned our posts.
2. Prime (late03 to early 04)
2.1. manner of involvement
2.1.1. Eva Park, recommended me to Rene Mendoza, who owned Prime treasure Holdings (Prime) to work on Korea Link proposal. Became my friend while we were testifying before the blue ribbon committee re Telepono sa Barangay.
2.2. position
2.2.1. Prime hired me as a technical consultant and lead designer for a national wireless network ("Prime Project").
2.3. task
2.3.1. It was explained to me later on by Mr. Mendoza that Prime was the counterpart of a foreign company, Korea Link. Korea Link was to submit to the government an unsolicited proposal for the Prime Project.
2.3.2. special instructions
2.4. result - Pursuant to my engagement, I began the design for the Prime Project. Sometime in February 2004, when I was about seventy-five percent (75%)* *complete, Prime informed me that the Prime Project would have to be shelved because Korea Link no longer had the funds to complete the project.
3. Arescom (late 04 to late 05)
3.1. manner of involvement – Rene Mendoza called me and informed that ARESCOM, Inc. ("ARESCOM") joined forces with Prime to propose a national communications network ("COMNET") to the DILG. He asked me to come on board.
3.2. position – technical consultant and lead designer
3.3. task - draft, draw up plans, and/or design COMNET similar to the that of the Prime Project, but involving a more advanced platform or technology and using american technology and equipment ("Arescom Project").
3.3.1. special instructions
3.3.1.1. Rene Mendoza told me that we had to add $40M to the contract price which would be kicked back "para sa lahat".
3.4. result – I was able to comply with the special instructions.
3.4.1. The Arescom project was presented to NEDA with a contract price of US$130M, inclusive of the US$40M kickback.
3.4.2. DILG rejected the project as a COMNET was not a priority project of DILG.
4. ZTE (May 06)
4.1. manner of involvement - my good friend Mr. Leo San Miguel ("Leo") contacted me and informed me that a national broadband network ("NBN") was to be proposed to the government by a Chinese company, ZTE Corporation ("ZTE"). This project would be the Arescom Project but now using Chinese technology and equipment.
We met at Chataue at El Pueblo, Ortigas Center.
Leo is my kumpare, being the godfather of one of my children. We've know each other professionally and socially for many years.
Leo represented that he was the technical head of the Filipino consultants for the NBN.
4.2. position - He wanted to engage my services as the head of the design team.
4.3. SPECIAL INFO:
4.3.1. The Filipino Consultants were: Abalos, Ruben Reyes, Quirino dela Torre, Leo, Mike Defensor (as GMA's representative), and Leo.
4.3.2. Leo would liaise between the consultants and myself with respect to the final contract price and other matters.
4.3.3. Leo told me that ZTE would be taking over the Arescom Project.
4.3.4. I was instructed to work closely with the technical staff of a couple of Filipinos and other ZTE technicians in the ZTE office located at the 25th floor of the Pacific Star Building, located at the corner of Makati and Gil Puyat Avenues, Makati City
4.3.5. The NBN was a project that will be submitted by ZTE as an unsolicited proposal to the government for its consideration, approval, and eventual implementation
4.3.6. It was intended that funding for the NBN was to be sourced from a loan facility from China Eximbank.
4.3.7. In consideration of their efforts, the Filipino Consultants will receive the kickbacks that was incorporated in the padded contract price.
4.3.8. My monthly fee was Two Hundred Fifty Thousand Pesos (Php250,000.00); of which One Hundred Thousand Pesos (P 100,000.00) was to be paid on a monthly basis and the monthly balance of One Hundred and Fifty Thousand Pesos (P 150,000.00) to be given to me on a lump-sum basis upon the approval of NBN.
4.3.9. He gave me 10K as a "signing bonus".
4.4. task – I agreed.
4.5. Introductory meeting to the ZTE officers and personnel – right after our one-on-one meeting.
4.5.1. Country manager – George Zhu
4.5.2. Project Director - Wang Feng
4.5.3. Leo presided over the GTKY meeting, introducing himself and me and the project.
4.5.4. thereafter , MY ENGAGEMENT AS chief designer/consultant of ZTE Project, specifically to oversee and supervise the drafting, designing/redesigning, and drawing up of plans for a complete nationwide internet protocol network (as against the existing voice protocol network), called the National Broadband Network ("NBN") WAS FORMALIZED. A copy of the resulting delineation and/or scope of my work in relation to the NBN project, as agreed upon with ZTE, is hereto attached and made an integral
part hereof as *Annex "A"*. My signature together with Leo's and that of ZTE'S manager Wang Feng located in page 9 of Annex "A" are hereby bracketed and marked as *Annexes "A-1", "A-2", and "A-3"* and made integral parts
hereof).
4.6. 130M
4.6.1. I informed Leo that the price was 40+90=130 (K+C=CP)
4.6.2. On or about 16 June 2006, I met Leo for a meeting at the Shang Palace, Makati Shangri-La Hotel regarding the ZTE Project. He said that he would first meet with the Filipino Consultants and would thereafter introduce me to the other personalities involved.
4.6.3. When we arrived at Shang Palace, Leo advised me to wait for him at the reception area. I waited with other people who represented themselves as PSG and Marines. While waiting, I noticed the following:
4.6.3.1. There were no other persons at the Shang Palace, probably because it was already around 2:00 o'clock in the afternoon.
4.6.3.2. COMELEC Chairman Abalos entered the Shang Palace to join the meeting. After what seemed to be 10 minutes, Chairman Abalos left the meeting and left the Shang Palace
4.6.4. After the meeting: I saw who attended the meeting: Mr. Ruben Reyes ("Ruben"), who was introduced to me; Retired General Quirino dela Torre ("Torch"); ZTE officials Yu Yong and Fan Yang, who were introduced to me. I was surprised to see that an old acquaintance, Mr. Stephen Lai, was attending the meeting. Mr. Lai was the technical
consultant of ARESCOM and a friend of ARESCOM's president Mr. Chris Ching.
4.6.5. When I got back to ZTE, I asked Wang Feng if he knew Stephen Lai, because I knew Steohen Lai from Arescom. He told me that Stephen Lai gave ZtE the arescom documents. I asked "for Free?", he replied" Are you kidding?" We laughed.
4.7. 139M
4.7.1. The next day, Leo told me that this was discussed at the meeting:
4.7.2. The following day, Leo went to the ZTE office and discussed the following:
4.7.2.1. The parameters for the proposal (NBN-1) were: The padded contract price would be US$139,000,000 (or US$9,000,000 more than the Arescom Project). I presumed the increase would simply be added to the kickback, leaving the project cost at US$ 90,000,000.
4.7.2.2. However, Leo said that the kickback was to be US$ 80,000,000, thereby decreasing the project cost to only US$ 59,000,000. I immediately said that such a proposal would not be technically defensible
4.7.2.3. Leo insisted that the kickback had to be US$ 80,000,000 because ZTE and the Abalos Group agreed to split the kickback thereby receiving US$ 40,000,000 each. The Abalos Group had to divide their US$ 40,000,000 as follows: US$ 20,000,000 for the government and the US$ 20,000,000 amongst *Chairman Abalos, Ruben, and Torch and Leo.*
4.7.2.4. Due to Leo's insistence, I said that I'd come up with a solution.
4.8. 189M
4.8.1. After a couple of days of having the ZTE technicians verify the costings of the NBN-1, I was able to confirm the impossibility of technically defending it.
4.8.2. Pursuant to the mandated padding instructions, I was able to arrive at a rough estimate which could be technically defensible by increasing the number of sites from thirty-six (36) to fifty-three (53). The rough costing was US$ 109,000,000, resulting in a padded contract price of US$ 189,000,000 ("NBN-2"), therefore 80+109=189. I reported this almost immediately to Leo. He instructed me to proceed with the NBN-2.
4.8.3. After finalizing the rough estimate the final project cost was 99. I presented this to Leo who said that the contryact price would remain at 189 leaving a kickback of 90. Therefore, 90+99=189 (NBN-3).
4.8.4. Sometime in July 2006, we presented the proposal to the NEDA, specifically to its infrastructure group headed by Mr. Ruben Reynoso and to their design evaluator, Mr. Ken Tanate. A printout of NBN-3 is hereto attached and made an integral part hereof as *Annex "B"*.
4.8.5. A couple days after, we presented the proposal to the chairman of CICT, Sec. Ramon Sales and the head of TELOF, Assistant Secretary Frank Perez. Sales and Perez were lukewarm to our proposal; Mr. Sales even advised us that this type of project should be left to the private sector to implement and should not be undertaken by the government. CICT Commissioner, Lorenzo Formoso was at this meeting.
4.8.6. After about a week, Mr. Perez called us for a meeting. At said meeting, Mr. Sales was also present. Mr. Perez gave a presentation of his technical objections to the NBN-3. In gist, he said the VSAT facility could not accommodate the maximum possible load and that it had to be a terrestrial backbone: fiber, wireless or radio. We objected to his comments because of his wrong assumptions. CICT Commissioner Formoso was again at
this meeting.
4.8.7. After this meeting, Leo, Formoso and myself huddled together. Formoso agreed with our objections. He insinuated that if he were the man in-charge, he would not make the stupid objections Perez made. He stated that if he were in-charge, we would not have problems.
4.8.8. When Leo and I were in the car, I told him that we would encounter problems with Perez. He assured me not to worry, as they would take care of the problem. The meaning of this retort was lost to me as I had no idea of what they would do.
4.8.9. Approximately a week passed then I learned that Perez was moved from TELOF to another position in CICT. Thereafter, Leo advised me to coordinate with CICT but to liaise with the new head of TELOF, Assistant Secretary Lorenzo Formoso. From then on, I commenced coordinating with Asec. Formoso on NBN-3.
4.8.10. Sometime early August 2006, Leo informed me that since the proposal was being pushed in the CICT and TELOF, there was enough justification for the Filipino Consultants to ask for a "PR Fund" of *One Million US Dollars (USD1,000,000.00)*.
4.8.11. Leo confirmed to me that the Filipino COnsultants received the earlier request for the PR Fund of One Million US Dollars (USD1,000,000.00). This amount was received by Ruben Reyes, Leo, and Torch *via* a wire transfer when they went to China sometime around 11 August 2006. Leo also informed me that the reason they were able to get the money was they had told the ZTE officials that the First Gentleman will be helping them get the proposal approved; further, Leo informed me that "Ben also went to
China", referring to Chairman Abalos.
4.8.12. Leo further confirmed to me that the PR Fund of *USD1 Million * will be used by the Filipino Consultants to obtain friendly results in the CICT, TELOF, NEDA, DOTC and other agencies.
4.8.13. In early September 2006, the Filipino Consultants met regularly at Wack Wack where I would sometimes accompany Leo. But I would always stay outside the room with the aides of the consultants. However, Leo would always inform me of the results of the meetings. I remember Leo telling me on one such occasion that NEDA Director General Neri was opposing NBN-3.
4.8.14. Also in early September 2006, I went with Leo and some ZTE staff to the office of DOTC Secretary Leandro Mendoza. Leo had intended to make a presentation of the NBN-3 to Secretary Mendoza and get his endorsement. When Secretary Mendoza met us, he inquired about NBN-3 and Leo informed him that this was the proposal being endorsed by Chairman Abalos. To this, Mendoza said: "*huwag na kayo mag-present, i-i-indorse ko na iyan sa legal."* Secretary Mendoza then instructed Atty. Noel Cruz, ASec. for legal of the DOTC, to secure all the proposals from us.
4.8.15. Several days later, Atty. Noel Cruz advised me that DOCT was indorsing the NBN-3 and instructed me to get an advanced copy of the indorsement.
4.8.16. On September 18, 2006, NEDA, through the infrastructure group, informed us on their basic objections on NBN-3. They informed us that we should revise the same and propose to use a terrestrial network instead of the original satellite network as a backbone because the latter would entail constant subscriptions/lease of transponders, which, in turn, would cost the government more in the long run. They argued, among others, that although using a terrestrial network as a backbone would involve a larger initial outlay, the same would be cheaper for the government in the long run.
4.8.16.1. The NEDA's objections and/or comments on ZTE's proposal is contained in the 18 September 2006 Memorandum to Mr. Ken Tanate, a copy of which was sent to me by email. A printout of the NBN-3 is hereto attached and made an integral part hereof as *Annex "C"*.
4.8.17. Leo advised the other Filipino Consultants of the NEDA's concerns, for which I already had a technical solution: to upgrade the existing terrestrial network of TELOF.
4.9. 269M
4.9.1. On 22 September 2006, the Filipino Consultants met the ZTE officials had another meeting in Wack Wack inside a private room. As usual, I stayed outside the room with the other aides. Present in this meeting were Chairman Abalos, Mr. Jimmy Paz, Ruben Reyes, Ret. Gen. Quirino dela Torre, Leo, and ZTE officials Fan Yang and Yu Yong.
4.9.1.1. *As the meeting progressed, Leo summoned me inside and while at the door, in the presence and within hearing distance of all those in the meeting, Leo told me that the new kickback to be is now USD 140 Million instead of the previous USD90 Million, as we would be using the terrestrial network as a backbone – in line with the NEDA suggestion. *The Filipino Consultants inside the private room did not say a word.
4.9.1.2. I then returned to wait outside the room.
4.9.1.3. After the meeting, Leo confirmed to me that the parties discussed the concerns raised by the NEDA. At this time, it was quite clear that a solution should be forthcoming not to use a satellite network and opt for a terrestrial one. My suggestion to use the existing terrestrial network of the TELOF was likewise taken up, considered, and eventually approved by the Filipino Consultants and ZTE.
4.9.1.4. I told Leo that, as in the past, any revision in the design will entail an adjustment in the cost. With the use of the terrestrial network as a backbone, there will be an upward adjustment. We both knew that with the upward adjustment in the cost, we could accommodate the kickback of 140.
4.9.2. As instructed, the necessary revisions were made in the technical and cost aspects of the design of the NBN-3 to conform to the mandate of NEDA and the request of the Filipino Consultants for a 140 kickback. The contract price became 269; i.e. 140+129=269 (NBN-4).
4.9.3. Sometime thereafter, while waiting for the official approval by the concerned government agencies, Leo informed me that the NEDA, through Jun Lozada, advised ZTE that a company by the name of Amsterdam Holdings, Inc. ("AHI"), purportedly owned by Jose de Venecia III ("Joey") allegedly had a proposal with the NEDA similar to that of NBN-4 and was objecting to ZTE's proposal. These objections covered, among others, the manner of funding (loan facility versus build-operate-transfer).
4.9.4. Around the 2nd week of October 2006, Leo informed by via cellphone that:
4.9.4.1. In a meeting AT Wack Wack, the Filipino Consultants discussed the objections raised by AHI. In that meeting, the Filipino Consultants urged Leo to take the lead in ironing out the differences with AHI, since Joey was personally known to him, to which Leo retorted: "mahirap kausap ito", referring to Joey. Also, the Filipino Consultants unanimously decided that the group offer Joey the amount of Ten Million US Dollars
(USD10,000,000.00) to withdraw the AHI objections to ZTE's NBN-4.
4.9.5. Sometime in the 2nd or 3rd week of October 2006, after finalizing the reports, ZTE submitted NBN-4 to the CICT, TELOF and NEDA. Thereafter, the NEDA, CICT, and TELOF came out with the positive reviews/reports which did not, at this time, include anymore objections to the proposal.
4.9.6. Sometime on the 3rd or 4th week of October, Leo later on informed me that Joey refused the USD10 Million offer.
4.9.7. As matters stood then, the NBN-4 had yet to be officially approved by NEDA.
4.9.8. Sometime in November 2006, there was a rumor that Jun Lozada offered ZTE and AHI a solution to harmonize their respective proposals: that AHI be the entity to which the contract will be awarded and ZTE be the supplier of AHI.
4.9.9. When I discussed the rumor with Leo, he brushed it aside saying that such proposal will never prosper.
4.9.10. On 5 December 2006, Leo brought me to the Wack-Wack Golf Club in Mandaluyong City. When we got to the veranda area, I saw Joey and Chairman Abalos inside a private room. While I waited in the veranda area, I noticed that Ruben, Torch, Jimmy Paz and Jun Lozada were also in the veranda but at another table.
4.9.10.1. After waiting for sometime, I was surprised to see the First Gentleman enter the private room where Chairman Abalos and Joey were in. After a few moments, Chairman Abalos left the room leaving Joey and the First Gentleman inside. All the people I mentioned remained outside.
4.9.10.2. After several moments, the First Gentleman exited the private room; he was fuming mad and he appeared very irritated. When he passed by me, I heard him angrily uttering the words: *"Putang ina, lecheng bata ito ang hirap talaga kausap!".*
4.9.10.3. I was surprised at the forceful and passionate remarks of the First Gentleman, and simply concluded in my mind that they had failed to come to an agreement.
4.9.10.4. The First Gentleman then proceeded to the open area and joined the table of Chairman Abalos, Ruben Reyes, Torch and Leo. I saw Joey leave the room and continued out of Wack Wack. After several moments, the First Gentleman left.
4.9.10.5. After the remaining persons discussed a while, they all stood up and left. I joined Leo out of Wack Wack.
4.9.11. While in Leo's car, Leo commented "*Ang hirap talaga kausap nito.*", referring to Joey. We then came up with some ideas on how this matter with Joey could be settled, but nothing definite.
4.9.12. I continued to refine NBN-4 at the ZTE office.
4.9.13. After a couple of days, I saw my ZTE counterparts, wang Feng and Howard Xue, working on a proposal for AHI. When confronted, they said that they were instructed to do so by their superiors. They admitted that Leo did not know about it and that I should not tell Leo.
4.9.13.1. Despite their request, I immediately called Leo and asked him to come to the office.
4.9.13.2. Leo arrived after about 15 minutes and I told him about the actions of Wang Feng and Howard Xue.
4.9.13.3. Leo confirmed my report and then called Yu Yong. After the call, Leo told me that ZTE was just going to supply equipment to AHI.
4.9.14. Thereafter, Leo informed me that the Filipino Consultants were still exerting efforts to reach a compromise with AHI. In fact, Leo and Torch told me that they were going to China together with Chairman Abalos, Ruben, and Joey on 27 December 2006 in a last ditch effort to forge an arrangement agreeable to all the parties.
4.9.15. Just before New Year, Leo told me over the phone all that transpired in that meeting. Simply, that the efforts failed.
4.9.16. In January 2007, George Zhu made me the liaison officer of ZTE to follow the progress of the NBN-4 with the government agencies.
4.9.17. To address the nagging concern that AHI posed and to push NBN-4, ASsec. Formoso formed a technical working group ("TWG") to evaluate the proposals of ZTE, AHI, and even ARESCOM. The results of the TWG's evaluation were tilted in favor of ZTE; it did not favor AHI's proposal.
4.9.18. Sometime in late January 2007, the DOTC formed a technical working committee to review the evaluations of the TWG and to make recommendations to Sec. Mendoza.
4.9.19. Sometime in February 2007, I also learned that the TELOF was moved back to the DOTC *via *an executive order, and the ZTE proposal was endorsed by Secretary Mendoza and Chairman Sales to NEDA.
4.9.20. With this development, I thought that the NEDA approval would be forthcoming; Leo informed me that it will soon come. I learned later on that the NBN-4 was still encountering resistance at the NEDA anchored primarily on the issue of "government guarantee" on the loan to be taken out from China Eximbank.
4.9.21. During these times, I noticed that Fan Yang was anxious.
4.10. 329M
4.10.1. On 12 March 2007, Leo again brought me along to a meeting in Wack Wack; as usual, I waited at the veranda area while the Filipino Consultants met in the same room. This time, Yu Yong and Fan Yang attended the meeting.
4.10.1.1. The meeting lasted quite a while and when it ended, Leo immediately informed me that the total proposed contract price had been re-adjusted to *Three Hundred Twenty Nine Million US Dollars (USD329,000,000.00) (NBN-5)* from *USD 269 Million* because the Filipino Group had to set aside 20 for Ricky Razon to get the proposal approved and 30 for the coming elections.
4.10.1.2. It was at this point that I reminded Leo that my contribution in the proposal and designs for the NBN project was concluded when NBN-4 was favorably endorsed by the CICT and DOTC to the NEDA. Leo told me not to worry, because the ZTE people will be the ones to make the necessary adjustments in the design and coverage of the network.
4.10.2. Indeed, the NEDA-Investment Credit Committee finally approved the NBN-5.
4.10.3. Thereafter, on or around the end of March 2007, on separate occasions, Leo and Fan Yang told me that ZTE made an advanced payment of 10 to the Filipino Consultants.
4.10.4. A few days later, Fan Yang told me that in a meeting they had with the Filipino Consultants on 04 April 2007 at the Makati Shangri-La, the Filipino Consultants demanded 30 to be used for the elections.
4.10.4.1. She said that ZTE will only approve and remit the additional advance payment of *USD 30 Million *when President Gloria Macapagal-Arroyo will be personally present at, and grace, the signing of the supply contract relative to the NBN project which was then scheduled in April 2007.
4.10.5. During the signing of the supply contract between the Philippine government and ZTE officials in China, President Macapagal-Arroyo arrived and personally witnessed the signing herself.
4.10.6. On separate occasions, Leo and Fan Yang confirmed to me that ZTE paid, and the Filipino Consultants received, the additional advance of USD 30 Million.
5. I am executing this affidavit to attest to the truth of the foregoing facts and I further attest that I was not paid, coerced, forced, intimidated, or in any manner asked to execute this affidavit for any consideration whatsoever, and I finally declare that I executed this
Affidavit voluntarily and of my own free will.
__ February 2008, _______________, Metro Manila.
*DANTE R. MADRIAGA*
*
*Affiant
SUBSCRIBED AND SWORN TO before me this ___ day of February 2008,
in the place above written.
*NOTARY PUBLIC*
While at it, maybe it's best if we learn more about him. Mala-CSI ba.
Here's Madriaga's sworn testimony as submitted to the Senate:
I, *DANTE R. MADRIAGA*, Filipino, of legal age, with postal address at 13
Cairo St. BF Homes Paranaque City, after having been duly sworn in accordance with law hereby depose and state:
1. Introduction
1.1. credentials I attended 1st and 2nd and half of 3rd year at UP. I transferred to Texas A&M and obtained my Bachelor of Science in Mechanical Engineering degree ("BSE") from Texas A&M in 1969.
1.2. professional experience Since then, I have been employed in various capacities by a number of companies, local and foreign, that specialize in computers and telecommunications. My duties in these companies entailed my expertise in the field of design, costing and implementation of computer and telecommunications networks.
Due to my long experience in the field of telecommunications, I have gained expertise in the formulation and design of telecommunications networks, as well as trading in pertinent and related equipment. My expertise in this field has also helped me build a competent proficiency in the costing of these networks
In 1999, engaged by DOTC as consultant for Telepono sa Barangay project. With the change in administration, we resigned our posts.
2. Prime (late03 to early 04)
2.1. manner of involvement
2.1.1. Eva Park, recommended me to Rene Mendoza, who owned Prime treasure Holdings (Prime) to work on Korea Link proposal. Became my friend while we were testifying before the blue ribbon committee re Telepono sa Barangay.
2.2. position
2.2.1. Prime hired me as a technical consultant and lead designer for a national wireless network ("Prime Project").
2.3. task
2.3.1. It was explained to me later on by Mr. Mendoza that Prime was the counterpart of a foreign company, Korea Link. Korea Link was to submit to the government an unsolicited proposal for the Prime Project.
2.3.2. special instructions
2.4. result - Pursuant to my engagement, I began the design for the Prime Project. Sometime in February 2004, when I was about seventy-five percent (75%)* *complete, Prime informed me that the Prime Project would have to be shelved because Korea Link no longer had the funds to complete the project.
3. Arescom (late 04 to late 05)
3.1. manner of involvement – Rene Mendoza called me and informed that ARESCOM, Inc. ("ARESCOM") joined forces with Prime to propose a national communications network ("COMNET") to the DILG. He asked me to come on board.
3.2. position – technical consultant and lead designer
3.3. task - draft, draw up plans, and/or design COMNET similar to the that of the Prime Project, but involving a more advanced platform or technology and using american technology and equipment ("Arescom Project").
3.3.1. special instructions
3.3.1.1. Rene Mendoza told me that we had to add $40M to the contract price which would be kicked back "para sa lahat".
3.4. result – I was able to comply with the special instructions.
3.4.1. The Arescom project was presented to NEDA with a contract price of US$130M, inclusive of the US$40M kickback.
3.4.2. DILG rejected the project as a COMNET was not a priority project of DILG.
4. ZTE (May 06)
4.1. manner of involvement - my good friend Mr. Leo San Miguel ("Leo") contacted me and informed me that a national broadband network ("NBN") was to be proposed to the government by a Chinese company, ZTE Corporation ("ZTE"). This project would be the Arescom Project but now using Chinese technology and equipment.
We met at Chataue at El Pueblo, Ortigas Center.
Leo is my kumpare, being the godfather of one of my children. We've know each other professionally and socially for many years.
Leo represented that he was the technical head of the Filipino consultants for the NBN.
4.2. position - He wanted to engage my services as the head of the design team.
4.3. SPECIAL INFO:
4.3.1. The Filipino Consultants were: Abalos, Ruben Reyes, Quirino dela Torre, Leo, Mike Defensor (as GMA's representative), and Leo.
4.3.2. Leo would liaise between the consultants and myself with respect to the final contract price and other matters.
4.3.3. Leo told me that ZTE would be taking over the Arescom Project.
4.3.4. I was instructed to work closely with the technical staff of a couple of Filipinos and other ZTE technicians in the ZTE office located at the 25th floor of the Pacific Star Building, located at the corner of Makati and Gil Puyat Avenues, Makati City
4.3.5. The NBN was a project that will be submitted by ZTE as an unsolicited proposal to the government for its consideration, approval, and eventual implementation
4.3.6. It was intended that funding for the NBN was to be sourced from a loan facility from China Eximbank.
4.3.7. In consideration of their efforts, the Filipino Consultants will receive the kickbacks that was incorporated in the padded contract price.
4.3.8. My monthly fee was Two Hundred Fifty Thousand Pesos (Php250,000.00); of which One Hundred Thousand Pesos (P 100,000.00) was to be paid on a monthly basis and the monthly balance of One Hundred and Fifty Thousand Pesos (P 150,000.00) to be given to me on a lump-sum basis upon the approval of NBN.
4.3.9. He gave me 10K as a "signing bonus".
4.4. task – I agreed.
4.5. Introductory meeting to the ZTE officers and personnel – right after our one-on-one meeting.
4.5.1. Country manager – George Zhu
4.5.2. Project Director - Wang Feng
4.5.3. Leo presided over the GTKY meeting, introducing himself and me and the project.
4.5.4. thereafter , MY ENGAGEMENT AS chief designer/consultant of ZTE Project, specifically to oversee and supervise the drafting, designing/redesigning, and drawing up of plans for a complete nationwide internet protocol network (as against the existing voice protocol network), called the National Broadband Network ("NBN") WAS FORMALIZED. A copy of the resulting delineation and/or scope of my work in relation to the NBN project, as agreed upon with ZTE, is hereto attached and made an integral
part hereof as *Annex "A"*. My signature together with Leo's and that of ZTE'S manager Wang Feng located in page 9 of Annex "A" are hereby bracketed and marked as *Annexes "A-1", "A-2", and "A-3"* and made integral parts
hereof).
4.6. 130M
4.6.1. I informed Leo that the price was 40+90=130 (K+C=CP)
4.6.2. On or about 16 June 2006, I met Leo for a meeting at the Shang Palace, Makati Shangri-La Hotel regarding the ZTE Project. He said that he would first meet with the Filipino Consultants and would thereafter introduce me to the other personalities involved.
4.6.3. When we arrived at Shang Palace, Leo advised me to wait for him at the reception area. I waited with other people who represented themselves as PSG and Marines. While waiting, I noticed the following:
4.6.3.1. There were no other persons at the Shang Palace, probably because it was already around 2:00 o'clock in the afternoon.
4.6.3.2. COMELEC Chairman Abalos entered the Shang Palace to join the meeting. After what seemed to be 10 minutes, Chairman Abalos left the meeting and left the Shang Palace
4.6.4. After the meeting: I saw who attended the meeting: Mr. Ruben Reyes ("Ruben"), who was introduced to me; Retired General Quirino dela Torre ("Torch"); ZTE officials Yu Yong and Fan Yang, who were introduced to me. I was surprised to see that an old acquaintance, Mr. Stephen Lai, was attending the meeting. Mr. Lai was the technical
consultant of ARESCOM and a friend of ARESCOM's president Mr. Chris Ching.
4.6.5. When I got back to ZTE, I asked Wang Feng if he knew Stephen Lai, because I knew Steohen Lai from Arescom. He told me that Stephen Lai gave ZtE the arescom documents. I asked "for Free?", he replied" Are you kidding?" We laughed.
4.7. 139M
4.7.1. The next day, Leo told me that this was discussed at the meeting:
4.7.2. The following day, Leo went to the ZTE office and discussed the following:
4.7.2.1. The parameters for the proposal (NBN-1) were: The padded contract price would be US$139,000,000 (or US$9,000,000 more than the Arescom Project). I presumed the increase would simply be added to the kickback, leaving the project cost at US$ 90,000,000.
4.7.2.2. However, Leo said that the kickback was to be US$ 80,000,000, thereby decreasing the project cost to only US$ 59,000,000. I immediately said that such a proposal would not be technically defensible
4.7.2.3. Leo insisted that the kickback had to be US$ 80,000,000 because ZTE and the Abalos Group agreed to split the kickback thereby receiving US$ 40,000,000 each. The Abalos Group had to divide their US$ 40,000,000 as follows: US$ 20,000,000 for the government and the US$ 20,000,000 amongst *Chairman Abalos, Ruben, and Torch and Leo.*
4.7.2.4. Due to Leo's insistence, I said that I'd come up with a solution.
4.8. 189M
4.8.1. After a couple of days of having the ZTE technicians verify the costings of the NBN-1, I was able to confirm the impossibility of technically defending it.
4.8.2. Pursuant to the mandated padding instructions, I was able to arrive at a rough estimate which could be technically defensible by increasing the number of sites from thirty-six (36) to fifty-three (53). The rough costing was US$ 109,000,000, resulting in a padded contract price of US$ 189,000,000 ("NBN-2"), therefore 80+109=189. I reported this almost immediately to Leo. He instructed me to proceed with the NBN-2.
4.8.3. After finalizing the rough estimate the final project cost was 99. I presented this to Leo who said that the contryact price would remain at 189 leaving a kickback of 90. Therefore, 90+99=189 (NBN-3).
4.8.4. Sometime in July 2006, we presented the proposal to the NEDA, specifically to its infrastructure group headed by Mr. Ruben Reynoso and to their design evaluator, Mr. Ken Tanate. A printout of NBN-3 is hereto attached and made an integral part hereof as *Annex "B"*.
4.8.5. A couple days after, we presented the proposal to the chairman of CICT, Sec. Ramon Sales and the head of TELOF, Assistant Secretary Frank Perez. Sales and Perez were lukewarm to our proposal; Mr. Sales even advised us that this type of project should be left to the private sector to implement and should not be undertaken by the government. CICT Commissioner, Lorenzo Formoso was at this meeting.
4.8.6. After about a week, Mr. Perez called us for a meeting. At said meeting, Mr. Sales was also present. Mr. Perez gave a presentation of his technical objections to the NBN-3. In gist, he said the VSAT facility could not accommodate the maximum possible load and that it had to be a terrestrial backbone: fiber, wireless or radio. We objected to his comments because of his wrong assumptions. CICT Commissioner Formoso was again at
this meeting.
4.8.7. After this meeting, Leo, Formoso and myself huddled together. Formoso agreed with our objections. He insinuated that if he were the man in-charge, he would not make the stupid objections Perez made. He stated that if he were in-charge, we would not have problems.
4.8.8. When Leo and I were in the car, I told him that we would encounter problems with Perez. He assured me not to worry, as they would take care of the problem. The meaning of this retort was lost to me as I had no idea of what they would do.
4.8.9. Approximately a week passed then I learned that Perez was moved from TELOF to another position in CICT. Thereafter, Leo advised me to coordinate with CICT but to liaise with the new head of TELOF, Assistant Secretary Lorenzo Formoso. From then on, I commenced coordinating with Asec. Formoso on NBN-3.
4.8.10. Sometime early August 2006, Leo informed me that since the proposal was being pushed in the CICT and TELOF, there was enough justification for the Filipino Consultants to ask for a "PR Fund" of *One Million US Dollars (USD1,000,000.00)*.
4.8.11. Leo confirmed to me that the Filipino COnsultants received the earlier request for the PR Fund of One Million US Dollars (USD1,000,000.00). This amount was received by Ruben Reyes, Leo, and Torch *via* a wire transfer when they went to China sometime around 11 August 2006. Leo also informed me that the reason they were able to get the money was they had told the ZTE officials that the First Gentleman will be helping them get the proposal approved; further, Leo informed me that "Ben also went to
China", referring to Chairman Abalos.
4.8.12. Leo further confirmed to me that the PR Fund of *USD1 Million * will be used by the Filipino Consultants to obtain friendly results in the CICT, TELOF, NEDA, DOTC and other agencies.
4.8.13. In early September 2006, the Filipino Consultants met regularly at Wack Wack where I would sometimes accompany Leo. But I would always stay outside the room with the aides of the consultants. However, Leo would always inform me of the results of the meetings. I remember Leo telling me on one such occasion that NEDA Director General Neri was opposing NBN-3.
4.8.14. Also in early September 2006, I went with Leo and some ZTE staff to the office of DOTC Secretary Leandro Mendoza. Leo had intended to make a presentation of the NBN-3 to Secretary Mendoza and get his endorsement. When Secretary Mendoza met us, he inquired about NBN-3 and Leo informed him that this was the proposal being endorsed by Chairman Abalos. To this, Mendoza said: "*huwag na kayo mag-present, i-i-indorse ko na iyan sa legal."* Secretary Mendoza then instructed Atty. Noel Cruz, ASec. for legal of the DOTC, to secure all the proposals from us.
4.8.15. Several days later, Atty. Noel Cruz advised me that DOCT was indorsing the NBN-3 and instructed me to get an advanced copy of the indorsement.
4.8.16. On September 18, 2006, NEDA, through the infrastructure group, informed us on their basic objections on NBN-3. They informed us that we should revise the same and propose to use a terrestrial network instead of the original satellite network as a backbone because the latter would entail constant subscriptions/lease of transponders, which, in turn, would cost the government more in the long run. They argued, among others, that although using a terrestrial network as a backbone would involve a larger initial outlay, the same would be cheaper for the government in the long run.
4.8.16.1. The NEDA's objections and/or comments on ZTE's proposal is contained in the 18 September 2006 Memorandum to Mr. Ken Tanate, a copy of which was sent to me by email. A printout of the NBN-3 is hereto attached and made an integral part hereof as *Annex "C"*.
4.8.17. Leo advised the other Filipino Consultants of the NEDA's concerns, for which I already had a technical solution: to upgrade the existing terrestrial network of TELOF.
4.9. 269M
4.9.1. On 22 September 2006, the Filipino Consultants met the ZTE officials had another meeting in Wack Wack inside a private room. As usual, I stayed outside the room with the other aides. Present in this meeting were Chairman Abalos, Mr. Jimmy Paz, Ruben Reyes, Ret. Gen. Quirino dela Torre, Leo, and ZTE officials Fan Yang and Yu Yong.
4.9.1.1. *As the meeting progressed, Leo summoned me inside and while at the door, in the presence and within hearing distance of all those in the meeting, Leo told me that the new kickback to be is now USD 140 Million instead of the previous USD90 Million, as we would be using the terrestrial network as a backbone – in line with the NEDA suggestion. *The Filipino Consultants inside the private room did not say a word.
4.9.1.2. I then returned to wait outside the room.
4.9.1.3. After the meeting, Leo confirmed to me that the parties discussed the concerns raised by the NEDA. At this time, it was quite clear that a solution should be forthcoming not to use a satellite network and opt for a terrestrial one. My suggestion to use the existing terrestrial network of the TELOF was likewise taken up, considered, and eventually approved by the Filipino Consultants and ZTE.
4.9.1.4. I told Leo that, as in the past, any revision in the design will entail an adjustment in the cost. With the use of the terrestrial network as a backbone, there will be an upward adjustment. We both knew that with the upward adjustment in the cost, we could accommodate the kickback of 140.
4.9.2. As instructed, the necessary revisions were made in the technical and cost aspects of the design of the NBN-3 to conform to the mandate of NEDA and the request of the Filipino Consultants for a 140 kickback. The contract price became 269; i.e. 140+129=269 (NBN-4).
4.9.3. Sometime thereafter, while waiting for the official approval by the concerned government agencies, Leo informed me that the NEDA, through Jun Lozada, advised ZTE that a company by the name of Amsterdam Holdings, Inc. ("AHI"), purportedly owned by Jose de Venecia III ("Joey") allegedly had a proposal with the NEDA similar to that of NBN-4 and was objecting to ZTE's proposal. These objections covered, among others, the manner of funding (loan facility versus build-operate-transfer).
4.9.4. Around the 2nd week of October 2006, Leo informed by via cellphone that:
4.9.4.1. In a meeting AT Wack Wack, the Filipino Consultants discussed the objections raised by AHI. In that meeting, the Filipino Consultants urged Leo to take the lead in ironing out the differences with AHI, since Joey was personally known to him, to which Leo retorted: "mahirap kausap ito", referring to Joey. Also, the Filipino Consultants unanimously decided that the group offer Joey the amount of Ten Million US Dollars
(USD10,000,000.00) to withdraw the AHI objections to ZTE's NBN-4.
4.9.5. Sometime in the 2nd or 3rd week of October 2006, after finalizing the reports, ZTE submitted NBN-4 to the CICT, TELOF and NEDA. Thereafter, the NEDA, CICT, and TELOF came out with the positive reviews/reports which did not, at this time, include anymore objections to the proposal.
4.9.6. Sometime on the 3rd or 4th week of October, Leo later on informed me that Joey refused the USD10 Million offer.
4.9.7. As matters stood then, the NBN-4 had yet to be officially approved by NEDA.
4.9.8. Sometime in November 2006, there was a rumor that Jun Lozada offered ZTE and AHI a solution to harmonize their respective proposals: that AHI be the entity to which the contract will be awarded and ZTE be the supplier of AHI.
4.9.9. When I discussed the rumor with Leo, he brushed it aside saying that such proposal will never prosper.
4.9.10. On 5 December 2006, Leo brought me to the Wack-Wack Golf Club in Mandaluyong City. When we got to the veranda area, I saw Joey and Chairman Abalos inside a private room. While I waited in the veranda area, I noticed that Ruben, Torch, Jimmy Paz and Jun Lozada were also in the veranda but at another table.
4.9.10.1. After waiting for sometime, I was surprised to see the First Gentleman enter the private room where Chairman Abalos and Joey were in. After a few moments, Chairman Abalos left the room leaving Joey and the First Gentleman inside. All the people I mentioned remained outside.
4.9.10.2. After several moments, the First Gentleman exited the private room; he was fuming mad and he appeared very irritated. When he passed by me, I heard him angrily uttering the words: *"Putang ina, lecheng bata ito ang hirap talaga kausap!".*
4.9.10.3. I was surprised at the forceful and passionate remarks of the First Gentleman, and simply concluded in my mind that they had failed to come to an agreement.
4.9.10.4. The First Gentleman then proceeded to the open area and joined the table of Chairman Abalos, Ruben Reyes, Torch and Leo. I saw Joey leave the room and continued out of Wack Wack. After several moments, the First Gentleman left.
4.9.10.5. After the remaining persons discussed a while, they all stood up and left. I joined Leo out of Wack Wack.
4.9.11. While in Leo's car, Leo commented "*Ang hirap talaga kausap nito.*", referring to Joey. We then came up with some ideas on how this matter with Joey could be settled, but nothing definite.
4.9.12. I continued to refine NBN-4 at the ZTE office.
4.9.13. After a couple of days, I saw my ZTE counterparts, wang Feng and Howard Xue, working on a proposal for AHI. When confronted, they said that they were instructed to do so by their superiors. They admitted that Leo did not know about it and that I should not tell Leo.
4.9.13.1. Despite their request, I immediately called Leo and asked him to come to the office.
4.9.13.2. Leo arrived after about 15 minutes and I told him about the actions of Wang Feng and Howard Xue.
4.9.13.3. Leo confirmed my report and then called Yu Yong. After the call, Leo told me that ZTE was just going to supply equipment to AHI.
4.9.14. Thereafter, Leo informed me that the Filipino Consultants were still exerting efforts to reach a compromise with AHI. In fact, Leo and Torch told me that they were going to China together with Chairman Abalos, Ruben, and Joey on 27 December 2006 in a last ditch effort to forge an arrangement agreeable to all the parties.
4.9.15. Just before New Year, Leo told me over the phone all that transpired in that meeting. Simply, that the efforts failed.
4.9.16. In January 2007, George Zhu made me the liaison officer of ZTE to follow the progress of the NBN-4 with the government agencies.
4.9.17. To address the nagging concern that AHI posed and to push NBN-4, ASsec. Formoso formed a technical working group ("TWG") to evaluate the proposals of ZTE, AHI, and even ARESCOM. The results of the TWG's evaluation were tilted in favor of ZTE; it did not favor AHI's proposal.
4.9.18. Sometime in late January 2007, the DOTC formed a technical working committee to review the evaluations of the TWG and to make recommendations to Sec. Mendoza.
4.9.19. Sometime in February 2007, I also learned that the TELOF was moved back to the DOTC *via *an executive order, and the ZTE proposal was endorsed by Secretary Mendoza and Chairman Sales to NEDA.
4.9.20. With this development, I thought that the NEDA approval would be forthcoming; Leo informed me that it will soon come. I learned later on that the NBN-4 was still encountering resistance at the NEDA anchored primarily on the issue of "government guarantee" on the loan to be taken out from China Eximbank.
4.9.21. During these times, I noticed that Fan Yang was anxious.
4.10. 329M
4.10.1. On 12 March 2007, Leo again brought me along to a meeting in Wack Wack; as usual, I waited at the veranda area while the Filipino Consultants met in the same room. This time, Yu Yong and Fan Yang attended the meeting.
4.10.1.1. The meeting lasted quite a while and when it ended, Leo immediately informed me that the total proposed contract price had been re-adjusted to *Three Hundred Twenty Nine Million US Dollars (USD329,000,000.00) (NBN-5)* from *USD 269 Million* because the Filipino Group had to set aside 20 for Ricky Razon to get the proposal approved and 30 for the coming elections.
4.10.1.2. It was at this point that I reminded Leo that my contribution in the proposal and designs for the NBN project was concluded when NBN-4 was favorably endorsed by the CICT and DOTC to the NEDA. Leo told me not to worry, because the ZTE people will be the ones to make the necessary adjustments in the design and coverage of the network.
4.10.2. Indeed, the NEDA-Investment Credit Committee finally approved the NBN-5.
4.10.3. Thereafter, on or around the end of March 2007, on separate occasions, Leo and Fan Yang told me that ZTE made an advanced payment of 10 to the Filipino Consultants.
4.10.4. A few days later, Fan Yang told me that in a meeting they had with the Filipino Consultants on 04 April 2007 at the Makati Shangri-La, the Filipino Consultants demanded 30 to be used for the elections.
4.10.4.1. She said that ZTE will only approve and remit the additional advance payment of *USD 30 Million *when President Gloria Macapagal-Arroyo will be personally present at, and grace, the signing of the supply contract relative to the NBN project which was then scheduled in April 2007.
4.10.5. During the signing of the supply contract between the Philippine government and ZTE officials in China, President Macapagal-Arroyo arrived and personally witnessed the signing herself.
4.10.6. On separate occasions, Leo and Fan Yang confirmed to me that ZTE paid, and the Filipino Consultants received, the additional advance of USD 30 Million.
5. I am executing this affidavit to attest to the truth of the foregoing facts and I further attest that I was not paid, coerced, forced, intimidated, or in any manner asked to execute this affidavit for any consideration whatsoever, and I finally declare that I executed this
Affidavit voluntarily and of my own free will.
__ February 2008, _______________, Metro Manila.
*DANTE R. MADRIAGA*
*
*Affiant
SUBSCRIBED AND SWORN TO before me this ___ day of February 2008,
in the place above written.
*NOTARY PUBLIC*
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