How to steal a private business
Wednesday, 05 14, 2003
Tired of all the Palace denials of the extortion racket of Arroyo officials and trouble shooters in Malaca's grand plan of taking over the Philippine International Air Terminal Co. Inc. (Piatco)'s Terminal 3 project, The Daily Tribune is reprinting the transcript of the tapped conversations between Frankfurt AG officials and their American lawyers.
Read about F. Arthur ?Pancho? Villaraza, President Arroyo's personal lawyer and trouble-shooter, demanding $20 million from the German firm Fraport in exchange for his background services to settle the problems of Piatco by effecting the buyout of the Chengs, Fraport's local partner and majority shareholders in the consortium Philippine International Air Terminals Co. (Piatco) that built Terminal 3 of the Ninoy Aquino International Airport.
Read about Villaraza's extortion attempt, among other revelations from Dr. Dietrich Stiller, Fraport's German legal counsel from Clifford Chance Punder, and Peter Henkel, head of a Fraport team in charge of the firm's investments in Terminal 3, and Fraport's two American lawyers.
Also in the tapped conversation, on which this paper in part based its exclusives on the Piatco controversy the past several days, Gloria Tan-Climaco, former presidential adviser for strategic projects, is unmasked as the operator apparently sent by Malacanang to work the Fraport and Villaraza sides.
At one point in the conversation, which took place apparently during a meeting among Stiller, Henkel and the two unidentified US counsels, Stiller can be heard saying,''Fraport, you need strong litigators who were well connected politically for otherwise you don't have a chance against the Chengs,'' quoting Climaco.
At another point, Stiller can also be heard saying, ''Hey, your friend (Villaraza) is a crook,'' this time quoting Mr. Endler, Fraport's chief financial officer.
Endler apparently called Mrs. Arroyo's lawyer-crony such upon learning of Villaraza's demand for $20 million, which, also according to the tapped conversation, he wants 'to be paid offshore via another entity in Hong Kong.''
Apparently, Villaraza has not kept his end of the bargain, that is, to put everything down in writing.
Fraport has brought its case against the Philippine government before a World Bank arbitration court.
Malacanang is asking the German firm to drop it, apparently fearful of the international backlash that would result from Fraport's laying bare allegedly massive graft and corruption in the Arroyo administration.
Dr. Dietrich Stiller is the German legal counsel of Fraport. He is from Clifford Chance P? Mr. Peter Henkel is, since early 2002, the head of the Fraport team in charge of Fraport's investments in NAIA Terminal 3.
US Lawyer 2: Let me just stay close to the facts there for a second. Now, the strong request from the (Gloria Tan) Climaco side, was this what was conveyed through (Joanne) De Asis or is this different?
Dr. Stiller: At the very beginning it was conveyed directly.
US Lawyer 2: Okay, so in February, which is before De Asis and Globe Capital is involved.
Dr. Stiller: They were not yet involved.
US Lawyer 2: At February, Climaco herself.
Dr. Stiller: Yeah.
US Lawyer 2: How...To whom did she speak? To whom did she deliver this message?
Dr. Stiller: At that time, to Endler (the chief financial officer of Fraport) and Struck (the executive vice president of Fraport).
US Lawyer 2: And what did she say? Why did she say she wants law firms changed?
Dr. Stiller: She told us that time, ?Fraport, you need strong litigators who were well connected politically for otherwise you don't have a chance against the Chengs.? And she suggested, there was a very strong suggestion from her side that Villaraza & Angangco are instructed by Fraport, because there is a very special relationship between the law firm of Villaraza, Angangco, Climaco and certain people in the government.
You know, Villaraza Angangco before it was renamed, had the name Carpio Villaraza Cruz. Carpio is very close to the President and who became a Supreme Court judge. He was the first Supreme Court judge to be appointed after Macapagal-Arroyo took over. And Villaraza, he stayed in the Firm, and Cruz became the presidential legal adviser. All of them are very close to Climaco. Carpio Villaraza and Cruz represented the Asian Emerging Dragons, the other project proponent who lost the bidding against Piatco.
US Lawyer 1: And Cruz became presidential adviser.
Dr. Stiller: Avelino, Avelino Cruz, and his nickname in the Philippines is ?Nonong,? so people always talk about Nonong.
US Lawyer 1: Nono?
Dr. Stiller: Nonong, ?Nonong? means Avelino Cruz.
US Lawyer 1: Okay, so the initial request conveyed directly to Endler and Struck was that ?Fraport, hire this firm.?
Dr. Stiller: Yeah.
US Lawyer 1: And Fraport's reaction was probably not conveyed immediately but some time later.
Dr. Stiller: Ah, Fraport, well because Fraport was not too much satisfied with QT (Quisumbing Torres) at that time, it was taken up. We had a meeting with Villaraza and, during that meeting, Villaraza...
US Lawyer 1: Asked for the money.
Dr. Stiller: ...Informed Fraport that he would be happy to do this but because of his special relations to the Palace, he would not be in a position to work for Fraport openly, so he would nominate other lawyers who would be the official adviser for Fraport and he would work on the background.
And he wanted to be paid offshore considerable amounts. How much was not exactly specified because this was not discussed until the very end.
And then Fraport made clear that Fraport is not willing to pay somebody in the background and some people in Fraport is not willing to make offshore payments to entities in Hong Kong, and, well, then there was a very controversial conversation between Endler and Climaco. Endler called Climaco and told Climaco, ?Hey, your friend (Villaraza) is a crook.?
This was repeated for several times and Climaco reported to Villaraza ?Endler called you a crook.? From that time there was an extremely hostile relationship between the law firm of Villaraza & Angangco on the one hand side and Fraport on the other side.
US Lawyer 1: Okay so how did Herrera, Teehankee and Faylona...
Dr. Stiller: Let me add something. Secretary Climaco's legal assistant, so to say, Atty. Nuval, formerly she's a freelancer but once upon a time she comes from Villaraza and Angangco and she left this firm to work for Climaco. Some people say that Villaraza had sent Nuval to make sure that Climaco does nothing which is not in line with the Firm's policies and she's expected one fine day to return to Villaraza Angangco.
US Lawyer 1: Where's Climaco now? She's no longer involved in this.
Dr. Stiller: She...it's not absolutely clear to us. At least, she resigned from her official position. She was appointed senior adviser as everybody who was a presidential adviser after having resigned from his or her office becomes a senior adviser, which is an honorary capacity without pay.
US Lawyer 2: That's after February, this is, so you had that discussion, Endler conveys his feelings about Villaraza. That's all, well, in the marginal frame, I guess. So Feb. 27 is the meeting next after that.
Dr. Stiller: The meetings continued and Climaco still pressed Fraport to take Villaraza & Angangco even after this event. It was at least indirectly conveyed to Endler and other shareholders. There were some negotiations between Fraport and Villaraza Angangco but not directly through Mr. Endler I think it was not cleared with Piatco, and he asked for something like $20 million or something like this and at a certain point these discussions were stopped.
US Lawyer 2: So it was after he asked for the $20 million that Endler called him a crook.
Dr. Stiller: No, it was a month before. It was a month before.
US Lawyer 2: So, Endler called him a crook before he asked for the 20 million.
Dr. Stiller: Yeah, and then the Philippine government asked Endler not to return to the Philippines, more or less.
US Lawyer 2: So, Endler called him a crook.
Dr. Stiller: Yes.
US Lawyer 2: Notwithstanding the fact that Endler called him a crook, there continued to be discussions indirectly through political advisers. Fraport continued to discuss the possibility of engaging...
Dr. Stiller: Probably for a period of one month or so there were no discussions at all.
Fraport Representative: Somehow in the end in all discussions with the decision what were we going to do from now on with the project and there the point then came up within the supervisory board, we talked about who can help us out here and who else could be helpful and then the name of Mrs. De Asis, for example, came up as one person who could be helpful. This was decision between Board and supervisory board of Fraport.
US Lawyer 1: On what... Villaraza asked for $20 million offshore through De Asis but presumably he had made this request in some way, maybe for less money, before and that was the basis on which Endler called him a crook.
Dr. Stiller: No, when Endler called him a crook, the amount was not yet specified. He was supposed to send Fraport an offer. But...
US Lawyer 1: A written offer.
Dr. Stiller: A written offer. But before this offer was sent, he was personally present, he already said that there should not be any direct instructions only indirect instructions. They would monitor and supervise other lawyers and they want to be paid offshore via another entity in Hong Kong.
US Lawyer 1: So there's no document.
Dr. Stiller: No document about this.
US Lawyer 2: Is it your sincere opinion that part of what was going on here was something which was as direct as hire Villaraza and this Angangco and he would participate in the $20 million offshore payment, or was it less than that. Was it simply this is somebody who is connected, who can do for you what you need?
Mr. Henkel: No, it was clearly indicated that this is a guy who should be utilized in order to make the necessary payments and then things would happen.
US Lawyer 2: She was, then, again, it was your sense that, although this was not ever expressly said, since things like these are not usually expressly said.
Mr. Henkel: I had my directions.
US Lawyer 2: Right.
Mr. Henkel: I just want to say, it was always said, 20 million for the Chengs and then the rest of the money, the 30 million would be the funds to distribute between different people and then there was that gentleman, he came from Villaraza's law office, his name is Nonong Cruz, and others, and other people who were backing the Chengs to be satisfied with this amount.
US Lawyer 1: Could we back up now when you say a portion for the Chengs. What's that story?
US Lawyer 2: Let's just back up a few, I've never heard the $50 million. We never heard that story. What is it? We got on this discussion because we asked Dr. Stiller, please explain all the lawyers involved and who they are. We've only gotten through the Firm.
Dr. Stiller: Only through Fraport's firms. We did not yet talk about who else is involved.
US Lawyer 1: But you mentioned something else, which is, apparently that there was a request for a payoff for something, for money to go to the Chengs. We haven't heard that before.
Mr. Henkel: To elaborate a little bit, we were always following different routes to solve our problems. The official route was to deal with the government. The official route was always to stay on the side of the government, do what the government says, and follow what they tell us to do.
So everything what we did, what we officially did, what we did, whether it was in Frankfurt, whether it was...were all in line with that agreement.
For that agreement, we had meetings with the Executive Secretary, with the legal adviser, with Gloria Tan-Climaco...
Gloria Tan-Climaco has an appointment letter in which she was not authorized to do what she did. And the appointment letter, as far as I'm told, seems personally what was only limited to different tasks but not to renegotiate with us the contracts.
But on the other side, we always, and I always here in Manila tried to find a way or to have an alternative ready in case that the way to discuss with the government would not show up as a dead-end road and would not lead to a favorable solution. I was, I was trying to build up an alternative on the basis of a private deal, and I was looking from the very beginning to find private investors.
Now, if you look here in the country for private investors that could take over the parts of the Chengs, the shares of the Chengs, and get in the project with the sufficient, that amount of money, there are not too many.
US Lawyer 1: Most of them are detractors in some way from the project right now.
Mr. Henkel: Yeah, so we found two.
US Lawyer 1: Who were they?
Mr. Henkel: The one is Ricky Razon. He is the operator of the harbor.
US Lawyer 1: Ricky Razon?
Mr. Henkel: Yes, he is the operator of the harbor. That's his company...Enrique Razon.
US Lawyer 2: R-A-S-O-N?
Mr. Henkel: No, R-A-Z-O-N.
Dr. Stiller: Romeo, alpha...
US Lawyer 1: Razon.
Mr. Henkel: Yes, and from him and then later on also from the second, the second source which is the information from Mr. Herrera Teehankee and Faylona, I heard that if they would get involved, they would only get involved after the Chengs were out of the project. And they told us that in order to get the Chengs out of the project, after they had familiarized themselves internally with the project, they told us that in order to get the Chengs out of this project, the 50 million would be necessary.
US Lawyer 1: To pay the Chengs?
Mr. Henkel: No, no, not to pay to the Chengs.
Mr. Henkel: 50 million would be necessary in order to get the Chengs out of the project.
US Lawyer 1: And that was Ricky Razon and who else told you that?
Mr. Henkel: This is Joseph Chua. He is the son-in-law of Lucio Tan and Lucio Tan is the owner of PAL.
US Lawyer 1: Uhu...Okay.
Mr. Henkel: So with both we are still in connection, we are still talking, we are talking again to find a solution.
US Lawyer 2: So, the $50 Million, those were two separate, Razon and the son-in-law of the PAL fellow.
Mr. Henkel: Chua.
US Lawyer 2: Chua. Those were two separate projects.
Mr. Henkel: To be very specific, the one said 40 and the other one said 60 and I always made 50 out of it.
(Laughter)
US Lawyer 2: Who said 40 and who said 60?
US Lawyer 1: Razon said 40.
Mr. Henkel: I think Razon said 40 and the other said 60.
US Lawyer 2: In fact, it's amazing how close they are, like a fishing market.
US Lawyer 1: So, but did they say that money was needed to be paid to who?
Mr. Henkel: To the, to the parties involved, let's say...
US Lawyer 1: What was the exact words? You had the discussion right?
Mr. Henkel: Yeah, something like this, but we never specifically talked about it because I didn't want to know who had to be paid out of this because the deal and the offer, the proposal was we bring in fresh money for this, to this company and, therefore, we did not, in the past, we did not discuss it in detail because they said, ?Okay, we make sure that the Chengs get out of this? and then we bring in 80 to 100 million more as fresh capital in order to finalize the building and to fund the start of operations, and this amount would be in either as shareholders' advances, and shareholder's capital increase or as a shareholder loans or something like this. It was never discussed in detail.
But they said, ?Okay, we take care...,? and this was in both cases, ?We take care of the Chengs.? So from some of the discussions, I learned that the Chengs, that payment to the Chengs would not be more than 20 million, even less. But they thought that, in this group, they had to pay, there would be paid people who would be able to convince the Chengs to get out of this.
Mr. Henkel: I believe if this 50 million had gone and was pumped into the different channels...
US Lawyer 2: Things will magically improve.
Mr. Henkel: The problems would be gone and we will have a chance to negotiate because, then, just for face-saving purposes, we have to amend the contract and the Concession Agreement.
US Lawyer 2: Given what your experience has been here over time and given the way in which you've been treated by people with whom you tried to reach business solutions, there'd be an awful lot of faith that you would make that $50-million payment. It would require, be an enormous aspect of faith on your part that $50 million is gonna get you where you need to go.
Mr. Henkel: We will not pay, the other guy has to pay it and I assume he knows the channels, he knows how to do this, he knows the environment.
US Lawyer 2: If your 50 million is gone...
Mr. Henkel: That's not what I'm saying. The hundred million are coming into the company. The 50 million is something that happens on his side. He pays 20 million maybe to the Chengs in order...as the purchase price for the shares and then there are 30 other million that he uses...
US Lawyer 1: For grease.
Mr. Henkel: For whatever, but, but then...
US Lawyer 1: Michael's point is that, that assumption,okay, if the Chengs are gone, 30 million or whatever is left over from what's paid to the Chengs goes to the appropriate channels here in Manila, things will magically improve.
US Lawyer 2: So they never really asked you to do things like what would you actually do. They don't respond in any rational way, causing you to believe, you don't know what they really want you to do.
Mr. Henkel: Yes.
US Lawyer 2: They ask you essentially to help them with respect to the Chengs in this way. When you do help them with respect to the Chengs in this way, they say, ?Don't bother me with this, it's your business!?
Mr. Henkel: Yes, and this was a real hell,although it was only a small amount because it's 5 pecent but, it's 10 or 5 percent, but they didn't...
US Lawyer 2: Your collection claim (Note: In December 2002, Fraport filed a collection lawsuit against Piatco), those are kind of steps to get somewhere.
Mr. Henkel: But in connection with this line of argumentation and this line of discussions, because these were the steps that the government requested from our side, in order to get into a position where they can take over this terminal and through this take over of the terminal, they say that they would be obliged to pay us and this was our understanding how we wanted to do it. We wanted to get out of this project and to get payment from the government.
US Lawyer 1: Is there a direct agreement with the senior lenders? Was there ever a direct agreement?
Dr. Stiller: No.
US Lawyer 1: There was never one negotiated?
US Lawyer 2: I think there's a draft but they refused to...
Dr. Stiller: No. There was a draft...
Dr. Stiller: The Palace itself. The first meeting at the Palace, there was a request from a Fraport board member, by Mr. Endler that, it was in front of five or 10 different people.
So, the request to the government was to impose all possible pressure on Piatco. There was a request, an oral request to the Philippine government not to negotiate with Piatco and, when Piatco asked for a meeting with the government, not to meet them.
Posts
