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Raising funds at DND (1)

(First of two parts)

You know it’s the election season when politicians start milking private contractors to raise campaign funds. Of course, politicians have always been shaking down businessmen who deal with government – it’s just that this nefarious activity is ramped up when an election is nigh.

An intelligence report that came into my possession alleges that defense contractors are being asked to pay P15 million in “administrative fees” to allow them to participate in biddings for big-ticket items under the Armed Forces modernization program.

There’s more. A department insider has confirmed that this “seed money” paid by contractors to ensure they were included in key bids ends up the pockets of high-level defense and military officials.

“They operate like a country club. You pay a fixed amount to get a chance at cornering juicy defense contracts,” said one source who has worked in various capacities in the government since the term of former President Fidel Ramos.

The seven-page defense intelligence report detailed interviews with bidders and suppliers as well as intercepted mobile phone messages discussing the fee demanded from the contractors. “This includes both local agents and foreign suppliers who were cajoled to sit down with them,” the document alleged.

Some of the contractors interviewed offered evidence such as taped conversations, pictures and footage of their meetings with a group of high-level defense and military officials involved in the awarding of military modernization projects, the report said. The document said some contractors were willing to execute their sworn affidavits.

The racket, I’ve been told, recently became part of fundraising efforts for the Liberal Party, and that former Defense undersecretary for civil, veterans and retirees affairs Eduardo Batac was present during the meetings with contractors. “The usual representation of the group is that they were authorized by the DND and the Secretary [Voltaire Gazmin], and most recently because it is a fundraising effort by the government for the Liberal Party,” the document said.

* * *

Batac could not be reached for comment. The DND has announced hat Batac resigned last month due to personal and health reasons.

“The common thread is that Undersecretary Batac would attend the first meeting usually in a hotel either in a special room or out in the open. In the latter case, he would not sit down with the proponent but would sit farther off, and [Jesse] Matibag will just show him as proof of assistance,” the document stated.

Matibag, a lawyer, was identified in the document as one of the brokers of the group who set up meetings with contractors, along with a certain Rhea Maddatu.

“Rhea Maddatu would then join him. In one of the tapes obtained, Rhea would not sit down with the group claiming that she would be scolded by Undersecretary [Honorio] Azcueta if she joins the group. She would just sit further out, but would be there either as advance party, also as proof of life,” the document said.

It was not clear, though, whether Maddatu is an employee or consultant of the DND. In the meetings, Matibag would allegedly show a copy of a contract detailing the fees to be paid to the group, the document said.

“Under legal cover of consultancy agreement, the group will charge an administrative fee of fifteen (15) million pesos without guarantee of success. The usual arrangement is an advance payment of three (3) million and a monthly payment of 1 million pesos for twelve (12) months,” the document explained.

It said the group used consultancy names such as Elementum Inc. and SPAM, but “the name of the consultancy usually changes with each project.” A verification with the Securities and Exchange Commission made by the investigating team of the DND showed that the name Elementum Inc. as a corporation “has not yet been registered but its name has already been reserved.”

SPAM, on the other hand, was verified as a “shell corporation without many assets,” the departmental report said. “But this (SPAM) has pronouncedly figured in both the coast watch project and the radar project,” the document said.

The document also alleged that an unidentified engineer “connected to SPAM” had asked an administrative fee of P40 million from the local representative of a foreign supplier.

The supplier is involved in a radar project with Israel – a negotiated government-to-government deal awaiting the issuance of a notice of award and contract and approval of President Noynoy Aquino.

The project involves three air surveillance radar units worth P2.68 billion.

On the other hand, the Coast-Watch System —a project of the Philippine Navy—is worth close to P1 billion and was awarded to another private company.

(Concluded tomorrow)

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