Notes On A Scandal

(The NBN-ZTE Deal Controversy)

The Department of Justice launched its own investigation into the controversial National Broadband Project-ZTE deal. The department says its investigation will be different from the ones being undertaken by the Senate and the Ombudsman because it will cover other crimes such as perjury, intriguing against honor, false testimonies and violation of the Government Procurement Act which are not covered by said investigations.

FEBRUARY 19, 2008 - DOTC ASEC. LORENZO FORMOSO III

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First to testify was DOTC Assistant Secretary Lorenzo Formoso III who was designated to evaluate proposals which came from ARESCOM, Joey de Venecia's Amsterdam Holdings, Inc. (AHI) and China's ZTE COrp.

Formoso said the ZTE proposal was both financially and technologically sound compared to AHI which had little capital and will be using a far less superior technology (CDMA compared to ZTE's YMAX which he said will be the 4G standard in the future).

In terms of coverage, the ZTE proposal was also superior because it would cover the so-called missionary routes meaning third and fourth class municipalities which are not normally "wired."

When AHI came to the DOTC with the proposal, it had a prepared endorsement letter which according to Formoso, the AHI wanted DOTC Secretary Leandro Mendoza to sign. But the endorsement letter was not signed.

Formoso further added that they asked AHI to submit additional requirements but it refused.

He also pointed out another problem, should the AHI proposal be approved. The AHI would be financed under the Build-Operate-Transfer Scheme which presented a problem because according to Formoso, under the anti-graft law, granting the contract to Joey de Venecia, a son of former House Speaker Jose de Venecia Jr. would be a violation since it prohibits granting of government contracts to government officials and their relatives.

Formoso also pointed out that AHI did not have a congressional franchise and technology partner to implement the NBN.

He insisted that the ZTE Corp. went through the process of procurement.

He also belies allegations of overpricing which was bared by former Philforest Corp. President Rodolfo "Jun" Lozada. Lozada claimed at the Senate investigation that the project cost ballooned from $262-million to $329-million because of commissions.

But Formoso said it was impossible. "Assuming there is a $130-million commission, subtract that from the final cost of the project which is $329-million, you will have more or less $200-million. That's cheaper than the original cost. Saan sila kukuha ng pang-abono?" said Formoso.

Formoso reiterated that the cost increased because the scope of the project was widened from 30% to 100% coverage of the entire country.

"He (Lozada) would not know the final contract terms, because by his own admission, he was out of the negotiations after June 2007," Formoso said.