ZTE Deal Controversy

The Philippine National Broadband Network controversy or the NBN - ZTE (Zhong Xing Telecommunication Equipment Company Limited) deal is a political situation that centers upon charges of corruption mainly involving Chairman Benjamin Abalos, former Commission on Elections (COMELEC) chairman, First Gentleman Mike Arroyo and Pres. Gloria Macapagal-Arroyo concerning the proposed government-managed National Broadband Network (NBN) for the Philippines and the presentation of its construction to the Chinese firm ZTE, a telecommunications and networking equipment provider.

The issue has captivated Filipino politics since it erupted in Philippine media around August 2007, largely through the articles of newspaper. It has also taken an interesting turn of events that includes the resignation of Benjamin Abalos as COMELEC chairman, the suspected bribery of congressmen and provincial governors called as "Bribery in the Palace", the removing of Jose de Venecia, Jr. as House Speaker, and the alleged "kidnapping" of Rodolfo Noel Lozada, Jr. who is the designated National Economic and Development Authority (NEDA) consultant-turned-NBN - ZTE witness.

Foundation of the NBN – ZTE Deal

ZTE Corp. Vice President Yu Yong and Department of Transportation and Communications (DOTC) Secretary Leandro Mendoza entered into a US$ 329.5 million contract for a national broadband network (NBN) that will enhance government communications ability last April 2007. Mrs. Arroyo flew to China even though the First Gentleman is still recovering from a critical condition, having recently undergone surgery for aortic aneurysm to witness the contract signing between ZTE Corp. and Department of Transportation and Communicationin Boao province China last April 21, 2007.

Nueva Vizcaya Congressman Carlos Padilla coded in a privilege speech last On August 29, 2007 that Chairman Benjamin Abalos, chairman of Commission on Elections (COMELEC) went to China to broker a deal for the NBN project. The following day, Abalos admitted he went to China four times but denied brokering for the NBN project.

Senator Aquilino Pimentel called for a Senate investigation about the NBN project last September 5, 2007. As a result, three committees held joint hearings about the issue:

1. Headed by Alan Peter Cayetano, the Accountability of Public Officers & Investigations “ Blue Ribbon Committee”,
2. Headed by Rodolfo Biazonthe, National Defense and Security committee
3. Headed by Mar Roxas, Trade and Commerce committee.

Jose "Joey" De Venecia III Statement

Last September 10, 2007, son of House Speaker Jose de Venecia, Jr., Jose "Joey" de Venecia III testified that he was with Abalos in China and that he heard Abalos "demand money" from ZTE officials. The son of House Speaker Jose de Venecia, Jr. was president of Amsterdam Holdings, Inc. (AHI), the company that lost its bid to ZTE for the NBN project.

The Supreme Court of the Philippines promulgated a temporary restraining order (TRO) last September 11, 2007 on the $329-million national broadband network (NBN) contract between the Philippine government and China's ZTE based on separate certiorari suits filed by Iloilo Vice-Governor and former Representative Rolex Suplico and Joey de Venecia III. Under political demands from the opposition group, the court gave ZTE fifteen days to comment on the order. Former opposition congressman Suplico, assumed that the agreement was sealed without public bidding and violated the Telecoms Policy Act, which calls for privatization of all telecommunications facilities. Congressman Padilla sued DOTC and ZTE officials of violating the Anti-Graft and Corrupt Practices Act, the Telecommunications Policy Act, the Build-Operate-Transfer (BOT) Act and the Government Procurement Act at the Office of the Ombudsman. AHI also appealed in Court to direct the DOTC to provide copies of the contract, since it should have won the same. On September 18, 2007, Joey de Venecia III testified that, President Gloria Macapagal-Arroyo's husband, Mike Arroyo personally told him to " back away " from hunting the NBN project.

Romulo Neri's Statement

Cabinet officials attended the hearing except for Romulo Neri who is the former National Economic and Development Authority (NEDA) Chairman (now Commission on Higher Education Chairman) who was sick during the Senate hearing last September 20, 2007. President Arroyo suspended the broadband contract with ZTE last September 22, 2007 after the bribery scandal produced major problems in her government.

On the Senate hearing last September 26, 2007, Neri and Abalos finally faced each other while playing golf at Wack Wack Golf Club. Neri testified that Abalos told him "Sec, may 200 ka dito" (you have 200 here) wherein they had been discussing the ZTE deal at that time. Abalos denied making the plain bribe attempt. Neri later brought up executive privileges in response to some Senators' questions. He later ignored succeeding Senate hearings still citing executive privilege

ZTE requested the Supreme Court to lift the TRO alleging last September 27, 2007, in its urgent compilation motion, inter alia, that the sanction cost the company millions. On October 1, 2007, Abalos publicized his resignation as COMELEC chairman and Resurreccion Borra succeeded him as COMELEC chairman. Last October 2, 2007, President Arroyo said to Chinese President Hu Jintao her " tough decision" to cancel ZTE Corp.'s contract for the NBN project on her trip to China.

Rodolfo "Jun" Lozada's Statement and Kidnapping

The Senate produced warrants of arrest to Neri and Rodolfo "Jun" Lozada, Jr., former chief executive officer of the government-run Philippine Forest Corporation and a consultant of the NEDA last January 30, 2008. Lozada passed over the Senate hearing and went to Hong Kong while Neri then went into hiding. Last February 5, 2008, House Speaker de Venecia lost a motion of confidence vote which unseated him as House Speaker; Prospero Nograles of Davao City, his partymate at Lakas-CMD, succeeded him as speaker.

As the Senate arresting team waited on the Ninoy Aquino International Airport (NAIA) on Lozada's arrival, last February 5, 2008, Lozada was taken by unidentified people "out of town" and Lozada's relatives asked for help on his whereabouts. Lozada finally came up last February 7, 2008 as police took him to La Salle Green Hills, Mandaluyong City. Mike Arroyo and Abalos was linked by Lozada to the ZTE scandal. The Supreme Court stopped the Senate from arresting Neri on the same day, ordering a status quo. Neri then resurfaced after the threat of arrest was taken off.

On a Philippine Senate hearing the next day, Lozada confirmed his NEDA boss Romulo Neri's testimony that Commission on Elections (COMELEC) chairman Benjamin Abalos and Arroyo's husband Mike Arroyo were behind the kickbacks in the deal. Lozada's statement was made after he was " kidnapped " on the orders of Department of Environment and Natural Resources (DENR) secretary Lito Atienza, Neri, former Presidential Management Staff head Michael Defensor, Secretary for Special Concerns Remedios Poblador and Deputy Executive Secretary Manuel Gaite.

Upon continuation of Senate hearings, Last February 11,2008, the government denied on kidnapping Lozada. Lozada claimed he was driven around Metro Manila and even reached Los Baños, Laguna, before he was transported to the La Salle Green Hills seminary. According to DENR Secretary Atienza, Lozada, who is his boss as the Philippine Forest Corp. is under the DENR, asked for his help as "he feared for his life" as he returned from Hong Kong. Joey de Venecia later claimed that ZTE advanced USD 1 million to Abalos; senators pointed out that this qualifies as "plunder" under Philippine criminal law since the advance was given when the foreign exchange was at about 50 pesos to 1 dollar, thus equaling the 50 million pesos floor for plunder.

On the February 26, 2008 hearing Deputy Executive Secretary Manuel Gaite appeared. He had previously said that the P500,000 he gave to Lozada's brother was for Lozada's expenses while staying at Hong Kong. Gaite said he "can't rationally justify" the reason why he gave Lozada the large amount. He said that his action "was moved by my conscience and my faith." Lozada earlier claimed that the P500,000 was a bribe. A ZTE-employed engineer, Dante Madriaga claimed last February 26, 2008 that 41 US million dollar was sought as "advances". ZTE then withheld more money, saying they needed to see President Arroyo's face at the signing of the contract.

After Jun Lozada's Testimony

Several sectors and well-known people such as Joey de Venecia and senator Panfilo Lacson called for president Arroyo's resignation after the Lozada testimony, while Senate President Manuel Villar and senator Alan Peter Cayetano called for a leave of absence. Vice President Noli de Castro on the other hand, asked President Arroyo and other government officials should be charged if they would be found directly involved in the alleged anomalies.

The Makati Business Club and other about 80 groups called for Arroyo's resignation last February 12, 2008. Last February 15, 2008, an estimated 10,000 people held a protest rally in front of Ninoy Aquino statue in Makati City to demand the resignation of Arroyo. More than 4,000 including former President Corazon Aquino and Lozada attended the Sunday mass at the La Salle Green Hills' St. Benilde Gymnasium.

Last February 25, 2008, the Catholic Bishops' Conference of the Philippines (CBCP), due to the Filipino people's cry for a united political outlook, called an emergency meeting. Under his CBCP presidency, the bishops said in their statement: "They refused to call for her resignation saying they wanted her, President Gloria Macapagal-Arroyo, to be part of the moral improvement process." Lozada, Aquino and several personalities attended the mass during the anniversary of the People Power Revolution at the Baclaran Redemptorist Church in the Manila suburb of Parañaque. The homily centered on the retort where Arroyo claimed that "People Power" is dead.

A huge rally was held again at the Ninoy Aquino statue in the Makati business district attended by Aquino and Estrada, despite several blockages by the Philippine National Police (PNP) of people willing to join the rally. The rally drew 15,000 people according to the PNP.

Yesterday February 29, 2008, the biggest interfaith rally in Makati City existed wherein a lot of people attended in search for the truth. During the peak of the rally at around 5:00 p.m., police estimated the crowd at 15,000, although rally organizers placed their own count at up to 80,000.