Liveblogging the cootie grooming session

(term borrowed from Me, Myself & Eileen) Please note this is not a literal transcript of the proceedings; it will also include my impressions of the goings-on. 2:03 pm Earlier today, a false alarm ushers in today's hearing in the Senate on the NBN and the ZTE deal. The Cabinet has been ordered to make a show of force at the Senate. 2:15 Romulo Neri says he won't attend because of "intestinal flu," says ANC report from Senate. 2:16 Sec. Larry Mendoza being interviewed by Ricky Carandang. Asked by Carandang about meetings -was Abalos was in meeting? I don't want to preempt process of investigation, says Mendoza. Pressed on FG lawyer's saying Abalos was there, Mendoza says, I'm sorry ah, I don't want to preempt investigation. Says he will go into the merits of the NBN and of the proponents. C: What's status of contract, anyway? M: Contract itself had three conditions, only one satisfied so far... Still a long way to go. C: Pushing through despite everything? M: We will just await decision of Supreme Court. C: What if contract doesn't push through, are you worried government might lose face with China? M: Yes, that's true... We have great relationship... C: And ZTE? M: Still committed. Went to my office yesterday and reiterated support for project. C: I understand some cabinet members opposed the deal? M: It went through the processes. I haven't heard of any cabinet secretary opposing the deal... None at all. C: Is Joey de Venecia lying? M: Well, ah, I dunno. 2: 41 Coverage on TV begins. Sen. Enrile: Is offended. He's reading from transcript; says Att. Habawel (?) that JDV3 may have violated attorney-client privileges with the PECABAR law office. Wants to read into the record what Atty. Habawel said. "Memo for JPE from DBH Re: Jose "Joey" de Venecia III (all caps) "Sir: "1. Joey first retained my services in my personal capacity (at that time not connected with Pecabar) as counsel for Multimedia Telephony to prosecute certifcate for public convenience and necessity for Internet-IP-Access-Node (docketed as an NTC case). "2. When I rejoined PECABAR October 1998, became general partner... Since then I've handled for Multimpedia Telephony the following cases: "i. NTC Case 99-206 An application for CPCN... "ii. NTC Case 2000-142 An application for CPCN to render universal mobile telecoms service (3G) "iii. NTC 999?? for radiomarine which someone opposed "3. Joey does not appear to be stockholder of Multimedia Telephony Inc. (please see attached articles of incorp.) but he acted as its CEE. "4. Multimedia Telephony Inc. terminated its general retainer with PECABAR  01 July 2002 all pending cases terminated by 2005." Enrile: I think telephone call by J3 call to this attorney was an attempt to dissuade me from participating in this investigation. I want to show J3 that this machination will not deter me from participating in this hearing. 2:47 Of course Sen. Cayetano has to quote the Bible and preach. I'm happy the cabinet members are here, but you should be doing it anyway even if it's for anything non-controversial. Mendoza has asked permission to make a presentation to enlighten everyone on "significant technical issues." So, OK. If Mendoza can integrate into opening statement. Cayetano: Today's guests:,DOTC Sec. Mendoza, Finance Sec. Favila, Asec. Lorenzo Formoso III  of DOTCTelecoms office, Elmer Soneja, DOTC. Abalos invited; Gabriel Villarael says Abalos accepts but is constrained to be excused today but will attend next week (Wednesday and Thursday); Neri has intestinal flu (get well soon!) so he'll attend next week. Bondoc, Suplico, etc. also present. Everyone under oath, OK? 2:52 Pangilinan: before oath, is document read by Enrile accepted by committee and if so, can we have copies? Enrile: I move I be permitted to present these documents formally, etc. Cayetano: Okidoki. (Enrile grumbles about capitalization of de Venecia company) Roxas: Welcome to everyone, cabinet members' presence is useful. If there is any indication this is toxic, this is proof: Executive Secretary is here, a whole list of officials; this situation makes me wonder what's so marvelous about this transaction that entire government has to grind to a halt... Biazon: Ah. First, thanks to Executive Department for removing a block that is cause for concern, insofar as full-blown constitutional confrontation between two co-equal branches. So we don't waste time of cabinet, in your presentations this chair would like to hear answers to some questions so you'll be guided. First would be, a presentation of a feasible feasibility study regarding program. Components of program, elements, no? Second, eh, would be uh, were there competitors in this program? Proponents? Third what were differences in different proposals and factors that led to selection of ZTE. The other question is: the sequencing of certain parts of the processes. Which came first, the contract with suppliers/contractors or whether preceded by loan agreement, or preceded further by approval from Monentary Board, meaning, we need to know sequencing because there are laws that dictate proper sequencing... Is there a contract? 2:59 Ermita, Teves, Apostol, Divanadera, Albastro, Andayo acknowledged; also Sec. of Ecclesiastic Affairs (?). Cayetano:  ZTE officials are here saying they offered no bribes. We tried inviting them, but no one at addresses. Sec. Mendoza,  can you tell them we'd welcome them if they'd like to defend project and good name of company. M: With pleasure. C: Escudero asked me to formally ask DOTC to ask for annexes A to K of contract. Do you have it with you? M: Very voluminous, we don't have it, but we'll provide copies. Lacson: I also asked for copy of loan agreement. C: Do you have it, Sec. Mendoza? Lacson: Not necessarily Mendoza, Teves here... M: Can we recognize Teves? C: We recognize Teves even if not invited, welcome. L: I'm not even sure if there's a document for 1.8 billion loan. It was in papers mentioned by Suplico and de Venecia.... C: That's true, are there any other documents? We're not sure even which is which... M: There's another document. Teves: I don't have copies of loan agreements pertaining to portions as loan agreements, North Rail, etc. There's a 500 million item here, but unutilized, it's supposed to be endorsed to include South Rail and Angat Dam and low-cost housing, and recent amount I signed was MOA for 400 million, not yet turned into into loan like other two, I didn't bring it but will submit at proper time. 3:06 B: Says these should all be repeated under oath; Teves placed under oath. affirms what he said was truthful. Mendoza begins opening statement: Hi, hello (interminable list of officials to greet)... First, thanks to Senate for giving us chance to appear and give its side on "alleged" controversy. With me are almost all members of cabinet, not only those with knowledge of the implementation of NBN project, but other members with expertise on procurement. Also with me are officials of DOTC, CICT, Telecommunications Office who came up with protocols; also members of bids and awards committees and technical working groups that analyzed bidders and processes to follow. Pimentel: Considering manifestation of Mendoza about participation of cabinet members in formulation, negotiation, execution of contract and naming subordinate officials, now that they're here, I'd like for them all to be sworn in so now committee can take jurisdiction over them and summon them at proper time. Otherwise they might allege excuses not to appear. C: Any objections? Pangilinan: Not an objection, but we need to list down who will take oath... Pimentel: Well Mendoza mentioned cabinet members here, that would include Devanadera, Andaya, Atienza (I dunno what he's done), Ermita, too. Let's start with cabinet members named and here. Pangilinan: I wrote them down... (rattles off names) C: Place them under oath. Oath administered; C. adds, NEDA deputy director-general; Pimentel says, Apostol, too, he has a lot to say (giggle, giggle from audience). C. asks "Mr. Wetness" to approach microphone, tee hees from audience. Apostol: In congressional investigation, only if we're called as wetness we'll be sworn, if we're only bystanders, no more. Pimentel: We're making you witness. A: Only if letter, not now! Enrile steps in: It's mandate of Constitution we respect rights of people appearing before our proceedings. I tend to agree with gentleman that bustanders not expecting to be called to witness stand should be given time, it's an ambush to do that. We should not demean preceding by doing this. Pimentel: Were only trying to respond to situation where members of cabinet resisted calls to testify... E: Anyway I will reduce my statement to form of objection and I call for a vote. C: Let''s clarify. When Sec. Teves made oath I said other secretaries who felt they might be asked to testify could take oath, we decided in caucus to extend courtesy. So if you don't want to take oath, you're put on notice you will be invited to testify next week. Is that OK, Enrile? Enrile: Rather odd to put them under oath when they voluntarily appeared in this hall. Shows if there's a need, then they will come. 3:19 Pimentel: I based on statement of Mendoza that cabinet and DOTC tech people are here to provide support to his testimony; if not necessary to put them under oath now, is there substitute device where we can acquire jurisdiction over them? Link to contract has been established. E: What I want to avoid is to create impression, even if not your intention, that this proceeding is used to harass. P: Is there way to make them sign they've appeared" C: Alternative is we'll ask them to take oath if called and if they volunteer to assist Mendoza. Biazon: Let's ask Mendoza to clarify. Was mention of other cabinet members to advice this hearing that those he named are being offered as potential resource persons or are they here as bystanders? E: Let's hear this witness first. Now we've forgotten what he said before. To keep orderly proceedings let's have him finish statement. B: I need answer. Are other cabinet members here potential resource persons or bystanders? M: Moral support, your honor. Pangilinan: So we can move forward, Teves, who wasn't invited, showed willingness to step forward. So if anyone mentioned, we can ask them if they're willing to take oath and testify. Pimentel: Fine. (wrangle, wrangle) Apostol: May I be allowed to go back to my seat!?? (Tee hees) Mendoza resumes: Also with me are those who investigated stolen contract and others involved in four other contracts signed in Goa, China. Let me update you on present status on cases filed against DOTC... 1. Petition dated 01 August for TRO filed by Vice-Gov. Suplico against NEDA, DOTC, COTC, Telof, ZTE, AHI, etc. Petition seeks to prevent execution of project, compel production of contract, and declare it null and void. 2. Petition for Mandamus, TRO 07 Sept. 2007 filed by Amsterdam Holdings Inc. vs. DOTC, etc., prays to compel respondents to commence any activity re: NBN project and access documents. As of 11 Sept. SC issued TRO for Suplico petition. Suplico also filed contempt complaint against me (Mendoza) for Star advertisement for trying to influence SC. Carlos Padilla also filed complaint at Ombudsman but we haven't gotten formal copy. We welcome complaints so we can settle in proper forum all accusations. We will, we will, rock you. At risk of being held in contempt by Sc, we will brave the tumultuous waters and tell all. Government's been treated unfairly for respecting sub judice rule. Yet critics have temerity to peddle lies. We can no longer bear to keep our silence. It's now or never before Filipino people. This now involves our relations with foreign states. We have pending agreements with People's Republic of China. International perception might view current accusations in an unfavorable light, relentless microscope of media might frighten investors. These issues are emotionally charged are at the end of the day, merely highly politicized statements. We should stick to the facts and maybe finally remove brooding dark cloud over NBN. This project is needed by the Filipino people, to improve the services provided by all the branches of the government. We will show, through this presentation, that there's no stain of wrongdoing in this project. Atty. Formoso will do the presentation. 3:32 Cayetano: Before you present, do you have hard copy. Formoso: We'll get it now. (lights are dimmed for presentation) 3:34 Formoso: Well try to show NBN will save billions; that ZTE offered best cost; the nation will gain, and law followed. Roxas: Other members can't see clearly, hold on. Cayetano: Projector's crooked. Gordon: Turn off the lights! Pimentel: I hope Formoso didn't do this deliberately so we can't follow it. Formoso: No! (Cayetano and Formoso debate background color of PowerPoint slides.... why is it red? Wasn't red, Formoso says... friendly banter... fiddle, fiddle...) [PowerPoint Formoso's presenting is the one Formoso presented at the Ateneo last June; Formoso's Power Point is available at the PCIJ Blog; it's a longer version of their ads; see NBN deal articles: if the DOTC had sense, they'd have put the PPT online, but sorry, no luck; to understand objections, see Lacking a backbone: The controversy over the “National Broadband Network” and Cyber-education projects] Formoso presents the above from 3:40-3:50 3:50 Mendoza: In closing, DOTC thanks you for your indulgence. Thank you. Cayetano: Please establish two definitions. Broadband and government-to-government, please. Mendoza: Can I we ask uh... Formoso to answer. Formoso: Uh. Broadband is a term is used to describe a transmission system that is rated speed 200 kbs to 100 mbs or higher, it's a unified form of communications where unlike before voice and data ran on different channels, its now on the same channel because packetized, and runs along broadband highway. Another analogy is a pipe... Government-to-government, if you look at projects, 92-98, national phone, regional phone, telepono sa baranggay, were all premised on a loan with foreign creditor nominating a home-grown contractor. C: So for DOTC it's government-to-government even if signed with specific contractor, if funding from a foreign government. F: Well, kinda... C: When you have loan with different country, that's clear, but here it's with a supplier, so your interpretation is, contract with ZTE government-to-government even if no Chinese official signed. F: Well, we assume, if Chinese government said they'd do loan if ZTE chosen, so we consider that government-to-government... (Cayetano and Formoso explore further; Formoso says ZTE deal is in the nature of an Executive Agreement is in the law: in fact, if there's an Executive Agreement, the procurement law says the agreement will be followed, not the prodecures of law.) 3:56 Lacson: what document did you sign in China? Mendoza: Supply Contract Agreement. Conditional contract. L: Is this the same document? (reads document) M: Yes. L: If a contract, did you go through public bidding? M: Executive Agreement, so no need to. L: Is this a contract or an executive agreement? M: Before you sign contract, you establish there's an Executive Agreement between RP and PRC. Then there's a government-to-government contract; in system of Chinese concessionary loans, they designate contractor. L: when you sought DOJ opinion you weren't sure. In fact here's July 26 opinion, and questions you raised were if the contract could be deemed an executive agreement, and if so, whether the mode of procurement fell under direct modes of procurement which is direct contracting. So when you signed you weren't actually sure you signed a contract? M: No, there are three requirements, this was one of them. L: To sign, you needed loan agreement. Based on past DOJ opinions, to qualify they said there were already loan agreements. In all DOJ opinions, a loan agreement is a must? M: Well ah, if I may clarify. Acting Secretary of Justice is here, maybe she should reply. C: Is Acting DOJ willing to reply? M: Usec. Paras from DOJ is here and willing. (Paras sworn in) 4:02 Paras: I am Chief State Counsel of DOJ. My office renders opinions, I'm also member of inter-agency committee to review foreign loans. This issue came up when they asked, is this executive agreement to constitute a rather exceptional way to award, as provided by law, and we said, it is, because it includes an exchange of notes between the Presidential Chief of Staff and the Chinese Ambassador, where PCOS asked, if, indeed, ZTE was their designated contractor and Chinese government said yes. Cayetano: I'm confused. Referring to this other case... But document says this is approved, provided an agreement is concluded with Chinese EximBank, so this is a contract? Abaya vs. Ebdane says there was a loan agreement. That was reference made by SC to affirm there was an executive agreement. But no loan agreement here, so how can it be classified as an executive agreement? So what was signed in Hainan, this document, was a contract or loan agreement? Paras: Your honor it was a contract... C: So if a contract, it should go through public bidding? P: Under the fax presented to me, it's not subject to public bidding. C: Why? P: Because there will be a loan. C: Because contract says its subject to an opinion and then a loan... (Lacson is irritated) Mendoza: We can ask Andaya to explain... Lacson: We will accept your pinch-hitter who was co-author of procurement law. 4:08 Andaya: We're arguing there's not an executive agreement. L: In Hainan was this contract or executive agreement? A: It is part of an executive agreement. L: Was there public bidding? A: If funding from abroad, it doesn't fall under procurement law; the contract is a part of an executive agreement and the agreement becomes one, upon approval of loan and with OK of monetary board, so nothing has happened. L: So is this government-to-government, isn't a stretch? A: The story isn't complete. Starting with designation of supplier. But the loan portion hasn't even been begun by Teves, who would do loan agreement that completes this whole thing... L: Are you familiar with this document on guidelines governing contracts and procurement? Not allowed during election period. A: There are exemptions for foreign projects. L: The one who gives exemptions is Chairman Abalos? A: Yes, but this is only a part, because all of these are small parts of a bigger contract, if there's no loan agreement, there's nothing.... this is merely kropek ... This is unenforceable contract. C: Was there exemption given by Comelec? A: There is no need, no basis to give, since there is no loan agreement... L: Was there due diligence? M: Actually, yes, all projects have feasibility studies... Biazon: Do we have copies of these feasibility studies? M: Yes, and we'll furnish. L: Do you have good sources for your articles, where you state ZTE is in hot water in other countries, including illegal contracts, and even blacklisted for overpricing and price-dumping? Bondoc: I interviewed sources from Telecoms industry at least 4 persons, and they pointed me to articles. L: Mendoza, in conducting due-diligence did you encounter this information? M: Never. C: I heard in Thailand, ZTE entered into bid with government and there were complaints. Did you hear about this? What we heard is ZTE is not blacklisted, it's listed in stock exchange of Hong Kong and Zhenzehn... Are we saying, is that this type of contract is like transformers, if no loan, it's subjected to bidding, but if a loan, it becomes an executive agreement? It cannot be a hybrid. Is your testimony and that of DOJ that there is such a thing as convertible contract. M: No. C: But you signed a contract. M: Not a contract, an agreement... C: So you can put a supply contract ahead of a loan agreement? M: Well, there's different ways for different countries. In China, the supply contract came ahead, but in Japan and France loan came first. C: But if subject to loan, and loan never came, you may have violated M: No contract, because conditional... C: No, there's a contract because there's a meeting of minds. M: Well, the position of the government is this is an executive agreement. C: So, supplier's contract, and loan agreement, at which point it's executive agreement, but right now, you have supplier contract but no loan agreement. 4:21 Estrada: Formoso, what's your involvement here. F: Other than in having a part in evaluating and signing as witness, that's it. E: Did you sign in Goa. F: Yes. E: How many times did you fly to China? F: Twice. E: Were you assigned as chief negotiator with respect to NBN? F: DOTC, not me. E: How many times did you meet ZTE officials with regards to this project? F: Since August last year, I'd say 5 or 6, mainly with technical people. E: Ever met with Chairman Abalos? F: As part of my CTCE duties, asked by Sales to accompany meetings of advisory council. Met first time was December. E: Give me an honest opinion, what do you think role of Abalos was in this NBN deal? F; I was in Comelec as part of my advisory council meeting. E: Have you talked to Abalos regarding this project? F: Never. E: To Joey de Venecia? F: Yes. E: Where? F: Comelec. E: Did they talk about this deal? F: No idea. E: Why did you choose ZTE over Arescom and AHI... When President laid down conditions: BOT, paid for by private funding; and no government subsidy and pay-as-you use, result is reduction in government telecoms expenses. My understand of your presentation is loan agreement, unlike others which didn't have loans? F: Arescom had a loan, and less preferentials. ZTE more advantageous compared to ZTE. Arescom limited to 21 sites unlike national coverage with ZTE. AHI says no cost but no such thing as a free lunch; we think it would be unfair to existing telecoms players to select Amsterdam and then use its network to help leverage it into competing in telecoms sector. Escudero: Uh, thank you. Um... Mr. Bondoc, do you know Presidential anti-graft investigator named Vida Sorobocar who was assigned to investigate this deal? Bondoc: She emailed me asking me to provide documents into possible investigation of Secs. Mendoza and Soneja on this deal. E: Then? B: I got email that she was sacked for communicating with me. E: What was your reaction? After you gave her information? B: I didn't, I published it in my column and felt she'd been fired because of what I wrote. E: I move to invite this official of Presidential Anti-Graft Commission... C: you signed supply contract? M: Yes. C: Look here,  your contract with ZTE, it says, whereas executive agreement it says, does it mean there's an executive agreement? M: Well this means there was an exchange of notes, that's why we asked DOJ opinion... C: So you were lying to ZTE? Is there an executive agreement? M: None. C: So there was fraud, you were saying to ZTE there was an executive agreement... M: But it's conditional... C: But you just said to the Senate there's no executive agreement. But in this document you said to ZTE, there is. It can't be there is and isn't one. M: May I consult lawyer who prepared this contract? C: Yes. 4:34 Atty. ___ testifies Lawyer: Sir, as based on this statement, executive agreement was entered into, where China agreed to finance NBN if ZTE was chosen. Reason for this was statement of Abaya vs. Ebdane, where SC said an executive agreement also includes an exchange of notes... C: But if no loan, is that an executive agreement? Lawyer: It's all part of the project... C: Is or was. Differences. Notes themselves are executive agreement? Lawyer: No. C: So no agreement? Lawyer: So far, no. C: Why did you let Mendoza sign if there was no agreement? Lawyer: Started with process with exchange of notes, that's premise for supply contract, then culminating in executive agreement. Escudero: Referring to contract: ratification by RP and PRC of executive agreement, evidenced by letter ofChinese Ambassador to PCOS Defensor relating to NBN and letter of NEDA... there is executive agreement based on the letters? Do you have the letters? Lawyer: Yes. Escudero: So there is an agreement based on the letters... Lawyer: No, not merely on basis of letters. The basis is culmination of all things... E: It says here, agreement evidenced by letter... Perhaps that is source of confusion? Contract itself is best evidence, it says, there was an an executive agreement, as shown by letters, so can you show letters? C: So uncomfortable for Senate to be told there's no executive agreement, but two portions of contract refers to executive agreement.... Pimentel: You know, lawyer has obligation not to get trouble... the difference between "there was" an executive agreement and "there will be" is precisely the question, why did you use language there was one, when you say there still would be one. Lawyer: We merely premised it on the letter, on the statement of Supreme Court. P: Excuse me, formulation of your contract is not based on Supreme Court decision, it's on your appreciation of facts before you, there's fudging of the facts, for Heaven's sake someone is pulling our leg. C: Presumption is good faith. So they assume we will follow law, is what Chinese assume. You state in contract you drafted that there is an executive agreement, so if we ask the Chinese they will say yes, because our document says so, but if we ask your Secretary, he will say there isn't. Either there was one that was ratified, or not. So when you say there's an agreement, there's a loan? Lawyer: Yes. C: And a loan requires monetary board approval. Lawyer: Yes. C: So Chinese will assume we acted in good faith and so it means they assume monetary board approved loan, so.. why would you tell ZTE there's an executive agreement, if there isn't one... Lawyer: There's no executive agreement so far. 4:45 Santiago:  No official made a follow up on ZTE with you? Mendoza: No, M'am S: No one broached it all all? M: Well, ah, it's practice for people to inquire... S: So that's your historical experience. So it's discretion as the better part of valor So any public official who made follow-ups with you? M: Well uh, maybe on AHI... S: Amsterdam? M: Well, the son was introduced to me by the father... S: Speaker? M: Yes. S: What did he say? M: Well, that the thing is good for the county... S: Well, to be seen if that's a violation of law. But you are saying it was Speaker who introduced his son to you at Wack-Wack? M: No, earlier part of 2007, at Speaker's house where he invited me for breakfast and then introduced his son? S: All of a sudden, saying this is my son of whom I am well pleased... M: Well, bringing up Amsterdam.. S: I am holding up study by Fabella and de Dios... Last sentence says we don't need NBN. Are you familiar with this paper? M: Not very much. S: Are you familiar with provenance of paper, where it came from? M: We do not exactly know who funded the paper, there was a lot of media blitz practically demonizing ZTE, well, this is one of the groups... S: You weren't curious to find out who was behind this paper? Let me make it easier for you. There is data that this paper was produced under auspices of Agile, financed by USAid. M: I am familiar with Agile... I don't know if two professors are identifiable with particular NGO. S: On to certificate of incorporation of AHI. Authorized capital stock is 5 million. Paid up capital is 325,000 pesos. Were you able to verify this document? M: We have copy from SEC. S: Has it been since amended? M: We dunno. S: If we go by this, AHI, was trying to bid for project 300-400 million dollars? Were you able to find out more in this respect? How can a company possibly bid? M: 242 million dollars, 12 billion pesos, one reason why TWG concluded that AHI lacks necessary requirements. S: Let me go back to incorporators. One is Chinese, another American. Did this ring bells and whistles, as ex-military man, did you realize that China and US engaged in a very bitter struggle for economic dominance. Was this part of turf war between two nations? M: I may not speculate, there isn't a war, but Chinese products are getting out of the market, and I don;'t know the reason... S: Did you see headline, de Venecia owes telecoms firm $12 million. Were you aware? M: Well, I think it's ZTE that furnished that, and they say it's true. S: Thank you Senator Madrigal, I will kiss your feet later. 4:58 Madrigal: When you went to see Speaker, was it to ask help for you son running for congressman in Batangas? M: No. Ma: Did your son win? M: Yes. Ma: Congratulations. Could you elaborate on your being quoted as saying... M: I deny that. Ma: You're under oath. M: Yes. Ma: So what was reconciliation meeting about? M: After Speaker introduced his son, his son went to my office several times, I endorsed him to TWG, and several times while engaged in my duties, speeches, dinners, I used to find him hanging around in the area. Ma: With all due respect. Were you or were you not in Wack-Wack with Mike Arroyo (and names) M: When? Ma: After you had your meeting in March or mid-March... Ma: Do you categorically deny? M: I need to know exact date... I am head of national golf association.... Ma: Do you even recall, or not choose to recall this meeting? M: I saw Joey de Venecia sometime in March... Ma: Abalos, Ruben Reyes... de la Torre, do you deny being in your presence? M: No.. Ma: Yes, no? M: Well, I need explain... Estrada: Madrigal is asking, was there any time you, the FG, de la Torre, etc. meet in Wack-Wack? M: There was a time when I met de Venecia and FG. Ma: when did you meet Formoso? J3: At Comelec. Ma: Did you expect? Surprised? J3: Was surprised to see him there, because I thought it was just Abalos, and Formoso had been avoiding my calls, and remember, Formoso, we ate ensaymada... Ma: Do you recall that? F: Yes. Ma: So proceed. J3: This was part of numerous meeting Abalos and I had, and he said to Formoso, "you see, Joey and I are now partners" Ma: What did that mean? J3: I took it mean that to Abalos it was important that to the approving officials, they'd know we were partners so there's no confusion it's important... Ma: Referring to Standard headline which alleges Senator Serge Osmena was go-between? J3: I've been introduced to him in mid-90s in NTC. Ma: So you would say report in Standard that you tapped Serge Osmena and Standard columnist Tony Abaya is inaccurate? J3: I don't know him the way they imply. Ma: Why would Standard which cites a Palace source, why would they try to implicate Serge? J3: I dunno. Ma: To Bondoc, Regarding sexcapades stories, who were your sources? Were there eyewitness? B: I can't reveal them. Ma: You stressed gifts, aside from "advances", the ZTE executives met him with two girls.... (recites lurid details, asks Joey to comment on Luli's comments on his hair, would it diminish his credibility? No, J3 says) Ma: Will you tell hearing what you said about First Daughter's drug allegations. We should not denigrate those who have fallen on this path and tried to change their lives. J3: I believe most people make mistakes. I experiment in Boston when I was 18-19. After a year of experimenting I saw my GPA drop. I went to Beth Israel Medical Center, I checked in, they have me medication to wean me off. Since I was 20 I have not taken drugs or even beer. I'm on board of New Beginnings, I brought AA here... I think if you learn from it and correct it, you can move on, I'm not ashamed of it, it's made me a better person... Ma: you've been sober for 20 years? J3: Exactly 22 years. 5:16 Pimentel asks how contract was "lost." Mendoza says it's easy to reconsitute, but he asked NBI to conduct investigation. Findings: not jusat ZTE contract was lost, it was stolen with 4 others. P: By whom? Bedol? M: No. Emmanel Ang, our commercial attache, was responsible. P: Charges filed? M: Well, the NBI is here... it filed a case before DOJ. I mean, Ombudsman. P: So case pending for loss of documents? M: Yes. P: Did you inform ZTE documents were lost. M: Yes. P: What did it say? M: They waited for conclusion of NBI investigation. Then we reconstituted contract. P: How many copies did you sign in Bao? M: That's odd. Only one copy? P: I stand corrected, one copy for us, one copy for ZTE. M: So the copy of ZTE basis for reconstituting? P: No, because copy of ZTE was also stolen. (crowd laughs) M: We have control copies for reproducing... on computer... P: How long reconstitute? M: After investigation. P: When? M: May 24. P: So loss reported June 20 at forum at Ateneo. So you'd reconstituted contract, but then your Usec tells forum it had been stolen. M: Clarification, Formoso only reported it stolen. P: No, Formoso, on June 20 at Ateneo, said he doesn't have copy, because it was stolen or lost. In fact, first time official recognition contract was lost or stolen. M: Formoso is here. F: I did disclose contract was lost. I did say it had been reconstituted based on control copies. I said I didn't physically have a copy. (long wrangling on why he said it had been stolen) 5:23 Cayetano: Did you scan original contract? M: There was a remaining impression on the computer... C: No scanning... M: Second signing was when? (wrangling over barcodes, which copy had a barcode, which copies were signed, who signed what, when, where, first and second time around...) (shouting by young lady; crowd murmurs...) Pimentel: Sometime later, Lacson will show that supposed first and reconsitututed copies have signatures on exact same places... Anyway, Mr. Formosa, you were a consultant of Abalos in Comelec before you went to DOTC? F: No, I never worked for Comelec. P: Somehow your name was linked to MegaPacific contract... F: That would be strange... First time I met Chairman was when under part of my obligations as member of advisory council for poll automation of May 2007 elections, I was required to assist.... P: You were also at Wack-Wack when FG pointed finger at J3? F: I wasn't there. P: You were there on some other occassion with Abalos? F: I don't play golf, have only been there for some other functions. P: Mendoza, you've heard of bribery in this case? M: Insinuations of bribery, sir? P: Including offers to Sec. Teves? Did you hear about that? M: No, never. P: Mr. Neri? M: No knowledge. P: Not even heard? Not even in papers? (cranky wrangling by the two) M: I don't know what to believe in media anymore. P: A sentiment I share. (Oooooh from crowd) Biazon: The gallery is advised not to make disturbing noises while these proceedings are going on. Were contracts lost in room? M: On the way to the room. B: Were other items other than contracts stolen? M: Only contracts. B: There were two signings. Original and reconstituted. B: Which did President attend? M: Boa. B: Original? M: Yes. B: That was the time the FG was in hospital? M: Yes, I believe so.... Can I make further statement? Actually it was a sidetrip, main reason was to attend Boa forum. 5:34 Aquino: Three offers? M: AHI was unsolicited, Arescom and ZTE backed by loans. (Noynoy Aquino asking extremely dorky tech-related questions; he's zeroing in on whether or not the parameters established by government for the NBN, were even necessary) 5: 43 Roxas says he's offended by Formoso's computation of savings; because government spending for talking to outside world isn't included; costs saved will only cover government-to-government calls; but will stay pay charges outside the system, so it will not incur major savings; Roxas showing a temper for first time; says Formoso is obfuscating the issue; Formoso admits computations don't admit that government's costs outside NBN system persist). Aquino: You advocate this for two reasons. First, savings. Second, security. F: Yes. A: Is there any fully secure system in the world? Foolproof? F: No. If you're dedicated enough you can hack any system. A: This is supposed to give us security, but being set up by another country accused of hacking... So all we're left with is supposed savings? 5.1 billion for a much smaller scale endeavor was original idea, and there's a law saying private sector should be engine of growth for telecoms. This NBN doesn't seem to comply... So why should be undertake this project? F: RA 7925 was supposed to foster competition. Not to prohibit a gov't telecoms system, which would be absurd, for example in terms of the military. It requires privatization of government telecoms facilities, if it competes with private sector. 5:50 Honasan yields his time to Aquino. Naks! A: Clarify why there seems to have been a reversal of the President's past policy, supposedly at the cabinet meeting? M: Well from BOT to direct loan... and government doing the project, was discussed at Neda sometime in March... While it's true if there are available private telcos; but they only serve profitable areas. What of 4, 5, 6th class municipalities? There are no providers. Very good if private entities do it, but when? We have been looking forward to covering, geographically, a bigger area than 1-3rd class municipalities. If we wait for private enterprise, it will take time. This is why the President the approved the government undertaking this broadband project. 5:54 Biazon: There's supposed to be 300 base stations in this sytem? F: Yes. B: Each base station could serve 30 km line of site? Difference if non line-of-site. F: Yes, signal would be degraded, maybe 15km. B: It cannot serve whole country? F: We did calculations, we could serve entire country. B: Can you submit locations? F: Yes. 5:55 Honasan: Aquino laid premise for my questions. Beyond technical, legal, and cost-benefits, I want to bring up non-quantifiable national security questions. Bush signed a law which I will bring to chamber's attention. Mendoza, assuming NBN breaks down, who will fix it? M: Part of contract is operation and maintenance. H: ZTE? Another foreign entity? M: Let me explain. We considered issue of security. We will ensure there's no leakage, I'm from military. When someone gives us a system, there's chance there will be leaks. But we will get third party to ensure there's no leak. H: UP Econ says even maintenance is beyond us, what about security. Formoso in briefing said there's a security audit, encrypting, protocols, etc. But in my view, a fountain cannot rise higher than source, even if there's a third party, fact is foreign entity is setting up the network... (then cheers up Mendoza by saying they're both Mistahs, and that his answers are between him and God, Senate, country, and long gray line, so is that Olrayt to you? Olrayt, Sir! M. says) 6:00 Villar: I was watching TV earlier. I'd like a summary of process from beginning to end, everyone involved, step-by-step and where we are, and what needs to be done to complete the transaction. Things are so confused, so please enumerate everyone involved... Any reports of unusual movements of funds, from Anti-Money Laundering Council? Oh, and I thank cabinet men for their unusual presence here, let's hope Palace continues cooperating, as we're only doing our jobs... 6:02 Arroyo: I'd like to echo Senate President's words. Last night we were discussing what if this case reaches Supreme Court, this relieves us of the tension, we, in the Senate did not want a case. 6:03 Escudero: Here's list of more documents we want from DOTC... You signed a supply agreement, the President was a witness. This means you had full authority of President? M: Yes. E: There's a document? M: Yes. E: We'd like copy. Supply agreement plus loan agreement, per DOJ, then is executive agreement? M: Yes. E: the procurement law exempts bidding, if there's an executive agreement. So why did supply contract come ahead of an executive agreement when you're not yet exempt from procurement law? M: Well, it's the way they do it in China. E: That applies to China. But under our laws, we cannot put a supply agreement ahead of an executive agreement. M: Well in effect, there's a foreign loan, and in that case we adhere to process of foreign government. E: Even when it contravenes our own? M: Well, there is no contract, this is just a supply agreement... E: But agreement awards contract... M: But it's not in operation yet... (Escudero then looks at whether it was wise for NBN to be government-done, when typhoons would lead to perpetual spending for repair, which private sector would have assumed; Ecudero then homes in on whether Formoso classified obsolescence; Formoso admits they did not take obsolescnece into account, or factor in costs for typhoon damage repairs) E: Is American version of NBN owned by government? F: No, parts, Defense, State, owned by government. E: Any government that owns entirely? F: Taiwan... (list of states to be furnished) E: There's national policy for private sector to do this. Why are we reversing policy and under what authority are you doing that? F: Law says privatizing networks for public use. Only means government can't compete with private sector, but government can operate its own if not in competition with private sector. E: What is legal authority are you basing government owning its own broadband network? F: May I refer you to e-commerce law (Formoso goes and looks for copy) E: Mendoza This is not BOT. ODA? M: No. Concessional loan. E: What's difference? M: Concessional loan interest slightly larger. E: Only difference? M: I stand corrected, DOF says this ODA. E: RA 8182 says express approval of Congress must be secured by executive after 1995, for all ODA. Do you have Congressional approval? M: Uh... may I have some moment? 6:17 Sec. Andaya replies: The legal basis for the financing is through the Foreign Borrowings Act, not the ODA Law. ODA has 25% grant package, upon referral of records, this was covered by FBA... Congressional Approval, anyway, is secured through approval of the Budget. E: ODA or not? A: In nature, it could be ODA, I'm just saying the legal basis is FBA... E: This is not in budget? A: No. E: Is a Forward Obligation Authority to be issued? A: Not yet. E: What are required. A: Teves will have to secure FOA, stating how we will use it, and pay it, and approval of Monetary Board, then he can enter into contract, our government has given neither. E: Congress will be informed? A: It would be, if under ODA, it would be in the Budget.... (Biazon clarifies the NBN can't be implemented yet, because no loan, and no Congressional authority; says project is like North Rail, with similar problems) 6:23 Roxas: You said this is not through ODA but FBA. This is legal, you say, and amortization will not even pass through Congress, because it would fall under automatic debt payment, with FOA and monetary board approval; after all, loan would not even go to us, but directly to ZTE, but also, every year, there'd be automatic appropriation for debt... Amortization, earlier, would be paid at 1 billion a year, and automatically. In fact, this will only pass scrutiny once, A: To use the loan, it would have to appear in the budget. But to pay the loan, it would appear in the budget. R: How? Amortization will be automatically appropriated. A: Yes. R: This is not a loan of the Congress. But we have a loan, and money released to ZTE. Then ZTE will put it up, even if we don't have the budget. What you'r saying is there's only two requirements FBA and monetary board. Then China EximBank releases loan. That money will not pass through us, it will go straight to ZTE, it will go from one book entry to another in China. A: We will have book entries... R: Yes, debit credit, but the whole thing goes from one Chinese pocket to another. Is there any other guarantee? A: Well, the Supreme Court.... R: Good thing this has reached SC. 6:29 Arroyo: In the end what Supreme Court decides will be the decision. We are discussion question we cannot resolve. Has there been any damage to government? Ar: We haven't spent a peso. Ar: Why don't we abort this? M: I cannot answer that, I'm just a member of cabinet, this was debated in NEDA... Ar: Will this affect RP-China relationship if cancelled? M: In effect, yes. There might be some international repercussions, if we don't wait for resolution of Supreme Court. Ar: Re: executive agreements. There are three kinds: contract to do something, perfected contract, and consummated contract. From what I gather this isn't even a perfected contract. If that is correct, there seems to be a battle among "commissioners" and this is the problem we have... To Mr. de Venecia, is it correct your paid in capital is 312,000? J3: 25 million pesos, paid-in. Incorporated two years ago. Ar: With 25 million paid in, contract would require 300-400 million dollars, what you are going to implement 12 billion peso deal, there's a gross disparity. J3: In terms of infrastructure, especially telecoms, you then make a capital call. Ar: We don't like using a franchise to leverage capital. J3: No, we already have options for two stockholders. And when when awarded through public bidding, then they'd subscribe... Ar: Mendoza, Madrigal asked you, I ask you point blank: Any occasion, any time, where Mr. Arroyo told de Venecia to back off? M: No. Ar.: Are you sure? M: Let me make amplifications, there was occasion where FG arrived... FG said to me, who is he? I said that is Joey, son of the Speaker. What is he doing here? And I explained he was following up contract, and FG asked, why is he doing that, he is the son of the Speaker, that is irregular? Then he just went away... Well, I've known FG, he's a mild-mannered guy, I've never seen him, well, ah, angry... Ar: You don't have to elaborate. Favila, re: aborting this deal. This deal has caused so much stress, is it still worth it? F: I was at meeting where Hu Jintao and GMA discussed ministers figuring this out. I met my Chinese counterpart I did mention there were issues, things that needed to be done back home, and even of cases where petitions were filed with SC, the Minister said he understood rule of law had to be observed, I would like to believe I got an opening when I reminded him we need to wait for SC ruling. Minister Bo Zi Lai, in my previous encounters, is a man who keeps an open mind... It's worth exploring, at my level, I am prepared to bring up options with him and discuss them thoroughly, I just can't second-guess how they respond. Ar: Well if it takes SC two years to decide this, what happens to NBN? Nothing. To speed up something so we can move on, so we don't have to keep investigating... Mr. de Venecia... there's allegation by Sec. Mendoza that Amsterdam does not have a track record. Let me ask you. J3: We have a track record. We have 100 years of experience with combined people. More cell site installed by us than ZTE. Broadband Philippines. An 800 seat call center. Mobile information network. A paging network....etc., etc. I as a 44 year old professional, have raised funding from George Soros, etc... I have the respect of investors in New York and the Middle East... I am competent in raising infrastructure finance for projects that make sense... 6:45 Enrile: If you were not the son of the Speaker, and given the very thin capitalization of Amsterdam which on paper you don't even own, an you explain to us why the government has entertained your NBN proposal? So much so that you have them a presentation? J3: Our interest was Bulid, Operate, and Own, it has merit because it doesn't require government to spend, borrow, or subsidize, and it's going through a process that has existing rules and guidelines for investors to come to the Philippines and make proposals. We made unsolicited proposal which is the way to bring up something to government. Our capitalization for a company doing business development is a lot of money. But even if contract were rescinded and rebid, we're no longer interested. Enrile: Formoso, what was capitalization of Arescom? F: 625,000. En: You also entertained them. F: Yes. We had to. En: Why do you entertain? F: With the understanding they would be funded by US EximBank... En: Suplico, my godson, have you ever acted as lawyer for de Venecia? Suplico: No. En: No? S: No. En.: Ever been a lawyer of Broad Band Philippines? S: No. En: You owned Broad Band Philippines, de Venecia? J3: I was a shareholder. En: How many shares? J3: In 1997, I became a shareholder... E: how much? J3: It varied. 1 share has chairman, when my American partners moved, I had to buy their stake... En: I am a little bit sleepy. Before you sold, what was your holding? J3: Roughly 65%. En.: You never appeared as an owner... J3: Company was incorporated in 1993. En.: Your name appeared in stock transfer book? J3: Yes. En.: True that ZTE supplied equipment? J3: Yes, but I sold to Sorianos, Ricky Razon, Ibazeta, Cuyukieng, etc. En.: Remained profitable? J3: Yes, I remained Chairman, they secured loan from ZTE... they have an outstanding loan, I've only attended three meetings... They have outstanding loan, but people running the company when I left were Friz Server and Ibazeta... En: How did you become owner of Amsterdam? J3: Was already a shell company, I was looking for holding company, I am beneficial owner... En.: In all companies you end up being stockholder, your name doesn't appear... Does Amsterdam Holding have power to invest in telecoms business? J3: It's an investment vehicle... If we were granted opportunity then we would increase capital and purchase franchises... This is process how we would address NBN. My understand from NTC is if we undertake project purely for government, it wouldn't need a telecoms franchise. If we sold bandwidth, we would need to buy franchise, and we were looking at three companies. En.: In Multimedia Telephony Inc., you did not appear as real owner. In Broadband Corp you did not appear as real owner. In Amsterdam also. Why submerge your identity in companies in which you had interest? J3: Multimedia Telephony owns Broadband -it's a brand. Amsterdam Holdings, as a businessman, and you might sympathize with me, I want some flexibility, when I know what I want to do, then I come in. En.: Well, I'd understand if you weren't son of the Speaker. J3: My father is a politician. I am a purely professional businessmen. I've never asked my father for anything since I was in college. My name might open doors for me, especially abroad, but I am an independent businessmen with right to do business in the Philippines. En.: To Mendoza. Who has control of effectuation of this contract. Purchaser, the Philippine side, or supplier? M: Philippine side. En.: And this will not proceed unless notice given by purchases of supply. M: Yes. En.: And this will only come when notice is given of effective date? M: Yes. En.: And that effective date will only come when all conditions have been satisfied. M: Yes. En.: So this is not truly a contract, because a lot has to be done for it to be a contract? M: Yes. En.: So up to now, this is a piece of paper. What in 2nd semester law school, is a contract in the process of becoming. M: Yes. En.: Until all conditions have been met, so nothing will happen. M: Yes. 7:02 Zubiri: Formoso, you claimed it would be dangerous to give this to Amsterdam holdings, because it would use it to sell bandwidth to the public. Expound? F: What Amsterdam would do is wait for award of contract then raise funds. That's their benefit. What they'd have is executive performance undertaking, where government would be forced to go to them but they'd sell to the public, which is why their system is geared to Z: Is this true? J3: Our proposal was for government to have 25% savings on existing expenses. If I bill DOH 2,000 pesos, they can compare to market; if we aren't lower by 25%, then they don't have to pay us; but if we are lower by 25% then they have to pay us for that specific service. Z: Being chairman of franchise committee in the House, there is a need for telecoms companies to get a franchise. Even then, they need concurrence if they buy. Would you be allowed to operate without Congressional franchise? J3: I am aware. I've been in industry for a long time, I've met you and your dad because of your committee. Once we start selling to the public, we'd need franchise. What we need is a company with a particular spectrum, then we'd buy one those companies.... Z: The point, Joey, since we met long time ago, you'd have to get franchise. Under the law, you'd have difficulty, because you'd have to divest, being the son of the Speaker. To be fair, I've said no to people asking for a franchise. A word of caution, now there may not be a conflict of interest. But in the future, please be cautious. To Mendoza/Formoso: On plan to get NBN from China, we're giving out our entire communications network to a foreign entity; under Constitution there should be 60-40 provision of ownership, for the reason of security. F: Well, you'd know where security breach took place, so people would be answerable, you could ask what happened. Z: Can't local companies do this? They're crying foul. F: Cost and security. On point of cost, we'd pay much more. Security aspect, better our servers for government information be in custody of government. (Z. asks about obsolescence; 10-13 years lifetime F. says; Z. asks what's to stop it being a monument to waste; F. says past deals were done at end of useful life of technology; but the NBN is at begining of useful life) 7:16 Zubiri: Mendoza, what is categorical answer. Has government spent a peso on this NBN to date? M: Not a peso. Z: To Andaya who is looking younger and younger, same question? A single peso released? Andaya: Not yet. Cayetano: By government, you mean. But ZTE could. A: No, there's no perfected loan. Even if true, we have no obligation. 7:18 Legarda rehashes previous question. Mendoza rehashes his replies. 7:26 Legarda: Is there an executive agreement or not? M: Not yet. It's still in process. L: Even if the supply contract says there was an executive agreement signed? M: This was explained by the one who wrote the contract, this may be explained by maybe there was some error... Uh, well, if the other party thinks it's OK... L: There is an admission by the executive that there was an error in which the document was drafted and signed? M: Well, no, the executive agreement is under process... (continued debate on "is" and "was" and differences in terms of English usage; Mendoza insists lawyer said intent of document was clear to both parties; Mendoza says there are many angles; government thinks, though, best angle to pursue is the Supreme Court, they will follow the rule of law... L: Has there been any offer in kind or cash, of any bribe, offer, for approval of ZTE? M: None. L: Sure? M: Yes. 7:32 Cayetano: When you went to China, did ZTE pay for your ticket? M. No, my office. C: So it's not true that government hasn't spent. 7:33 Pangilinan: Two issues. First, legality of contract. Second, was there corruption? Third, was Abalos broker? Fourth, if so, who was in it with him? Only the first question can be resolved by Supreme Court. P: Who negotiated with China, and why didn't they put loan agreement first and supply contract next, unlike practice with Japan and Korea? M: That's the rules in China. P: Can we have copies of those rules? M: Yes P: So if the rules of China contravene our own, we'll accede? Andaya (jumps in): Can we ask what law was violated? P: Procurement law. A: The law you cited doesn't cover this transaction. This transaction is covered by another law, since it involves funds from abroad. P: Maybe so, if we knew what sort of thing this is, if it's an executive agreement or not... If we'd had proper bidding, we wouldn't have this problem. For example Nlex, or Maynilad, Sale of Fort Bonifacio... But those without transparency have problems. Returning to Abalos. Mendoza said at Wack-Wack, Abalos was there. Did Abalos talk to you about ZTE? M: No. Never. P: So he was there by chance? M: Yes, coincidence. P: Formoso was at Abalos' office, and de Venecia was there. Formoso: Yes. P: Abalos didn't approach you to discuss ZTE when de Venecia was there? F: No. We discussed project of Joey, NBN. P: Yes, NBN. F: Yes, but Joey and I discussed it but Abalos didn't say anything. P: So your were in office of Chairman. de Venecia was there. You were discussing NBN deal with de Venecia. But Abalos was there being quiet. F: (heated reply: de Venecia was hounding me!) 7:43 Escudero and Andaya then grapple on procurement law; law states no distinction as to source of funds; Andaya says the IRR's don't make those distinctions; Escudero says the IRR's, if that's the case, contravenes letter and intent of the law; Andaya concedes! 7:46 Biazon rehashes Escudero's points. Andaya concedes again. Cayetano asks very good question: as author of the law, what was your intention? Andaya concedes, yet again, that the law did not want to make distinctions. But that conditions and commitments to foreign institutions makes government submit to rules that differ from ours. 7:48 Estrada asks pointless question; Gordon is at the bat. Who set priorities for NBN? M: Well, President said cybercorridor connecting entire country... Only way to do it is through NBN. G: Didn't anyone say there are higher priorities? Schools? elections? M: There's money for that. G: Will you use NBN for computerization of elections? M: No. G: Makes me nervous, Abalos is there. Instead of computerizing elections he seems more interested in this broad band... (rehash, rehash) 7:55: Gordon does point out that government has a broadband (fiber optic) backbone installed: Transco! Formoso admits that yes, this is so: but it's point to point, but what they want is a system that allows branching out in between; Gordon skeptical of the need for this, considering the least-developed municipalities don't even have computers. Gordon points out J3 knows big shots; J3 says he was invited by his dad to his dad's house; that Mendoza was there to ask his dad's help for his (Mendoza's) son's candidacy -the Lakas certificate- and it was then J3 mentions to Mendoza that he had a pending proposal; at which point Mendoza says the problem with your proposal is the Old Man is mad at you; which is why Mendoza then set up reconciliation meeting at Wack-Wack. 8:00 G: Why didn't you report Abalos when he offered you a bribe? J3: He said he was having his Last Hurrah. I told him telecoms isn't sexy the way it used to be. What I said was you can be a director of company after you retire. (Gordon then makes points about telecoms budget of government going down steadily; asks cabinet members with money that would be allocated, was it really priority or was it donor-driven, pushed by China but why not spend 15 billion pesos on something else? Mendoza says ICC and NEDA discussed it. Gordon makes pitch for money to be used for automating elections instead. Mendoza says well, we have case in SC and Ombudsman... Gordon then launches rant to point out foreign governments when they lend, insist what they lend is spent on their products) 8:06 Enrile: Is the reason you don't put your name in companies you own, because there's an anti-graft provision prohibiting you from engaging government clients? J3: We've engaged government subscribers before, PECABAR never brought it up. E: You knew anti-graft law proscribes you from getting interested in contracts where government money is involved. J3:  Nope. I've been in business even before my dad was Speaker. And contracts signed when my dad wasn't Speaker. And our proposal goes through a strict process in which my father is not involved. E: But you are not allowed to be involved. J3: No, the law says the officials cannot have discretion, and the process has to follow the procedures. My father never had discretion and all procedures were strictly followed as the law says. (Enrile snorts and has to retreat: a rare occurrence that he was beaten on a point of law!!!) 8:11 Gordon and Formoso rehash details of why Transco fiber optic system exists, and why, then, NBN is needed. 8:16 Escuero points out Telof is office that will maintain NBN. 100 million budget and 700 million personnel allowance. Points out office to manage NBN is in current business of delivering telegrams and using bicycles. 8:18: Cayetano asks why CyberEd is required at additional cost when there's NBN. Formoso can't answer. M: Sec. Lapuz will reply on that. Formoso and Cayetano discuss why CyberEd is needed when NBN can carry video also; Cayetano asks why Formoso has spent hours trying to convince the public to support NBN, when he hasn't tried to explain to Sec. Lapus that he could save  25 billion by using NBN instead of setting up CyberEd. 8:22 Cayetano asks Mendoza to repeat statements that FG is mild-mannered. When Mendoza repeats it, Cayetano says he obviously didn't see FG losing cool during ethic hearings. Biazon asks Formoso how many base stations Smart has; Formoso says ask NTC, companies view it as trade secrets. Biazon wants to know how many Globe, Sun, Smart have. J3: NTC has that, each base station has a radio station license. Biazon: I heard there's 12,000... Anyway... (Biazon then asks Formoso to attend wiretapping hearings) B: So will you attend? F: Of course I can't say no. B: Y-ees. 8:27 Cayetano brings up CITC plans 100% connectivity planned for major municipalities; 4th class by 2010; the ICT road map, then, meant private sector could do it by 2010. But then, he asks Formoso, why have you been telling us that private sector can't do it? But this report says it was planned and seen as possible. Formoso seems a bit stumped. F: Well, it's a road map, not a factual statement; but with NBN we are saying we will do it this way. 8:31 Pangilinan: Yes or No, Sec. Teves: You were interviewed on TV saying Chairman Abalos approached you on NBN deal. Teves: Can I relate what happened? The first time Abalos called me was probably more than a year ago. When Ricky Carandang asked about that incident, I said I couldn't recall. Upon further reflection, Abalos asked if he could bring businessmen but they were leaving; so I said Ben, is it OK to bring them over weekend? I had no idea what would be brought up. What I did recall was meeting Chairman Abalos and Sec. Mendoza on broadband in Wack-Wack. As Sec. Finance, I thought it would be important for me to get information on this project. 8:35 Estrada: Why was contract rushed? Why did President go? M: There were 5 contracts, and President was there because she was at Boa Forum, and we happened to sign. E: And at a time when her husband was gravely ill? M: Yes. E: Are you aware of letter of Amb. Kenny? M: No. 8:35 Roxas asks about fifth and sixth class municipalities... Mendoza says there's plenty. Roxas says only 1,500 or so municipalities of all kind, so how many of the 5th and 6th class don't have access? Formoso says we need to spend 15 billion to connect these? Formoso says they'll send data. Roxas says, you defend this proposal so avidly, why don't you know? Again, how many of these 5th and 6th class municipalities don't have any telco access? This is why credibility is low; when we ask you actually how many municipalities stand to benefit from NBN, you don't know! Mendoza, is it possible most municipalities already have telco access? Mendoza, we don't have numbers, we can't say right now. Roxas asks Formoso: there are 25,000 "end points" what are those? Formoso says, they're base stations. Roxas: basically antennas? Formoso: Yes plus VOIP phone. Terminals. R: So these terminals, what will they be like, these 25,000 terminals. F: Small, just enough to have a surface to receive signals. R: So wherever they are, within a certain radius, this is the transmitter people would use. According to your program, government offices, employees would use these antennas... Would private people use them? F: No. R: So within these 25,000 endpoints, all government agencies would use them, government-to-government; so from Senate we can call 5th class municipality. F: Yes. R: Why then, spend 330 million when we can reach them? F: The level is not the connectivity we want. R: So instead of 4 cylinder we want 12 cylinder. F: More functional. R: But functionality we want is what we use. If for example your records aren't digitized, they can't use VOIP. F: But there's VOIP. R: We can videocam- F: Not necessarily, just voice... R: But then 330 million for an exclusive system, which only government would use? Why aren't we more selective and specific in targeting spending, to bring those who really need it? F: We're sending you annexes... R: You can't answer, my experience is if proponents can't answer immediately they don't know the whole score. We've been here for hours. Is this really the best use for the money, for our borrowing capacity? F: Back bone is only 18% of cost... R: That's 16 million dollars. That's a lot of money... Mendoza, this Telof, this is one of the agencies slated for rationalization, isn't it? I recall cabinet meetings where this was determined as an agency to be shut down. M: Yes, part of the rationalization... Reduced and relocated. (Roxas and Mendoza exchange opinions on government priorities and the while elephant known as Telepono sa Baranggay) R: This seems to me a project in search of a rationalization. 8:52 Estrada: Sec. Teves, you admit you met Abalos and Mendoza. T: Yes. E: Mendoza claimed Abalos never approached you regarding NBN. So what did you talk about? T: There was a meeting in Wack-Wack regarding NBN. There I was given information that I would meet ZTE officials. I was invited by Mendoza and Abalos would be at that meeting. E: That meeting took place? T: It took place, in a room near golfer's verandah, it's a small restaurant now. Cayetano: More a huddle or a real meeting? T: I came late. I had previous dinner. It was almost finished when I joined. C: Date? T: Can't recall. C: Mendoza? Mendoza: ZTE called me, they wanted to meet at Wack-Wack. One issue was how it would proceed, ZTE said ChinaEximbank was ready. I said it should be DOF Sec. to talk about this. C : When? M: Can't recall. C: What was Abalos's role there? M: He just happened to be there. C: ZTE officials most likely weren't members of Wack-Wack, so most likely you need a member to be there. M: Well, the Chairman, he's in and out of Wack-Wack... 8:56 Cayetano: Thank you. This hearing is suspended. *** What now? What next? Some ideas in Uniffors. For the technical aspects of things, go to Yugatech: Making Sense of the NBN Project.