Apparently, on Sunday, the Philippine National Construction Corporation ceased to exist. It didn’t get its government franchise renewed after the Senate, alarmed by a deal the PNCC entered into with a foreign hedge fund (Radstock Securities), declined to approve the passage of a new franchise law.

Ricky Carandang yesterday explained what the deal was, and why it alarmed the Senate. PNCC had refused, since 1978, to recognize a debt claim by the Japanese Marubeni Corporation. In 2001, Radstock bought the debt from Marubeni for 100 million pesos. Radstock got interested in the debt after the Asset Privatization Trust ordered PNCC to recognize the debt, which by that time had ballooned to 10 billion pesos. Last year, Radstock and the PNCC agreed to settle the debt according to the following terms:

Under the terms, Radstock would be paid P1 billion in cash, 30 hectares of real estate worth an estimated P6 billion, shares of stock in PNCC with a par value of P2.3 billion, and future cash flows worth P9.38 billion, for a total of P18.68 billion.

Which is, of course, a tidy profit for Radstock, which had acquired the debt for 100 million. Carandang says the order to recognize the debt (which until then, had no hope of being collected) was undertaken during the Estrada administration. The compromise itself was reached under the present administration. The senators who led opposition to the deal, Drilon and Osmeña, pointed out both the recognition of the debt, and its settlement, required Palace approval. Carandang says what’s interesting is, who could have managed to shepherd the process through two different administrations?

So where’s the public interest in a deal like this? Drilon and Osmena argue that the recognition of the debt in 2000, prejudiced PNCC shareholders (which is largely the government) and unfairly favored Radstock over other creditors (which is largely the government). In order to settle the debt PNCC effectively liquidated itself and ensured that the P36 billion it owed the government would never be paid.

Here’s what it looks like to me: Radstock, perhaps for a cut of the profits, enlists the aid of some people influential with the Estrada Adminstrtion to recognize the Marubeni debt. The idea is that once the debt is recognized, it will need to be paid. Marubeni, perhaps for a cut of the profits, agrees to sell the debt at 99.9 percent discount on the face value. But four months later, Estrada is unexpectedly ousted in a coup in February 2001. In order to complete the transaction, Radstock needs to find someone connected with the new government of Gloria Macapagal-Arroyo who can pull the strings to get a compromise deal approved, perhaps for a cut of the profits. So they bring a few more people into the deal.

Read the whole thing. In any other country, the deal would have become a major campaign issue.

The Palace is all praises for Pulse Asia (the latest senatorial preferences survey pleases it) but vents its spleen against Social Weather Stations. And yet both surveys seem to say the same thing, when it comes to the point the Palace objects to:

Malacañang on Monday said it was not bothered by an opposition-sponsored survey that found 40 percent of voters believed that President Gloria Macapagal-Arroyo “will cheat in the May 2007 elections for her candidates to win.”

“I believe the other side of the coin is that more people believe that the elections will be clean, honest and credible,” Press Secretary Ignacio Bunye said, referring to the 20 percent who disagreed with the statement and 35 percent who were undecided…

…The TU spokesperson, Tourism Secretary Joseph “Ace” Durano, dismissed the SWS survey as opposition propaganda.

Durano said Pulse Asia had a similar survey dated April 3-5 asking respondents “about the quality of elections this year.”

The result, he said, showed that 56 percent expressed the view that the coming elections would be clean and honest.

“Comparing the two surveys, it can be concluded that majority of respondents believe that the upcoming elections will be clean and honest,” Durano said.

There’s another story on which political endorsements have clout. Nikkin Beronilla has an interesting article which looks at the diminishing pull of celebrity candidates; and Joel Rocamora takes a look ahead:

Is the result of the election a foregone conclusion? Because there is no presidential election, the government will remain in power no matter what happens. Because all the races are local except for the Senate and party list races, mostly local issues will be determinant. What cannot yet be determined is how the President’s persistent unpopularity will affect election results. An April 2007 SWS survey shows distinct voter preference for opposition candidates at all levels, but with gaps small enough to be covered by machinery and cheating in local elections. Another, possibly more important development is the intensifying competition between Lakas and Kampi, two pro-administration parties. Whether or not a lame duck president can keep both warring political parties within her camp will determine a lot of what happens in the next three years.

He then looks into what to expect come election day itself:

Coffeeshop scuttlebutt and more and more open accusations show that administration operators are concentrating on the Senate and party list races. Although victory in the Senate race is measured in the millions, approximately 15 million for top slots, the eighth to the fifteenth slots will be determined in the hundreds of thousands. This is where syndicates of current and retired Comelec officials play a role, selling votes, doing “dagdag” (add), “bawas” (subtract) operations. This can be done by pre-stuffing ballot boxes, and/or doctoring result lists at the precinct, municipal and provincial levels in a very sophisticated, highly developed ‘market’. Although the Palace and the Comelec deny that these operations are in place, all politicians, especially senatorial candidates and their campaign staff take this into consideration.

Many news articles,and even the opposition spokesman, Adel Tamano, have been quoting the political mapping that the Institute of Popular Democracy undertook (Rocamora heads it) and he (Rocamora) provides a digest of his group’s findings:

Congressional races provide the bridge between “national” and “local”. The contests for congressional seats at local districts are being watched carefully because these will determine whether the opposition can get the (roughly) 81 votes constituting one third of the 242 district and party list seats (assuming 24 seats will be allocated). It’s going to be difficult. More than half of the races are “no contest”. Incumbents or dominant local clans control as many as 133 out of 219 districts, of which only 25 are opposition. There are another 32 contests where opposition candidates have even chances of winning. The other contests are between parties of the administration, most importantly Lakas and Kampi. It is difficult, at this point, to determine whether there will be enough opposition votes for impeachment.

And so: status quo, after May. An opposition Senate, an administration House, but a brewing war between the two major camps in the administration, which will be faced with more unpopular policies, such as raising taxes, which will affect the administration’s allies as they begin to think of either capturing, or retaining, power in 2010.

In my entry in Inquirer Current, there’s the current political buzz in the blogosphere: will blogs and other websites now be registered, and taxed by the government?

Whispers in the Loggia on an expected upcoming decree from Rome, authorizing the wider use of the old Latin Mass.

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Manuel L. Quezon III.

18 thoughts on “Whodunnit?

  1. kung totoo, is this similar to china, or different? they say they want to tax the internet and blogs raw, and they all want us to register. i bet they’d drop the tax thing as a concession and just require us to register.

    anyway, will this be implemented AFTER the elections?


    China orders bloggers to register with government

    Associated Press
    Tuesday June 7, 2005
    Guardian Unlimited

    The Chinese authorities have ordered all weblogs and websites in the country to register with the government or face closure in Beijing’s latest attempt to control online dissent.

    Commercial publishers and advertisers could be fined up to 1m yuan (£66,000) for failing to register, according to documents on the Chinese information industry ministry’s website.

    Private bloggers or websites must register the complete identity of the person responsible for the site, and the ministry – which has set a June 30 deadline for compliance – said 74% of all sites had already registered.

    Article continues
    “The internet has profited many people, but it also has brought many problems, such as sex, violence, feudal superstitions and other harmful information that has seriously poisoned people’s spirits,” the ministry said in an explanation of the new rules.

    All public media in China is controlled by the state, but limits on the internet have tended to lag behind advances in technology that hindered Beijing’s ability to keep tabs on users and service providers.

    In the latest move, information industry ministry computers will monitor sites in real time and search for their registration numbers, reporting back if a site is unregistered.

    China has more than 87m internet users – the world’s second largest online population after the US.

    The government has long required all major commercial websites to register and take responsibility for internet content. At least 54 people have been jailed for posting essays or other content deemed to be subversive online.

    However, blogs on which writers post their thoughts for others to read have been harder to police. According to cnblog.org, a Chinese blog hosting company, the country has around 700,000 such sites.

    The international press freedom group Reporters Without Borders has criticised the new rules, saying they would force people with dissenting opinions to shift websites overseas. Mainland Chinese users could be barred from accessing them because of government censorship filters.

    “Those who continue to publish under their real names on sites hosted in China will either have to avoid political subjects or just relay the Communist party’s propaganda,” the group said. “This decision will enable those in power to control online news and information much more effectively.”

    The latest restrictions follow the introduction of many other measures. Authorities have closed down thousands of internet cafes, the main point of entry to the internet for many Chinese unable to afford a computer or web access.

  2. Is it really for tax or to crackdown on bloggers who criticize the government? After the Human Security Act is finally in place, the government with its still unconfirmed DoJ secretary, Norbie and Esperon will surely have a field day.

  3. “….saying they would force people with dissenting opinions to shift websites overseas…”

    Will the government be able (within current laws) to prevent us from doing the same?

    I’m thoroughly clueless but what blog providers are in the country anyway?

  4. Radstock surely paid consulting and other legal fees for transforming the Marubeni-debt instruments they bought (from less than 200-million pesos) into billions of pesos.

    It may odorous, but it (Radstock) may be legal, unless bribes changed hands.

  5. Took the article below from the PNCC website. Unfortunately, the date of posting from the Manila Bulletin wasn’t included.

    “PNCC Projects P200M net income in 2007
    by James A. Loyola – Manila Bulletin

    The Philippine National Construction Corporation (PNCC) expects to earn a net income of about P200 million in 2007 after suffering massive losses for the past thirty years of its franchise period.

    PNCC Spokesperson Atty. Maridel Tacardon said PNCC suffered a loss of P2.09 billion in 2005 based on the Audited Report by the Commission on Audit.

    Tacardon said the projected financial turn-around will be achieved by a combination of decisive measures in total corporate restructuring, particularly reduction of debt, resolution of long standing legal cases, drastic right sizing of the organization, and reduction in corporate expenses.

    The PNCC owes Philippine National Bank P2.4 billion, the payment of interest for this debt has resulted in audited net income losses for the company.

    PNCC is now in an advanced state of negotiations with PNB to finally resolve six years of arrearages. The settlement will result in substantial reduction in debt and interest charges.

    The firm has also asked the Supreme Court for an approval of its settlement with Radsstock stemming from the Regional Trial Court decision to award Radstock P13 billion in 2002 plus interest.

    Furthermore, PNCC has proposed a long term restructuring of its P5.6 billion obligation to the Bureau of Treasury.

    PNCC has entered into an amicable settlement with its seven labor unions wherein the latter will benefit from enhanced separation and retirement packages.

    This is in line with PNCC’s program to phase out unprofitable divisions and service lines and stick to the core business of developing tollways.

    PNCC is currently requesting Congress for a 25-year extension of its Franchise to develop more tollroads and arterial linkages from Carmen, Pangasinan to Lucena, Quezon.”

    Looks as if PNCC seems content in bargaining from a position of weakness

  6. How much does it cost to elect a suppliant Senate? A few billion. That is simply chicken scratch compared to the billions in dollars in the procurement of capital public goods.

    Is Carandang also setting himself up for a big payday? Other newspaper guys have been harping on this for some time. Carandang has a better media platform.

    Dominguez has been the primary local influence peddler that enabled Marc Rich (rogue commodity trader) owner of Glencore to purchase PASAR.

    In the world of commodities and high flying finance the currency is not money but connections to the powers that can make things happen.

    The progressives in Congress had asked repeatedly for an audit of all debts incurred under Marcos. This little episode is simply the tip of the iceberg.

    Will anything come out of it? Think PIATCO and the fertilizer scam. Garci cost simple chicken scratch.

  7. cvj… there is a whole lot of profit-seeking behavior on Radstock’s part (and definitely on Marubeni’s part). Profit-seeking behavior : in which entities seek to extract value by engaging in mutually beneficial transactions.

    Remember that when someone pays P100M for a debt obligation which has a cloud on it — the speculator-buyer gives value (turns a probably-worthless piece of paper to cash) to the seller. The escalation into the billions is predominantly inflation working its effect.

    If anything, the rent-seeking behavior happened within PNCC walls. Remember that it is PNCC who wanted its franchise renewed. Can’t fault Radstock for wanting to get paid a dollar on the dollar. Fault can be put on the doorstep of that somebody in PNCC who, instead of paying 5-cents on the dollar, argued (and won!!!!) before the PNCC board to pay 100-cents on the dollar.

    There should be 4 or 5 more names “with fault”. There is a lot more to this story than contained in the Ricky Carandang blog-speculation or even in the Inquirer stories, in particular, the details and particulars surrounding the consulting and legal fees that surely Radstock paid.

  8. UPn stude,

    Of course there is bribery abd kickbacks in the Radstock deal. The leadership of PNCC are Gloria appointees from the military. Those who run PNCC don’t own it. (PNCC was the old CDCP of Roberto Cuenca. The government took over and changed the company’s name after Edsa.) The company directors are not paying Radstock with money out of their own wallets.

    The debt was renounced so the original creditor Marubeni sold the debt paper for less than 1% of its value to a speculator and all of a sudden PNCC decides to pay up. And you are considering the possibility there is no bribery or kickbacks involved?

    CDCP – Wala kaming utang sa inyo

    Marubeni – oh shit

    Radstock – bilhin ko na lang sa inyo yun worthless paper

    Marubeni – okay

    Radstock – PNCC paano naman itong utang ng CDCP sa amin?

    PNCC – magkano ba?

    Radstock – eh lumaki na dahil sa interest, bilyon bilyon na ngayon

    PNCC – Ha? billions?

    Radstock – Oo

    PNCC – O sigue babayaran namin

  9. UPn Student, so the following example you gave in Abe Margallo’s blog does not apply?

    “An example of rent-seeking is when a company lobbies the government for loan subsidies, grants or tariff protection. These activities don’t create any benefit for society, they just redistribute resources from the taxpayers to the special-interest group.” [UPN at April 26, 2007 8:33 AM ]

    Anyway, your interpretation gives profit-seeking behavior a bad name. Businesses are embedded in the society in which they operate so they should not be given a free-pass just because they consider themselves ‘profit-seeking’ entities. We do not have to put up with such behavior from these corporations.

  10. cvj… The Ricky Carandang blogstory does not true up 100% to the Inquirer columns, which does not help.

    PNCC chair Arthur N. Aguilar and Radstock director Carlos G. Dominguez can provide a lot of answers, but the question is can they be compelled to.

  11. cvj and manuelB… I backed into this type of deal against the US IRS. I had a purchase contract on a house in Virginia for $30K below assessed, which the owners agreed to. [Damn ugly house, flea-ridden, big lot.] Then we discovered that the owner can’t transfer the asset because there was an IRS tax-lien which was $85K over and above their equity in the house and the owner (unemployed woman — husband left her, plus the tax lien) was in no position to pay. My settlement attorney said that if I bought the house, then the IRS can go after me as the new owner.
    And then… and then he also said that in 90% of the cases that he had seen, that the IRS clears out the tax lien when the new owner makes the request. So I did a Marubeni… I bought the asset, then asked my lawyer to file the paperwork so I can take the full value out of the house.
    No bribes, no nothing, not even a phone call to any IRS-dude, and my settlement attorney was just a professional with technical experience doing his job. As for the seller.. she had no equity, so she took out zero. But her tax-lien got cleared. Now I unlocked value from a dead asset, and I had a few thou in the bank as just reward.
    I hope you understood what I just told you. If you don’t understand, you don’t understand.

  12. cvj and ManuelB… you give me the impression that you don’t pay attention or you don’t have the appreciation for financial and other details. I did say, but you seem to overlook it, so I’ll say again:
    Fault can be put on the doorstep of that somebody in PNCC who, instead of paying 5-cents on the dollar, argued (and won!!!!) before the PNCC board to pay 100-cents on the dollar ( with inflation escalation, on the debt CDCP-to-Marubeni now held by Radstock).

  13. Upn,

    Wa;a na ngang utang. Nabuhay lang ulit ang utang kasi binuhay nung 2000-2001.

    Tanong mo sa sarili mo – Kung meron tinitindigan ang marubeni ibebenta ba nila yun ng ganun ka mura? Ano sila tanga?

    Yun exmple mo sa tax case mo mali.

  14. manuelB: I could not see from the Carandang nor Inquirer entries where CDCP (nor PNCC) had asked a Philippine court to relieve them from the debt obligation via “statute-of-limitations” rule. No one did; the face-value of the debt had some weight. [In fact, the court rulings I’d seen were towards making payments.]
    Corporation bookeepers (in this case Marubeni bookkeepers) will carry the debt on the books because they don’t have signature authority to remove it. The ones with signature-authority inside Marubeni knew the debt was practically worthless, which is why the Radstock purchase of CDCP-debt-to-Marubeni penny-on-the-dollar makes sense.
    Then someone inside the PNCC boardroom actually presented a case to pay (which is okay because it clears the books) but he used as basis the face-value-CDCP-debt-to-Marubeni with inflation as opposed giving Radstock ten-to-1 or even fifteen-to-one return on their P100M-transaction. Never underestimate the foolishness of fools. Maybe he was an oversexed fool who liked Brit girls that Radstock provided, or maybe Radstock uncovered some dirty secrets and did some arm-twisting. But the PNCC board agreed to a lutong-makaw, which is insane!!!
    Was it Radstock? Was it a PNCC-board-of-director? Was it the PNCC chair? Was it some Magician working his magic and every one else were puppets?
    Odorous… but I have no idea who broke what law when.

  15. Sounds like a pure business to me. Radstock buying a worthless credit while at the same time assuming all the risk of collections for a possibility of profiting thereby. Whether they can realize the profit out of it depends on whether they can pull through all the legal maneuvers attached to collection. It’s a high-risk investment indeed, but high-profit as well.

    That the deal is prejudicial to the government is not an issue for Radstock. Naturally, protecting its investment and its 10000% prospective profits are its only concerns. Nothing more.

    Up to this point, it’s just business. Clean.

    But, if any crime is committed along the way, it is the government that should do its work. To this, the process of the recognition of the debt, and the subsequent compromise settlement, are the suspects.

    It’s not easy to point fingers. But I just hope the big gentleman and little mamita has no hands in all these maneuvering process. Else, it’s pigs doing monkey business.. again?!.

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