Despite hard times, Arroyo hires pricy foreign consultants for Charter Change

The PCIJ’s latest story, a one-part report by Malou Mangahas, a member of the PCIJ board of editors, uncovers a million-dollar contract signed by the Arroyo government to retain the services of an American law firm to lobby for charter change in the U.S. government.

The contract was signed by National Security Adviser Norberto Gonzales Jr. on July 25, the same day that Mrs. Arroyo delivered her State of the Nation Address and announced that “it is time to start the great debate on charter change.”

The PCIJ has copies of the contract and other disclosure documents filed with the U.S. Department of Justice by Venable LLP, the U.S. law firm that will get paid $75,000 per month plus expenses for one year.

We got in touch with Venable, who confirmed the contract’s existence but declined to give details. None of the government officials we talked to, however, have any knowledge of the contract, which was apparently made in great haste and secrecy.

ON THE same day that she delivered her State of the Nation Address and summoned the nation to start “the great debate” on charter change, President Arroyo awarded a million-dollar lobbying consultancy contract to an American law firm to “secure grants and (US) congressional earmarks” for her initiative to “reshape the form of government…into a parliamentary federal system.”

On July 25, 2005, Mrs. Arroyo hired the lobbying and representation services of US-based Venable LLP, one of America’s top 100 law firms, for a substantial sum of $75,000 a month, or $900,000 (P50.4 million) for 12 months.

The amount excludes “costs for travel, telephone, fax, copying, etc.” and “professional services” of up to $720 per hour for Venable’s senior associates. These expenses, for which no ceilings were mentioned, could double the contract cost.

The contract was signed at a time when the government is reeling from a gaping budget deficit and calling for belt-tightening measures.

Former President Fidel V. Ramos, who inspired Mrs. Arroyo’s charter change initiative on July 8, the day the Hyatt 10 group of secretaries bolted the Cabinet, thinks the idea of getting foreign consultants is not good. “There is no need to spend government money for that purpose because we must do it all ourselves and persuade ourselves genuinely and truly without foreign participation, ” he said.

The contract does not state why US support for constitutional change is needed at all. Nor does it say what specific charter amendments the President needs US support for. The contract also includes lobbying for loans and grants from the US government, especially assistance to upgrade the capabilities of the Philippine military and police.

The US law firm confirmed the contract exists but none of the Philippine officials contacted for this report, including Executive Secretary Eduardo Ermita, whose job is to scrutinize contracts authorized by the President, know about it.

In disclosure documents it filed with the US Department of Justice, Venable listed “Maria Gloria Macapagal-Arroyo” and the “Republic of the Philippines” as “the client” that contracted its services to “represent the interests of the Philippines in the United States.” The PCIJ has copies of the contract and other disclosure papers submitted by Venable to U.S. authorities.

National Security Adviser Norberto Gonzales Jr. signed the three-page agreement as “the authorized representative of the President of the Philippines,” while lawyers James T. Pitts and James George Jatras signed for Venable. Pitts is a transport sector expert, while Jatras’ experience is in homeland security and Eastern Europe affairs.

The contract was apparently done in precipitate haste and shrouded in secrecy. Apart from Gonzales and Mrs Arroyo, senior executive officials and legislators did not know about it.

Two months after the contract’s signing, these officials have not yet been informed of its existence by either Mrs Arroyo or Gonzales.

The contract does not specify which government agency is footing Venable’s bill. For sure, the National Security Council that Gonzales heads could not afford it. The NSC’s entire budget for 2005 is just P49 million. The agency’s approved confidential, intelligence fund is a measly P2 million.

The contract is a big expense item given Mrs Arroyo’s fresh calls for citizens and civil servants to tighten their belts amid surging oil prices. She said she herself has had to make do with using her hair dryer just once a day to save on electricity.

Why Gonzales, and not the President or a full-fledged Cabinet member, signed the contract with Venable is a big question. Venable’s contract lists the NSC office on V. Luna in Diliman, Quezon City, as the address of its “foreign principal” — “The Republic of the Philippines.”

Gonzales could not be reached for comment, even via his mobile phone. He flew last week to an undisclosed country in the Middle East, and for days now has shut off his mobile phone. Even his staff could not contact him. He is expected to return to Manila Tuesday night.

In phone calls and a questionnaire sent by email, Venable lawyers Pitts and Jastra were not forthcoming either.

In a joint mail, they stated: “Thank you for your inquiry. As we have indicated to you by telephone, for reasons of attorney-client privilege, we must decline to answer your questions regarding our representation of the Government of the Republic of the Philippines in its relationship with the United States.”

“We suggest that any other inquiries be directed to the appropriate authorities of the Government of the Philippines,” they added.

As national security adviser, Gonzales also serves as director-general of the National Intelligence Coordinating Agency (NICA). Before the NSC, he was Presidential Adviser for Special Concerns from February 2001 up to January 2004. He chairs the Partido Demokratiko Sosyalista ng Pilipinas, and Kaunlaran ng Magsasaka Inc.

A policy review and staff unit under the Office of the President, the NSC’s mandate in law is to coordinate “the formulation of policies relating to or with implications on the national security.” Whether such a mandate includes contracting a US law firm to lobby for charter change is questionable.

The NSC has no offices or personnel in the US that could enable it to monitor Venable’s work for the Philippine government. It has about 80 personnel, all based in the country.

The scant details of Venable’s engagement with the Philippine government come from a copy of the contract it appended to disclosure documents it filed in compliance with the US Foreign Agents Registration Act or FARA.

Apart from Gonzales, few knew about Mrs. Arroyo’s deal with Venable.

Those kept in the dark about the contract included the President’s legal counsel Merceditas Gutierrez, the most senior foreign affairs officials, the Philippine ambassador to Washington, and even Gonzales’s deputies and staff in the NSC.

Ermita was at first incredulous, insisting that all contracts authorized by the President should pass through him, as a matter of course. Told that Venable lawyers had confirmed the authenticity of the contract, Ermita said in jest, “Tatanungin ko si Bert (Gonzales). Sasabihin ko, ikaw pala may tinatago ka, ha!” (I will ask Bert. I will tell him, so you are hiding things from me now.)

Even without reading the contract, Ermita explains that it’s normal for governments to seek the assistance of foreign experts, given that Mrs Arroyo has declared charter change as one of her priorities.

All documents and issuances for signing or release by the President must pass the legal scrutiny of Gutierrez. Venable’s contract was a singular exception. On her request, PCIJ faxed Gutierrez a copy of the contract that she says she knew nothing about.

“We don’t know anything, we have no participation in that contract,” says Foreign Affairs Undersecretary for Policy Franklin Ebdalin. DFA Spokesman Gilbert Asuque adds, “I’ve asked those in charge in the DFA and our records show we have no information about that contract.”

Another official in the DFA’s Office of American Affairs says even the Philippine ambassador to Washington DC is clearly “out of the loop.” Not a single piece of paper has moved from Washington advising head office that such a contract existed, the source says.

Retired General Victor Mayo, NICA deputy-general who keeps house at the NSC during Gonzales’s occasional trips in-country and overseas, has not read nor seen the contract with Venable.

“Nobody in the NSC could give you answers. The DG (director-general) could have done it without us,” Mayo explains.

Gonzales “sometimes does things by himself, nagugulat na lang kami (we are just taken by surprise).”

Mayo recalls, however, that sometime in July, “he asked me in a very casual tone if there is anything wrong with him signing up a PR firm, and I told him maybe none.”

“I did not see anything wrong with it but after that, I was not privy to what he signed, when he signed,” Mayo adds.

This is not the first time that Mrs Arroyo acquired the services of expensive foreign consultants.

Since 2002, Burson-Marsteller, a leading global communications firm with expertise in crisis-issues-reputation management and media relations, has helped Malacañang’s public-relations team spruce up Mrs. Arroyo’s public image.

Secretary Rigoberto Tiglao, Presidential Management Staff chief, had acknowledged that Burson-Marsteller’s 12-month contract fee was $800,000, an amount supposedly paid by pro-Arroyo businessmen.

But the contract Mrs Arroyo assigned to Venable goes beyond personal makeover. On top of Venable’s multiple tasks for the Philippine government is “securing grants and congressional earmarks for charter change,” even before the President could spell out what provisions she wants amended.

In addition, under the contract Venable is also expected to lobby for and represent the Arroyo administration in facilitating the Philippines re-inclusion in the credit facilities of the Overseas Private Investment Corporation, secure a Philippine credit ratings upgrade in the US Eximbank, “create a capability enhancement program for the Armed Forces” and acquire up to $800 million in credit under the US Defense Loan Guarantee program, and “achieve a similar upgrade program” for the Philippine National Police.

But before Venable could do this, Mrs Arroyo has to deal with both critics and supporters back home.

Opposition Sen. Sergio Osmeña III deems the contract with Venable flawed for various reasons — “lack of transparency” in the negotiations, “lack of due diligence” in getting the best value for “an unauthorized expenditure,” and the questionable capability NSC’s Gonzales to monitor Venable’s compliance with the contract’s provisions.

“Congress has not appropriated funds for this,” Osmeña avers. The secrecy surrounding the contract’s signing could not be justified because, “charter change does not fall under national security.”

In Osmeña’s mind, the biggest irony of all is, “the American people know about it but the Filipino people who are paying do not.” — with additional reporting by Sandra Aguinaldo, GMA 7