The PCIJ’s latest report is a follow up to our report last week exposing the $75,000-monthly contract entered into by the Philippine government with the US lobby firm, Venable LLP. As we wrote in that report, that contract was intended mainly to get US support for Charter-change initiatives in the Philippines.
Since the report’s publication, the government has announced that the Venable contract will be cancelled. But, as this follow-up story points out, the contract provisions require a three-month notice for cancellation, during which period all fees must be paid. In addition, it stipulated payment of a three-month advance.
In this report, Malou Mangahas searched disclosure reports filed by US lobby firms to show that since 2001, the Arroyo government has spent at least $3.7 million or P208 million in eight multiple, loosely monitored, and largely secret consultancy contracts for eight US-based lobby and law firms. Four of these contracts are still active. The biggest among them involve the PR firm Burson-Marsteller which got a $1-million deal to provide “global communications support to assist in the promotion of international investor confidence…support for media relations, economic communications materials development and distribution, communications training, and ongoing provision of senior counsel.”
The last item simply means an image makeover for President Arroyo. Perhaps the most legitimate contract was that signed earlier this year by the Office of the Solicitor General to “represent the country in the arbitration case initiated by Piatco regarding claims related to the development of the Manila Airport.”
The other contracts are too general and too broadly defined and involve largely image-making for either the President or the country. A table listing all the contracts is included in this story.
SINCE it assumed office in 2001, the government of President Gloria Macapagal Arroyo has spent at least $3.7 million or P208 million in eight multiple, loosely monitored, and largely secret consultancy contracts for eight US-based lobby and law firms.
The controversial agreement with the law firm Venable LLP is only the latest contract that Mrs. Arroyo had authorized her Cabinet deputies to sign in the name of the Government of the Republic of the Philippines.
The $75,000-monthly deal with Venable, which involves securing donations and US Congress earmarks for her Charter change initiative, will remain in force at least until the end of 2005, despite official pronouncements that it has been revoked.
This is because the Venable contract specifies that the agreement may be cancelled only by giving 90 days notice and only after “all fees and expenses incurred through the date of the termination period have been paid.” The contract, which was signed in July, also committed the government to pay a three-month advance.
Apart from Venable, three other consulting firms have “active status” contracts and continue to receive huge dollar fees from the government. While there is nothing wrong with engaging US firms to promote Philippine interests in the United States, the contracts have been questioned because of the secrecy with which they had been signed and the government’s refusal to disclose exactly who is footing the bill for these services. Because of the secrecy, it is not possible to check whether the funds used for these contracts are well spent.
US federal laws require lobby firms to file disclosure and financial reports on their engagement as agents of foreign principals, but in the absence of similar laws in the Philippines, the same contracts remain closely guarded secrets of Malacanang.
Since the Marcos era, all Philippine presidents have hired US lobbyists. US government records show that the government of Joseph Estrada paid $1.3 million, or P72.8 million, for four lobbying contracts it signed with as many consultants from July 1999 to December 2000.
Today Palace officials insist that the contracts are paid for by businessmen. But budget sources said confidential and intelligence expense accounts under control of the Office of the President are being used to bankroll these agreements. Confidential and intelligence expenses are not subject to government audit. All the President has to do is to write a confidential letter to the chairman of the Commission on Audit listing down the expenses incurred under these accounts. No receipts are needed.
Apart from Venable, the most expensive of the three other “active status” consultancy contracts that the Arroyo government continues to pay is the $1-million per year public-relations deal with with Burson-Marsteller, “the world’s fifth largest PR firm.”
The firm was hired to render “global communications support to assist in the promotion of international investor confidence…support for media relations, economic communications materials development and distribution, communications training, and ongoing provision of senior counsel.”
The last item involves an “image makeover” of Mrs Arroyo, who has been described as charisma-challenged. Richard Mintz, who managed the US Department of Transportation’s media office under former President Bill Clinton, and served as staff director for Sen. Hillary Clinton during the 1992 campaign, heads Burson-Marsteller’s global PR advocacy.
Burson-Marsteller signed its first 12-month contract with the Arroyo government in July 2001 ($800,000 retainer fees, plus $200,000 in “out-of-pocket expenses” per year) but remains on government payroll to this day. In its latest financial report, Burson-Marsteller said it received from the Philippine government $ 447,494.64 in fees and expenses from May 1 to Oct. 31, 2004.
If Burson-Marsteller seems partial to Democrats in the US, another contract was awarded to a lobby firm with Republican leanings — Bannerman & Associates Inc.
The Philippine government, through its Embassy in Washington, hired Bannerman for $216,000 a year to “contact members of Congress and the Executive Branch to determine support for any legislation that affects the (sic) US-Philippine relationship” and “work to create a supportive political environment for these issues through the general promotion of the US-Philippine relationship.”
M. Graeme Bannerman, who served as staff director of the Senate Foreign Relations Committee and was member of the Bureau of Intelligence and Research and of the Policy Planning Staff at the State Department, heads the firm.
In the six-month period ending April 28, 2005, Bannerman reported receiving $86,981 from the Philippine government.
Yet another contract involves getting legal advice from White & Case LLP, a big and old US law firm with associates across the world and clients that include private companies, financial institutions and governments.
| LOBBY/LAW FIRM
|TASKS/TERMS OF CONTRACT OF LOBBY/LAW FIRM
|Bannerman and Associates, Inc.
|M. Graeme Bannerman; Government of the Philippines, represented by the Philippine Embassy in Washington
|$80,000 per year plus $16,000 in expenses incurred in Washington, DC and $16,000 in travel expenses outside the US; In its latest disclosure statement for the six-month period ending April 28, 2005, firm reported receiving $86,981 form the Philippine government
|July 1, 2001-June 30, 2002; RENEWED, ONGOING CONTRACT
|“contact members of Congress and the Executive Branch to determine support for any legislation that affects the (sic) US-Philippine relationship” and “work to create a supportive political environment for these issues through the general promotion of the US-Philippine relationship”
|Ian Mccabe, managing director of Burson-Marsteller; Government of the Republic of the Philippines, signed by Exec. Sec. Alberto Romulo and represented by Ariel Abadilla, Charges d’ Affaires, Philippine Embassy in Washington
|$800,000 per year plus “out-of-pocket expenses” estimated at $200,000 per year; contract renewed; latest financial disclosure reports showed Burson Marsteller received from Philippine government $447,494.64 in fees and expenses for the six-month period ending Oct. 31, 2004
|July 1, 2001 – June 30, 2002; RENEWED. ONGOING CONTRACT
|“provide global communications support to assist in the promotion of international investor confidence, enhance the sovereign credit rating and strengthen perceptions of the international business community that the Philippines is an attractive location for foreign direct investments. Activities are being carried out in the Philippines, elsewhere in the Asia-Pacific region, North America and Europe. They include support for media relations, economic communications materials development and distribution, communications training, and ongoing provision of senior counsel”
|White & Case LLP
|Karen M. Asner, Partner, for White & Case; Republic of the Philippines – Office of the Solicitor General
|Billed by the hour, professional fee rates not disclosed
|Contract disclosed to US Department of Justice April 24, 2005 ONGOING CONTRACT
|“represent the Republic of the Philippines in an ice arbitration initiated by Piatco and in an ICSID arbitration initiated by Fraport arising from claims related to the development of the Manila Airport” and “render legal advise and analysis with respect to the representation of the government of the Philippines in this arbitration”
|James Pitts, James George Jastra for Venable; Norberto Gonzales for Government of the Republic of the Philippines, designated representative of President Gloria Macapagal Arroyo
|$900,000 for 12 months, plus unlimited expenses for “travel, phone, fax, copying, etc.” and “professional fees” of up to $720 per hour for senior associates
|July 25, 2005 – July 24, 2006; 90-day notice required for termination of contract in writing; ONGOING CONTRACT
|“secure grants and (US) congressional earmarks” for her initiative to “reshape the form of government…into a parliamentary federal system;” and 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 credit under the US Defense Loan Guarantee program, and “achieve a similar upgrade program” for the Philippine National Police
|Maria Luisa M. Haley (MH International)
|Maria Luisa Mabilangan Haley; signed by Executive Secretary Alberto Romulo with Ambassador Ariel Abadilla, Philippine Embassy in Washington listed as “foreign principal”
|$180,000 for 12 months, plus $36,000 in “reasonable business expenses, including business class air travel” of $36,000 per year
|July 1, 2001 – June 30, 2002
INDEMNIFICATION CLAUSE: “If Consultant is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter ‘proceeding’) by reason of the fact that she, or a person of whom she is the legal representative of, or was acting within the scope of her employment for Client, whether the basis of such proceedings is alleged action or inaction in an official capacity or in any other capacity while so serving, Consultant shall be indemnified and held harmless by Client to the fullest extent permitted by law, against all costs, charges, expenses, liabilities and losses (including attorneys’ fees, judgments, fines or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by her in connection therewith, and such indemnification shall continue, even though she has ceased to serve in such capacity.”
|C&M (Crowell & Moring) International. Ltd
|Doral S. Cooper, President; Government of the Republic of the Philippines represented by Executive Secretary Alberto G. Romulo
|$360,000 a year in retainer’s fee; plus $72,000 in expenses (“travel, fax, phone, postage, word processing, copying and administrative overtime”
|July 1, 2001 -June 30, 2002
|“advise and consult on matters related to trade and economic interests of Philippines, including bilateral, regional and multilateral issues” and “activities may include contacting (US) Administration and Congress”
|Rhoads-Weber-Shandwick Government Relations (an affiliate of BSMG Worldwide)
|Barry Rhoades, and then defense Secretary Angelo Reyes, according to published reports
|$240,000 a year, according to O’Dwyer’s PR Daily database on lobbyists
|May 2, 2002- 2003
|“execute effectively a government relations service and public affairs support program in the United States”
|Patton Boggs, LLP
|Philip S. Kaplan; Exec. Sec. Ronaldo Zamora for Government of the Philippines
|$384,000 per year, including “all professional fees, project-related expenses and administrative costs”
|July 1, 2000 – June 30, 2001, Renewed Contract carried on from Estrada Administration; Zamora said contract Ramos Administration had hired Patton Boggs “four to five years earlier.”
|“assist in contacting major private US business and financial institutions for the purpose of facilitating investments in the Philippines” and “assist in connection with US-Philippine relations”
The agreement with White & Case was signed for the government on April 24, 2005 by the Office of the Solicitor-General to “represent the Republic of the Philippines in an ice arbitration initiated by Piatco and in an ICSID arbitration initiated by Fraport arising from claims related to the development of the Manila Airport.”
For this job, White & Case said it would bill the Philippine government “by the hour” but did not specify its professional fee rates.
Apart from these four ongoing contracts, the Arroyo administration had also entered into four other agreements, variably called “engagement letter” or “letter of agreement” or “retainer agreement” or “consulting agreement.”
The first of these consummated deals was one inherited from the Estrada administration with Patton Boggs LLP, that boasts of “a reputation for cutting-edge advocacy by working closely with Congress and regulatory agencies in Washington, litigating in courts across the country, and negotiating business transactions around the world” for “200 international clients from over 70 countries.”
For its Philippine contract, Patton Boggs hired an old Philippine hand, Ambassador Philip S. Kaplan, deputy chief of mission of the US embassy in Manila in 1985-87.
San Juan Rep. Ronaldo Zamora, Estrada’s executive secretary who signed the contract with Patton Boggs for the period July 1, 2000- June 30, 2001, said the Estrada administration merely inherited the consulting contract from the government of Fidel V. Ramos, which the law firm had supposedly served earlier “for about four to five years.”
The Patton Boggs contract is most distinguished for its brevity — its text is all of four paragraphs, including one where Kaplan instructed Zamora to remit consultancy fees to the firm’s Riggs Bank account.
But by far the most curious and clearly onerous of the concluded contracts is the first that Mrs. Arroyo’s government signed in July 2001, or barely five months after she took power.
This contract was awarded to MH International, a small consulting firm with no track record that is owned by Maria Luisa Mabilangan Haley, a Filipino-American employee and Export-Import Bank board director-designate of Bill Clinton. Haley and her husband John had been implicated in alleged conduit contributions by the Lippo Group of Indonesia to the Clinton re-election campaign.
Haley’s contract with the Philippine government that was signed by Foreign Affairs Secretary Alberto Romulo, at the time Arroyo’s executive secretary, required her to serve as “an independent contractor to render advisory services on a non-exclusive basis.”
To do this, she informed the US justice department she would “coordinate services through vocal, written, or electronic contact. Temporary travel may be required” and “advise or coordinate services for the Republic of the Philippines as assigned.”
Even as her reporting duties are not spelled out, Haley was awarded $180,000 in retainer fee, plus $36,000 in “reasonable business expenses, including business class air travel” per year, for a monthly take of $18,000 or P1 million.
In addition, she secured an “indemnification” clause in her contract that obliged the government to pay her all costs, charges and liabilities in case she is involved in any legal action arising from the contract.
For all the millions of dollars that had been spent on foreign consultancy and lobbying firms, government officials have yet to agree on firm quantitative or qualitative measures to assess whether the country is getting its money’s worth.
| LOBBY/LAW FIRM
|TASKS/TERMS OF CONTRACT OF LOBBY/LAW FIRM
|Patton Boggs LLP
|Government of the Republic of the Philippines
|$834,166.56 for six-month period ending December 3, 2000
|July 1999-July 2000; July 2000-July 2001
|“advised the foreign principal regarding the attraction and facilitation of U.S. investment, which included analysis of U.S. corporations potentially interested in the Philippine market, as well as meetings with Philippine officials, U.S. Government officials, and both Philippine and U.S. business leaders” and “assisted the foreign principal concerning U.S. – Philippine relations, including defense cooperation, and an official visit by the President to the United States”
|Government of the Republic of the Philippines
|$291,666.65 for six-month period ending July 31,2000
|“communicated with U.S. media and private sector officials to arrange meetings/interviews for Philippine Government officials. The registrant prepared and distributed press releases to U.S. journalists”
|Philippine Long Distance Telephone Co.
|$195,000 for six-month period ending December 1, 2000
|“provided support to the foreign principal in organizing aspects of the visit of President Joseph Estrada …to the United States. The registrant provided communications support, including preparation and distribution of informational materials, media relations, event management and strategic counsel”
|Government of the Philippines
|$49,226.44 for six-month period ending August 9, 2000
|“consulted with and provided the foreign principal with an analysis of the Philippine textile and apparel trade with the United States. The registrant also advised the principal on bilateral textile and apparel agreement between the United States and the Philippines and provided statistical and economic material”
|Troutman Sanders, LLP
|Sergio Osmena III, Philippine Senate
|Activities: None Reported; Finances: None Reported
After all, despite his array of consultants, the economy floundered and Estrada was ousted. Over the last four years, Arroyo’s economic team has largely failed to shore up the level of direct or portfolio investments. The situation has started to turn bright only this year.
“You have to make subjective judgment on whether the figures tell the real story or not, you cannot be objective,” said Zamora
“The problem is for everything good that happens in the country, the consultants will claim a part of. For everything bad, they would say they have no role in it,” he added.
To be sure, the hiring of consultants reflects in part the lack of confidence in, perhaps even respect for the Philippines’ foreign service corps. The country’s diplomatic contingent in North America is the largest posting of the foreign affairs department, but it is also there where Arroyo has hired a bevy of consultants.
In Zamora’s mind, this is a waste of money: “Because of consultants, you get a lot of free time if you are in mission. Many ambassadors could afford not to stay in the mission, travel abroad, work out personal business deals.” Consultants, he added, tend to “remove a lot of load off our envoys.”
The difference, however, is that while foreign consultants could claim up to millions in fees and reimburse expenses sans ceilings, Filipinos serving in the foreign service could not.
At the very least, Zamora reckons that consultants like Philip Kaplan of Patton Boggs offered President Estrada great company. “Kaplan flew three or four times a year to the Philippines when he was our consultant.”
Once in Manila, Kaplan and his wife Barbara would hie off promptly to Malacañang for dinner meetings with Estrada, First Lady Luisa “Loi” Ejercito.
In the state dining room through the night, over good food and good wine, the consultant briefed the President on the latest grist coming out of “the Washington gossip line.”