by MALOU C. MANGAHAS

CORRUPTED TO the core, and entirely, by a “cartel” of kickback-takers with support from the highest levels of the Philippine government.

In gist, this is the damning conclusion of the World Bank's anti-corruption unit, the powerful and dreaded Department of Institutional Integrity (INT) regarding the Bank-funded National Road Improvement and Management Project-1 (NRIMP-1).

According to the INT, “the entire NRIMP-1 Project has been corrupted,” and had put “at least $30-45 million of the entire $150-million loan at risk,” or lost to “a cartel” of contractors, bureaucrats, politicians. Two witnesses said bribes were also “shared” with “relevant local media and nongovernment organizations...to avoid bad publicity.”

	EXCLUSIVE THE CONFIDENTIAL WITNESSES WHAT THE WITNESSES SAID

The cartel has been “institutionalized and has operated with impunity for at least a decade, possibly longer,” on account of the “systemic corruption and bid rigging” in the Philippine public works sector.

Even worse, “evidence suggests (that) the cartel may enjoy support at the highest levels of the Government of the Philippines, including several officials of the DPWH (Department of Public Works and Highways) and even reaching the husband of the President (Gloria Macapagal Arroyo) herself.”

“Ultimately,” said the INT, “the cartel harmed development itself — NRIMP funds were not disbursed because of the fraud and corruption, and the roads were not rehabilitated with the development funds allocated to this purpose.”

60 WITNESSES, PILES OF DOCS
The INT said that its investigation — which eventually implicated 16 individuals and had the unit’s acting director Johannes Zutt recommending sanctions against 17 companies — involved 60 separate witness interviews and the evaluation of hundreds of documents.

“Despite fears that they risked their physical and economic well-being,” the INT said, “over a dozen witnesses confirmed the existence of the cartel and provided details on its practices.”

By the INT's reckoning, “a syndicate made up of contractors and corrupt officials in the DPWH had organized and had been operating a cartel to control road projects at least as early as 1998.”

But “Filipino politicians later took a managing role in the organization,” while DPWH officials “arranged for contracts to be awarded to particular contractors in exchange for bribes and kickbacks,” said the INT.

With the cartel's operation, it continued, “the entire system operated (and may continue to operate, with respect to other contracts...) under 'a gentlemen's agreement,' with implicit understanding that those who violate the agreement will be denied the prospect of winning future contracts.”

The cartel provided “the illusion of competition — the appearance of a free market (that) was entirely simulated,” the INT said.

According to the INT report signed by Zutt, “the evidence is sufficient for a determination that it is more likely than not that the respondents, with the active cooperation of numerous officials of the Government of the Philippines, participated in an institutionalized cartel replete with collusive tendering, bid rigging, price fixing, and the routine payment of bribes and kickbacks.”

In the 260-page report on the INT's findings dated March 20, 2008, Zutt also recommended sanctions against a Filipino contractor and 17 construction companies that joined the three rounds of project biddings.

(A separate 230-page Part II of the INT report enrolls the “Record of Interviews” that the investigators conducted with 54 named witnesses from April 2003 to November 2006, in the Philippines, Japan and South Korea.)

'AFFIRMATIVE DECEPTION'
Thirteen of the 17 firms were put under the category of respondents who “either refused to cooperate with the Bank's investigation or affirmatively misled the INT.”

Such “affirmative deception” of the Bank and “obstruction of its investigative mission should be an a priori disqualifying circumstance from doing future business with the Bank.”