by LUZ RIMBAN

NOT FAR from an estero in Manila's crowded Chinatown district of Binondo stands a narrow, four-story building fronting an alley barely wide enough for a car to pass through. A shingle on the ground floor says it is the office of a recruitment agency called "Lakas Tao Consulting Services."

Records of the Securities and Exchange Commission (SEC) say this is the Lakas Tao building, and that on the third floor can be found the head office of the Binga Hydroelectric Plant, Inc, (BHEPI) which until four years ago held the $143-million contract to rehabilitate the Binga power plant in Benguet.

Employees at the ground floor office say BHEPI folded in 1998, soon after Fidel Ramos's term as president ended. Yet the National Power Corporation (Napocor) is now handing back the power plant to the same company that people say no longer exists.

This is only one of the many mysteries that surround the BHEPI, a company owned by businessman Catalino Tan. Apart from presiding over what appears to be a phantom firm, Tan also allegedly used a fictitious stockholder to wrest control of the management from the hands of Taiwanese investors.

Catalino Tan is listed in the SEC as having only two other companies aside from BHEPI: the garments firm Pearl Lady and the food company Shanghai Maling Corporation. Yet another mystery is how he and some Chinese investors managed to snag the Binga project over other contractors in the first place.

But while he had no previous experience in the power industry, Tan had — and has — formidable clout to back up his claim to Binga: personal ties with former President Ramos and now, President Arroyo, as well as connections elsewhere in the government.

The history of the Binga power plant rehabilitation is, in fact, a story of how Tan, godson of Ramos's father, Narciso, and an active member of Lakas, the dominant party in the ruling coalition, used those connections to bend government rules and to employ government machinery against opponents and rivals.

In 1998, however, tables were turned on Tan when people identified with Ramos's successor, President Joseph Estrada, wrested control of Binga from him. At the time, Tan was also deep in a dispute with the Napocor, which refused to pay him because it said he had failed to perform the work required at the plant.

Now that Ramos and Lakas again have considerable influence in government, Tan has retapped his personal and professional ties with those in power and is now poised to regain control over the Binga power plant.

Defending Tan in a telephone interview with the PCIJ, Presidential Adviser for Political Affairs and Lakas stalwart Joey Rufino remarked that people may think Tan is a "bad person" and that the contract "was given to him on a silver platter." But, he said, "it was worse during the time of Erap (Estrada). Tan was crying for two years. Kung malapit siya sa amin eh di kaagad nabalik na. (If he really were that close to us, then he would have had it back sooner)."

Still, if the rules were to be strictly followed, says construction magnate Felipe F. Cruz, his firm, FF Cruz and Sons, should now be managing and rehabilitating the Binga power plant. In letters to then President Joseph Estrada and later to President Arroyo, Cruz insisted that the Binga contract should have been awarded to him, as second lowest bidder for the contract, after Catalino Tan terminated his agreement with the Napocor in 1998. Cruz had also written both presidents to inform them that the original bidding for Binga was "very suspicious and anomalous."

It is of course no surprise for a rival firm to question how another company bagged a government contract. But interviews with Binga and Napocor insiders, as well corporate and official documents, all indicate that the Binga deal did get off to a questionable start.

In early 1993, Tan arranged a meeting in Malacañang between Ramos and a group of Chinese investors from the Chinese state-owned firm China Chang Jiang Energy Company (CCJEC). At that time, the Philippines was suffering from 12-hour brownouts, and Congress had not yet passed the law granting the president emergency powers to enter into contracts with independent power producers (IPPs).

Napocor officials who were present said Tan and Ramos wanted them to sign a contract right there and then for the rehabilitation of the Binga plant, with CCJEC as contractors. But the state power firm officials refused, since Napocor technical personnel had not yet reviewed the document.

To provide a blanket of legality over the procedures, Napocor decided to invite bidders, although the process was not formally called a bidding. Records show that a solicitation of project proposals was advertised on April 30, May 1 and 2, 1993, for a "canvass bidding" that was to be held on May 17, 1993.

The two-week time period given to prepare the bids was not enough, say Cruz and other people who studied the bidding procedures. "It's not easy to study a project and put up a bid," says a lawyer who is familiar with the case, adding that coming out with a proposal alone could cost millions of pesos. Cruz also recalls that given the short time frame, "it was indeed very difficult for serious proponents to make a viable estimate for such a big project."

The bidding was held on May 17, 1993, from 2:00 to 5:00 pm. According to Cruz, when the clock struck five, only three proponents - all local contractors - had been able to submit their bids. He says the Chinese arrived after 5:00 pm, yet their bids were entertained. Cruz says he found that suspicious since he had participated in previous biddings where the deadline was strictly kept.

The bids were supposedly opened in the absence of the bidders. The CCJEC offered the Napocor a price of $.0449 per kilowatt hour for the energy that Binga was to produce. FF Cruz's proposal was $.0480; Cruz was later to fume in a letter that the closeness of the Chinese bid to that of his company's was "statistically improbable if not impossible in a clean and formal international bidding."

Before anyone knew it, CCJEC was declared winner, and the government soon entered into a negotiated contract with it. In a memorandum to Ramos on May 28, 1993, then presidential legal counsel Antonio Carpio advised the president that he could grant the Napocor authority to enter into a negotiated contract for Binga, under Republic Act 7648 or the Electric Power Crisis Act, which Congress had passed just a month before. In the marginal notes appearing on the memo, Carpio wrote, "Sir, this is the first project to be negotiated under RA 7648." (underscoring Carpio's)

Other legal experts would not share Carpio's apparent excitement over the deal. One lawyer who studied the Binga case later lamented, "Is this the best we can do for Binga? Bring in a China Chang Jiang? Couldn't we have done better than this?" The question had to be asked because, as it would later turn out, the Napocor continued to pay the Chinese company even after it became obvious that it was not fulfilling the provisions of the contract, mainly to dredge the Binga reservoir.

On September 19, 1994, then Batangas congressman Hernando Perez, who is now the secretary of justice, delivered a privilege speech exposing how CCJEC "has been milking and milking the Filipino people." Perez cited how from August 12, 1993 to March 25, 1994 alone, the Napocor paid CCJEC P257 million in fees even as silt continued to collect in the Binga reservoir. Other records show that CCJEC collected a total of $24.89 million in net payments from August 1993 to August 1995.

Some of the Chinese officials of CCJEC would later be accused of dollar salting, charges that others involved in the Binga project say were trumped up to get them out of the way. Whether that was true or not became moot after the CCJEC's Chinese officials were deported. Before they left, however, they turned over their shares to a Taiwanese firm called Thunder International, which then became majority stockholder of the company.

Herman Ho was designated Thunder's representative. A Deed of Assigment dated May 20, 1995 showed that the other shares were transferred to Chan Bun Pen, president of Mindanao Shipbuilding Corporation, a Binga subcontractor, and to Jesse D. Alto, an accountant and supposedly the representative of Catalino Tan, whose name thus far had yet to appear in any of the documents.

Shortly after that, Ho would also find himself slapped with charges, this time from the Bureau of Immigration. One day in 1996, Ho landed at the Ninoy Aquino International Airport only to find himself barred from entry. Immigration officials said he did not have the necessary working permit and that he was blacklisted from entering the country. Yet someone privy to Ho's case says that save for a handwritten note from then Immigration Commissioner and former Lakas congressman Leandro Verceles, there is no record of any complaint against the Taiwanese.

All this time, CCJEC had a capitalization of only P13 million. In December 1996, the company informed the Securities and Exchange Commission it was changing its name to Binga Hydroelectric Plant, Inc. (BHEPI). A month later, it increased its capital to P375 million and asked the SEC to exempt it from registering the additional P371 million funds infused by new stockholders.

It was then that that Catalino Tan was elected company chair and president. The Taiwanese investors, who were eased of their directorships, asked the SEC to intervene, but the matter was left unresolved. Indeed, a petition for at least an SEC-supervised board meeting would not be entertained until after Ramos left office in 1998.

In the meantime, the Taiwanese watched as the renamed and reorganized company listed a certain Law Cho Shek as its majority stockholder. They took note that minutes of board meetings usually listed him as "absent" and that neither Tan nor his lawyers could produce any document identifying Law Cho Shek or stating how he bought into BHEPI.

This led the Taiwanese to suspect that Law Cho Shek did not exist at all, prompting Ho's lawyer Jose Bernas to file perjury and estafa charges against Tan's attorneys, Santiago Gabionza and Maria Rita Bonifacio.

Documents lodged with the SEC show that nobody had ever heard or seen Law Cho Shek. When the SEC later tried to subpoena him at his address, 616 Estraude St., Binondo, Manila, which also happened to be the office address of BHEPI, the summons was returned because no one knew who he was. The same thing happened with a justice department process server, who could not locate Law Cho Shek at that address. (Gabionza told the PCIJ to fax him the questions it wanted him to answer, but did not reply despite repeated follow-ups.)

The SEC finally acted on the BHEPI dispute during the administration of Joseph Estrada, whom the Taiwanese investors approached for help. But those involved say people close to Estrada saw the lucrative potential of the Binga plant, decided to take the contract for themselves.

On January 25, 1999, the SEC appointed a management committee to take over the Binga contract, while the ownership dispute was being decided. Named committee chair was Anthony Escolar who, his appointment papers showed, was "part of the Official List of Receivers" of the SEC.

Escolar, it turned out, was a godson of Estrada and close to his mistress, Guia Gomez. Escolar in turn named Roland Lautchang, an official of the Erap for President Movement, as a committee member. It was during this time that Estrada's son by Gomez, Joseph Victor 'JV' Ejercito, is said to have taken part in the Binga project through a company called the Asia Pacific Dredging Corporation. Ejercito's name is nowhere in the company's papers filed at the SEC. Napocor and Binga employees, however, say it was widely known among them that Asia Pacific, which got a contract to dredge the Binga reservoir — the same task that was supposed to have been done years before by the CCEJC/BHEPI — was Ejercito's.

Toward the end of the Estrada administration, the ownership dispute was finally resolved in Catalino Tan's favor. Tan, along with the Taiwanese investors and other stockholders signed a settlement agreement and agreed to let Tan collect fees from the Napocor. The fees would be collected once Tan reassumes control over Binga, and then shared with all those involved. The signing of the settlement agreement signaled the dissolution of the SEC-appointed management committee, as well as the withdrawal of all pending cases Tan and his co-investors filed against each other, including the perjury and estafa lawsuit against Tan's lawyers Gabionza and Bonifacio.

Tan has also promised to pay the salary and benefit claims of some 120 former Napocor employees running the Binga plant. These employees, who had been absorbed by the CCJEC and were left hanging in the course of the corporate dispute, had put up their own company, the Itogon Power Generation, Inc., which then filed its own claims before the state firm. Tan has said he will pay the employees once he gets Binga back.

A nine-man technical working group at the Napocor, however, had concluded in May 2000 that Tan was not qualified to do the job stipulated in the original contract. It had thus recommended that should the ownership dispute be settled in Tan's favor, he should "look for new credible and experienced partners to do the job in accordance to (sic) acceptable standards."

Then this July, a government inter-agency review committee that studied 35 contracts entered into by the Napocor with IPPs declared the Binga deal as among the most onerous, having legal, technical and financial infirmities. The committee noted that among the problems at Binga were BHEPI's "defective meters" that led to overstated fees, as well as Napocor's claims of damages amounting to $4.402 million because of the delay in the operation of the plant and the non-completion of the rehabilitation work at the reservoir.

Once more though, Tan's sterling connections have enabled him hurdle such obstacles and make a comeback at Binga. Joey Rufino said Tan now has "an American partner to join him. I don't know the name of the company but these guys are well-connected in Washington."