The sweetheart deal that turned sour

Seven years have gone by since I exposed the anomalies in the Iloilo Convention Center, and despite efforts of Senate Minority Leader Franklin M. Drilon to bury the issues, the truth simply cannot stay hidden. It must be told, and retold, and retold. Drilon has used everything in his power to destroy my credibility and keep his corruption below the radar screen of the Duterte administration. And he wants me to go to jail for daring expose the ugly truth about his projects, especially the Iloilo Convention Center.

The time is ripe to bring back the issues to the center stage. Drilon has been attacking the Duterte administration for “planned plunder” in the procurement of vital equipment and supplies to combat the Covid 19 pandemic since last year. The allegations are shallow, bereft of evidence and anchored only on a desire to demolish the image of President Rodrigo Roa Duterte. Drilon is a great pretender. He talks as if his own record is spotlessly clean. In truth, his corruption is beyond compare.

Without a doubt, the ICC project is the single biggest act of plunder committed by the Aquino administration. It was funded from the Disbursement Acceleration Program (DAP) which was the brainchild of Drilon and then Budget Secretary Butch Abad. In fairness to the late President Aquino, he didn’t know Drilon and Abad were taking advantage of his feeble mind which was incapable of comprehending the gargantuan scheme to rape and plunder the national treasury.

The corruption in the ICC took place in stages. At each stage, numerous violations of the law were committed. Such was the rapacity of Drilon that he wasn’t satisfied with cheating the Filipino people only once, but at least four times. Each segment is enough to send him to eternity in jail.

Let me unravel these anomalies one by one.

The Sweetheart Deal With Megaworld

As the chief architect of the DAP, Drilon suddenly had a bottomless ATM machine from which to draw public funds. The DAP was already being challenged before the Supreme Court, and Drilon found himself in a race to look for projects into which to funnel money, with an eye to raking in tons and tons in kickbacks.

He had started with the Benigno Aquino, Jr. Avenue (known locally as the “Diversion Road”) and the Esplanade into which he earmarked more than a billion pesos. DAP virtually gave him a blank check; he had the power to allocate fabulous amounts of money for pet projects.

His search for more projects took him to the area of tourism. Local officials suggested the construction of a convention center. As it turned out, the Megaworld Corporation was developing the Iloilo Business Park out of the 72 hectares of land that used to be the Iloilo Airport. With the transfer of the airport to its present site in Cabatuan, Iloilo, the government put the property up for sale through public bidding. Megaworld won it with a bid of P1.2 billion.

Drilon saw that part of the development were two five-star hotels along the main avenue. Between these hotels that were under construction was a 1.7-hectare property that was clearly earmarked as site for a convention center. Megaworld’s timetable had put the convention center’s construction on the backburner; it wanted to develop the market for meetings, incentives, conferences and exhibitions (MICE).

A lightbulb popped inside Drilon’s head: Why not get Megaworld to put the convention center to the front of its timetable? It would definitely look good for Iloilo to have its own convention center. It would complement the massive infrastructure building program that was underway to transform the landscape of Iloilo City. It would give Drilon the show window he needed to project his image.

Not too many people knew that Drilon had ambitions to become President. In fact, the DAP was his slush fund to build a campaign warchest for a future presidential bid. And the development of Iloilo City was to be his propaganda vehicle as a man of vision and action.

With this in mind, Drilon approached Andrew Tan, chief executive officer of Megaworld, and laid down a proposal that was too good to turn down.

Iloilo needed a convention center, Drilon told Tan. The government is willing to bankroll its construction on that 1.7-hectare lot between Richmonde Hotel and Courtyard by Marriott. But the law requires that any infrastructure project on which public funds can be spent need to be owned by the government. Would Megaworld be willing to donate that property? Before Tan could blink, Drilon followed up with a sweetener: Once the ICC is completed in accordance with Megaworld’s own architectural design, the facility would be given back to the developer as operator under a lease agreement. Megaworld was going to have its cake and eat it, too.

Deed of Donation

At once, Megaworld got its architect, W. Coscolluela and Associates, to prepare the plans for the facility. This world-famous architectural firm made a rough estimate of P200 million as the funding requirement for the ICC construction and site development. This figure was incorporated in the Deed of Donation as one of the obligations imposed on the Department of Tourism as donee — earmark P200 million to finance the project. In addition to clearly stating the financial requirement for the project, the Deed of Donation also provided for the engagement of a private company to operate and manage the ICC. This was supposed to be the icing on the cake.

The Deed of Donation was signed on November 13, 2012 in what was hailed as a historic public-private partnership to push the economic growth of Iloilo City.

Unknown to Megaworld, the ICC was just a legal cover for the rechanneling of public funds into private pockets. By itself, the donation was littered with violations of law. Among these are:

  • The donation violated RA 8974 (for acquisition of right-of-way from private owners or donation of real estate as site for government projects). This law states that the donation must be simple and unconditional. The late Ramon Jimenez, as Secretary of Tourism at the time, usurped his authority. The deed of donation was null and void.
  • The conditions that were contained in the Deed of Donation were the following:
    • That the government allocate a specific amount of money (200 million pesos) to finance the construction of the convention center;
    • That the government adopt the architectural design of Megaworld’s architect for the convention center to conform to the over-all development plans of the Iloilo Business Park; and
    • That the government, upon completion of the project, would turn over its operation and management to a private company under a Lease-Operate-Manage (LOM) contract.
  • A careful examination of the deed of donation would reveal that the undertaking was a joint venture between DOT and Megaworld. NEDA guidelines require joint ventures to undergo a competitive process in the selection of the private sector partner. Before the government can allocate funds for such undertaking, the project proposal must undergo scrutiny by the Investment Coordination Committee (ICC) of the National Economic Development Authority (NEDA). Short-cuts that are fatal to the whole project were taken because Drilon was in such a hurry. This violated Executive Order No. 230, series of 1987.

Unwarranted benefit or undue advantage in violation of RA 3019

In this donation stage of the ICC, Drilon and the public officials who were involved are liable for violation of RA 3019, or the Anti-Graft and Corrupt Practices Act, particularly Section 3 (e) for giving unwarranted benefits or advantage to Megaworld. Without a doubt, the construction of a convention center to be situated between its two hotels was in the over-all development plan of Megaworld. The very configuration of the lot makes it obvious. Hence, by allocating public funds for the construction of the ICC, Drilon and his cohorts gave Megaworld’s business as property developer an unfair benefit or advantage.

Conversely, this act also caused undue injury to the government which is punished in the same section of the anti-graft law because it was done in blatant violation of the law

How the cake turned sour

Fast forward to 2014. Even before the construction of the ICC was finished, the Tourism Infrastructure and Enterprise Zone Authority (TIEZA), an attached agency of the DOT, advertised its search of a private sector partner to operate and manage the facility as set forth in the Deed of Donation. The “competitive selection process” was just a cover. While there was a public bidding, only Megaworld took part. Naturally, TIEZA issued a Notice of Award on the PhilGEPS website on May 5, 2014.

But strangely, the transaction wasn’t consummated. Megaworld backed out of the deal even if it was handed over on a silver platter. The reason? The project was grossly overpriced. By then the total expenditures had reached P750 million, way above the P200 million specified in the Deed of Donation.

The question needs to be asked: Why did Megaworld specify the amount of P200 million?

First, it knew that it was the amount necessary to undertake the construction and complete the project in accordance with the plans and specifications of W. Coscolluela and Associates.

Second, Megaworld was fully aware that a lease contract for the operation and management of the ICC would have the recovery of the asset valuation as basis for the computation of rental. In the private sector, the capital investment must be fully recovered within 5 to 7 years. As a property developer, Megaworld need to set a cap to what the government needs to spend on the project for its own protection.

Unfortunately, the greed of Drilon put Megaworld’s business interests into the garbage bin. Apparently, he didn’t care about the feasibility aspect of the project from the viewpoint of Megaworld. His objective was to use the ICC as a funnel to divert public funds. This put Megaworld in a losing situation. It gave up a property worth P510 million in the mistaken belief it would eventually be handed back on a silver platter with a convention center. Now, it held an empty piece of paper.

For Megaworld to proceed with the management contract would only aggravate its losses. It would bleed dry in having to pay for the overprice as contained in the computation of the rental payments. At P750 million, computed over a 10-year recovery period, Megaworld would need to pay TIEZA a minimum of P75 million a year! At best, rental income for the first 10 years would range between P10 to 12 million A YEAR. Andrew Tan wasn’t stupid. He’d rather not have his own convention center rather than suffer from financial hemorrhage.

As a result, TIEZA was also stuck with an ICC that nobody wanted to operate and manage under such horrendous financial terms and conditions for the rental. Between 2015 and 2016, TIEZA conducted three to four public biddings in search of a private sector operator, to no avail. It tried to revise the terms of reference to ease the financial burden. Nothing worked.

(To be continued)

About Manuel "Boy" Mejorada
Manuel "Boy" Mejorada is a journalist and social media activist. A former Iloilo provincial administrator, he is now waging a crusade against corruption and narco-politics.

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