Subject: [NEXTEL-1] Lawmaker surprised why Nextel was permitted to operate beyond franchise

From: [email-masked]
Date: Mon, 30 Jun 2003 20:47:46 -0400

Posted on Tuesday, July 1, 2003
Lawmaker surprised why Nextel was
permitted to operate beyond franchise
By Johnna Villaviray, Senior Reporter

In 1990 Mel Velarde, then 26, carved out a name for himself as a telecommunications whiz by introducing cable television to low-income households.
In 1998, at 34 Velarde sold his shares in Sky Cable to concentrate on providing two-way broadband satellite Internet service throughout the country.
Four years later, Velarde engineered the buyout of Nextel Communications Philippines Inc. (NCPI), renamed Next Mobile, to go head-on with established cell-phone companies.
Velarde's record in the telecommunications industry, however, was insufficient to put out the controversy over the company's actual ownership.
"There is no evidence that the 'Mel Velarde Group' has the required financial muscle and wherewithal to acquire such a big amount of P11 billion, or $200 million, in order to justify its acquisition of NII's shareholder advances in the NCPI," said the Congress resolution that called for an investigation into the NCPI's corporate structure.

The NII is the US-based mother company of the NCPI, whose foray into mobile-phone operations without a proper franchise-its license was for trunk radio operations-also boggled lawmakers looking into perceived misdemeanors by the company's previous owners.
Rep. Prospero Nograles, an author of the resolution, admits the panel needs more time, and more information, to digest or dismiss consistent reports that Velarde and his partner, Maxwealth International, are fronting for another interest group.
"Mahirap mo ng ma-link on the basis of the document. But with the testimonies of the people there, we'll dig deeper into [this]," Nograles said.
There is little direct evidence to support the theory, but Nograles acknowledges that there is a preponderance of suggestions that NII executives had very influential people, both in the private and in the public sector, helping them.
Nograles could not understand how the Securities and Exchange Commission (SEC) and the National Telecommunications Commission allowed the NCPI to go beyond its license.

In the quarterly registration statement filed before the US SEC in 1998, the NII acknowledged that its transactions were open to legal challenge.
"The company believes, and has been advised by Philippine counsel, that the above-described transactions with Gamboa Holdings comply with Philippine law, including applicable Philippine corporate ownership rules," it said. "However, there can be no assurance that the above described transactions will not be subject to legal challenge."
In another document, the NII narrated how it acquired 87 direct and indirect shares of the NCPI through holding companies that it helped establish.

The SEC received a complaint against the NCPI around April this year, but the deliberation by the SEC en banc was preempted by the congressional inquiry, which asked the SEC to provide a status report of the case.
"The Office of the General Counsel is on top of that now. It is working with the congressional inquiry," assured Fe Gloria, a two-term commissioner.

Dan Gabuyo, a lawyer from the SEC's Company Registration and Monitoring Department, said the NCPI was told over a month ago to explain why it has not been complying with the government's reportorial requirements. Registered companies are required to submit a general information sheet and financial statements to the SEC.
Questions on NCPI's ownership seeped out with the disclosure of its former president and chief executive officer, Antonio Urera, that the NII used dummy corporations to buy out local shareholders.
Urera, a veteran in the telecommunications field, went public with "personal knowledge and/or information about the management, operations and affairs of the NCPI."

In the affidavit filed before the congressional panel, Urera described how the NII violated laws on the limitations of foreign ownership and the antidummy law, suggesting that the consolidation of NII's interests in the NCPI was marked by the entry of Gloria Tan-Climaco into the board of directors of Infocom, the NCPI's previous name.
Climaco started her career with the accounting firm Sycip Gorres Velayo & Co.  (SGV & Co.) and became its youngest and only female chairman and managing partner. She had been President Arroyo's adviser for strategic projects and figured prominently in the brouhaha over the bidding for the Ninoy Aquino International Airport Terminal 3.
The Gos, who owned the share in the NCPI that Gamboa Holdings bought, were a client of Climaco while she was with SGV. Climaco also engineered the merger of Equitable Bank and PCI Bank.

Equitable-PCI Bank is among many on the stable of clients of the Angara, Abello, Concepcion, Regala & Cruz Law Offices (ACCRA). The NCPI is among ACCRA's clients.
Urera is convinced that NII executives would not have been able to skirt the law had influential groups not helped them.
"What I know is, if you got a powerful firm here, they will be close to many things, many offices," Urera said.

Velarde's takeover of the NCPI lent credence to rumors about the special treatment the company has received owing to his past business dealings with the Villaraza & Angangco Law Office-known as the Carpio, Villaraza and Cruz Law Offices before its two founding partners joined government service.
The firm of Arthur "Pancho" Villaraza is disreputably close to President Arroyo and her family. Its founding partners, Avelino Cruz and Antonio Carpio, were appointed presidential legal adviser and Supreme Court justice. A senior partner, Simeon Marcelo, serves as Ombudsman.
A ranking SEC official said that NII executives approached the Villaraza firm, known in law circles as a spotter for troubled companies, to help quell a government investigation into its ownership structure.
Velarde, through a subordinate, denied that the Villaraza firm was behind his acquisition of the NCPI. He acknowledged, though, that Villaraza has been his legal counsel for a number of years.

In a faxed statement, Velarde said his involvement in the industry consisted of "building blocks of a personal vision for his country: an establishment of a nationwide wireless infrastructure that is dedicated to delivering education on all levels as the core intent to Filipino masses."
"The convergence of education and ICT [information and communication technology] will pave the way for a truly life-changing, fate-altering impact on the Filipino masses. My personal goal is to have as many millionaires and billionaires in the Philippines," it continued.
Velarde's good intentions appear to be overshadowed by the alleged involvement of the Villaraza firm, which also represented the tycoon Lucio Tan, a losing bidder for the NAIA Terminal 3 project.

The Villaraza firm is known to be an aggressive and thorough firm. The Manila Times tried to get Villaraza's comment but was told by his secretary that he was "not interested."
Former SEC chairman Perfecto Yasay recalled that, at one point, Villaraza and Carpio lobbied him to reject the application of Pilipino Telephone Corp. for a public corporation.
"At that time Pancho Villaraza was going around talking to the commissioners," Yasay said in an interview. "'Yung law firm na 'yun, very influential at the SEC."

Yasay, who blew the whistle on Estrada's efforts to protect the businessman Dante Tan during the BW stock manipulation scandal in 1999, acknowledged that he has nothing solid on wrongdoings by the other SEC commissioners.
But he said some instances, including a supposed request by now Supreme Court Justice Rene Corona for an injunction on his wife's case, buttressed his impression that the other commissioners were not working independently as called for by SEC policies.
"If the Villaraza firm says do what we want, and the commissioners know that the firm is close to the administration, they would side with the law firm," Yasay said.
Fe Gloria, a career official who has been serving the agency for over three decades, was the senior commissioner during Yasay's chairmanship of the SEC.

Yasay expressed disappointment with Gloria, saying she does not appear to be upholding the changes made to ensure SEC's independence from political pressure.
He acknowledged being told that Gloria is a "silent partner" in the Villaraza firm, but that no direct evidence links her to Villaraza, a Sigma Rho fraternity brother of her late husband.
The Sigma Rho has members spread across the biggest law firms in the country, including the ACCRA.
Gloria acknowledged that she knew Villaraza, but said professional and personal interaction between them was minimal.

"There are instances when we would meet in the office, but that's common among lawyers in the SEC," she said in a telephone interview.
She added that while her husband and Villaraza were fraternity brothers, Villaraza was "very much a junior."
A colleague of Gloria agreed that it was very hard to substantiate the influence of the Villaraza firm in the SEC.
"Their names don't appear in anything. There are hardly any appearances. They are very discreet," the SEC official said.
"But that's how [the firm] works, in the background."

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