THE FRAPORT FACTOR

By Bernie Lopez

 

In spite of massive efforts from the GMA administration to have NAIA 3 opened before the election, it did not materialize. A source in the construction contractor community claims that the real reason, aside from the substandard construction which is the predominant issue at hand, is that Fraport, after all the squabbles, pulled out the software for the highly computerized airport system, and there are no ready replacements.

If this is true, it may mean we have to retool the building in terms of hardware on a massive and expensive scale and get a new corresponding software in order to begin to operate, over and above the issue of unsafe substandard construction. If we are to purchase new software, it has to fit the hardware at hand. This means additional time and money.

Now that Fraport lost its case at the International Center for Settlement of Investment Disputes ICSID in Washington DC, clearly, it is a major character in this sinister mystery story. Fraport can still derail and delay the opening of NAIA 3 because it feels it has not been properly compensated. It is important then to paint a clearer picture of Fraport, over and above the many information featured in this column in the past. A new white paper has emerged recently from sources in Germany, which has intimate knowledge of Fraport’s history and modus operandi, and has reached the Philippine print media. This paper, which is the source for this article, includes excerpts from intimate minutes of stockholders’ meeting which Fraport tried so hard to keep away from the German media, arguing in the courts that the contracts had a confidentiality clause.

Fraport is first of all a government-owned corporation (79%), and as such, is open to public corruption and political forces. This government equity is divided into three parts, the largest share to the State of Hesse (32%), the next to the City of Frankfurt (21%), and to the Federal Republic of Germany (18%). Prime Minister Roland Koch of Hesse resigned as chair of Fraport board days before the 2004 stockholder meeting under extreme pressure over the controversy on the NAIA 3 project. Actually, Fraport is ultimately owned by the people of Germany as taxpayers. The Fraport board played a key role in the expose of the ‘crimes’ of management and its supervisory board, which was under the helm of CEO Wilhelm Bender.

The modus vivendi of Fraport with regards big projects abroad which incurred huge losses was one of the most powerful tool of the guilty, namely, silence or plain and simple cover-up of data which would incriminate people at the echelon. This was true not only for NAIA 3 but other controversial projects in Germany itself, Peru, Uzbekistan and Mexico, to name some, which totaled about half a billion Euros in the past few years, according to the white paper. For this subtle silence or sin of omission, Fraport employs many law firms at huge expense.

When CEO Bender presented the figures for NAIA 3 in the stockholders’ meeting, he was met with a barrage of violent objections against the loss of $490 million. Bender blamed the Philippine government for violating its own laws. Subsequent protests over NAIA 3 argued that Fraport was in fact a partner in crime in the dealings over NAIA 3, whether of no choice of its own, or with premeditated complicity. The board accused management of releasing funds without sufficient collaterals and participation in management planning and decisions. It asked why Fraport did not even have the right to examine the books of PIATCO, its investment partner in the NAIA 3 project, when in fact Fraport contributed more than 61% of capital and 90% of the funds. And PIATCO claimed it owned 60% of the consortium together with local partners, since the law required foreign investment not to exceed 40\5. In other words, Fraport was the bag man in reality but not on paper. Bender told the board that Fraport may not be able to recover its investments in NAIA 3.

Fraport was hoping that the change of President from Erap to GMA in 2004 would save the day for its investments. Former chair Koch had known much earlier of the criticisms of then Vice President Arroyo about the way Fraport did business in the Philippines. Bender told the Fraport board another $90 million was needed to complete NAIA 3. This was followed by threats from the Philippnie government to demand damages for the delayed NAIA 3 project.

By this time, the board, incensed by Fraport’s helplessness to solve the single biggest loss in NAIA 3 among all its projects abroad, filed a case at the Regional Court of Frankfort to exonerate management for its bad decisions. But the court ruled in favor of management, a victory which would double the ire of the board. The Hess state government, which held the greatest amount of shares in Fraport, ordered a committee to conduct an investigation of the ‘Fraport Manila Scandal’.

Fraport, in spite of its defeat at ICSID, and in spite of the corruption scandal in Germany, still has the ability to derail the NAIA 3 project today. It will do everything in its power to rectify its losses somehow because of pressures from the German public. But it may finally just close shop because of the billions on overseas losses.

beteljuice7@gmail.com