Philippines Takes on US Corporate Giant
Allegations of corruption and inequity fly over a nuclear plant as the country deals with power shortages hampering the economy
MANILA — THIS is the Philippines's summer of discontent.
A decade of neglect has resulted in a power crisis - electricity is shut off for eight to 10 hours daily across Manila on an unpredictable rotating basis. Computer displays blink and data disappears, stair wells plunge into darkness, factories grind to a halt, hospital intensive care units hurriedly transfer to generators, and babies cry in the sweltering night.
The nation's power shortage is exacerbated by the inoperative Bataan Nuclear Power Plant, which has been embroiled in national politics in the Philippines and international legal wrangling.
Allegations of corruption were made almost as soon as the contract to build the reactor was awarded to Westinghouse Electric Corporation in 1976.
The plant was completed by Westinghouse in 1985, but never started up. If the Philippines' first nuclear power plant had been activated as planned, the 620 megawatts generated would have been enough to meet current demand. US court case
On July 14 this year, a United States judge stalled a Philippine appeal against Westinghouse in a case involving the Bataan plant.
In May, a US jury acquitted Westinghouse of bribing former Philippine president Ferdinand Marcos to win the contract. Further, Dickinson Debeviose, the New Jersey circuit judge, ruled that threats by the Philippines government against Westinghouse witnesses amounted to "terrorizing" the witnesses and were "intolerable."
Former President Corazon Aquino made the Bataan plant a 1986 election issue, promising to scrap it.
Her reasons for doing so included her contention that Marcos and Westinghouse had cheated the country. She also agreed with antinuclear activists and environmentalists who oppose nuclear power and claim the plant is dangerous.
The Bataan plant is located 50 miles west of Manila in an earthquake zone, six miles from a volcano, and was dusted by ash but not damaged by the 1991 eruption of Mt. Pinatubo. Safe as built?
While some claim the plant is poorly constructed, reports by experts differ as to whether the plant is safe to operate.
Technical complaints are being considered by the Court of Arbitration of the International Chamber of Commerce in Geneva. The court is expected to render a decision by September.
Several government task forces are looking at proposals to refurbish and operate the plant, as well as plans to convert it to a non-nuclear power plant. Either option would take time and more money.
Interest on loans taken out by the government to finance the project currently amounts to $300,000 a day, while the principal is the biggest single loan in the country's $31-billion foreign debt portfolio.
The mudslinging has splattered a number of targets: Westinghouse is accused of bribing Marcos; banks are said to have suspected the deal was ill advised but pushed loans through anyway; Mrs. Aquino never acted to replace the sorely needed generating capacity.
The court case against Westinghouse, which President Fidel Ramos says the Philippines will appeal, pits a developing country against a giant multinational company.
Now some groups are saying the country should refuse to pay the "immoral debt" while others say an out-of-court settlement, although less "morally satisfying" than a conviction, would be satisfactory.
"The outcome is redistributive. It transfers wealth from the poor Filipino consumer to the rich American businessman," says Rene Azurin, an economics professor at the University of the Philippines.
Allegations of corruption were based on the efforts of Herminio Disini, a "special sales representative" for Pittsburgh-based Westinghouse and New Jersey-based Burns and Roe, who allegedly channeled money from Westinghouse to Marcos. Married to Imelda Marcos's cousin and one of Marcos's golfing partners, Mr. Disini fled to Austria after Marcos's ouster in 1986.
In 1974 Disini made the first pitch on behalf of Westinghouse for two 620-megawatt reactors costing $500 million. Westinghouse ultimately built a single reactor that has cost the Philippines $2.1 billion.
Westinghouse admits paying $17.2 million to Disini but successfully argued it was a legitimate commission. Disini may have pocketed $40 million to $80 million, sources say. The New Jersey Federal District court civil jury - presented with 40 witnesses and 600 documents - found insufficient evidence that money passed from Disini to Marcos.
Aquino is reported to have considered but rejected the option of repudiating the debt. But she kept her promise to junk the plant immediately upon assuming office.
Aquino then disbanded Marcos's energy program and Geronimo Velasco, the former energy minister (who was generally considered a competent manager), left the country.
As early as 1988 a congressional committee warned of a crisis if no alternative was found to the nuclear plant.
Aquino was busy pursuing the case against Westinghouse. Critics charge she may have spent as much as $30 million on litigation.
Despite the cost of litigation (US lawyers were reportedly paid more than $35 million) and the judge's ruling that damages would be no more than the alleged bribe of $26 million, two separate settlement offers involving cash and credits of up to $100 million were spurned.
"Underlying all these legal claims is our contention that Westinghouse engaged in illegal and immoral conduct against the people of the Philippines," says Sedfrey Ordonez, the Philippine Secretary of Justice under Aquino.
Aquino's actions were driven by "hatred and emotion" says Perfecto Fernandez, a University of the Philippines law professor. Design disagreement
There are technical as well as emotional issues that remain. "The plant's design and construction are deficient in many respects, quality assurance and quality control were not adequately maintained during construction, [and we are] left with a defective plant that would be unsafe to operate," says Mr. Ordonez.
James Keppler, a former US Nuclear Research Commission official, reported to the Philippine Senate that the plant "is unsafe and wouldn't be licensed to operate in the US."
Nathaniel Woodson, a Westinghouse spokesman, says that at the time the plant was completed it was "ready to be loaded with nuclear fuel and go into operation."
Mr. Ramos, who has made it clear he is not opposed to nuclear power, has appointed task forces to look into rehabilitation of the plant and to assess non-nuclear use.