MALACANANG TAKES FLAK OVER HIRING OF U.S. LOBBYING

C O N F I D E N T I A L SECTION 01 OF 02 MANILA 004464

SIPDIS

DEPT FOR EAP, EAP/MTS, EAP/MLS, INR/EAP

E.O. 12958: DECL: 09/22/2015
TAGS: PGOV PINS PINR ECON RP
SUBJECT: MALACANANG TAKES FLAK OVER HIRING OF U.S. LOBBYING
FIRM

REF: A. MANILA-EAP/MTS 9/22/05 UNCLASS E-MAIL

B. MANILA 4443

C. MANILA-EAP/MTS 8/29/05 CLASS E-MAIL

D. MANILA-EAP/MTS 7/27/05 UNCLASS E-MAIL

Classified By: Acting Political Counselor Joseph L. Novak
for Reasons 1.4 (b) and (d).


1. (C) Summary: Malacanang has recently taken a great deal
of criticism for the hiring of Venable LLP, a U.S.-based law
firm, to do lobbying. Opposition and even some
pro-administration lawmakers have asserted that the contract
was too expensive and complained that it was non-transparent.
Matters came to a head late September 21 when National
Security Adviser Gonzales was held in contempt and detained
by the Senate for failing to answer questions regarding the
contract. As of late September 22, Gonzales technically
remains under Senate detention while in a local hospital
where he is being treated for health problems. Malacanang's
bumbling efforts to explain itself -- including over whether
or not it is canceling the contract -- have hurt its
credibility and are giving the story some legs. End Summary.

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Controversy over Lobbying Contract
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2. (U) Malacanang has taken a great deal of flak recently
for the hiring of Venable LLP, a U.S.-based law firm, to do
lobbying. The story broke last week while President Arroyo
was in the U.S. attending UNGA when Opposition politicians
announced details of the contract, which was reported to be
for one year and to cost USD 75,000 a month plus costs with
the first three months paid up front. (Note: The contract,
which has been filed with the USG, has since been published
in toto in the local press -- see ref a. End Note.)
Anti-Arroyo Congressmen Alex Cayetano, Rolex Suplico, and
Roilo Golez lashed out at Malacanang over the cost of the
contract and publicly questioned what it was for and who
exactly in Malacanang had agreed to it. Echoing some of the
nationalist rhetoric bandied about over the matter,
Congressman Teddy Casino, a member of the leftist Bayan Muna
party, stated: "This contract is a treasonable act by Arroyo
and shows how vulnerable the government is to graft and
corruption."


3. (C) After Malacanang assistants fumbled for a couple of
days in developing a coherent response, National Security
Adviser Norberto Gonzales stepped forward and announced that
he had signed the contract. Gonzales went on to claim that
the contract was useful as a way to seek advice from U.S.
sources on how the Philippines might approach the issue of
Charter Change. (Note: Charter Change is the term used in
the Philippines when discussing possible Constitutional
changes, including the idea of transforming the current
bicameral system into a parliamentary one. In fact, the
contract deals with a whole range of lobbying services that
Venable would perform in addition to any work on Charter
Change. End Note.) This raised a storm of protest, with
Opposition and some nominally pro-Malacanang lawmakers
wondering why the Philippines was paying for advice to "a
foreign company" on "a domestic matter." Congressman Gilbert
Teodoro, who is usually pro-Arroyo, told Acting Pol/C on
September 22 that he could not understand why Malacanang
would have engaged a lobbying firm at such a high price: "We
have so much poverty in this country -- why couldn't
Malacanang have seen what a problem this would cause when the
contract inevitably was made public." When queried by the
local press, Venable would not comment publicly on the
matter.

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Canceling the Contract?
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4. (U) On arrival back in Manila on September 18, President
Arroyo held a meeting with Cabinet members at the airport.
She reportedly asked Gonzales about the contract and he
recommended that it be canceled. She agreed, although Arroyo
backtracked somewhat by stating that the contract could be
"revived" in a subsequent TV interview. After the meeting,
Gonzales told the press he was canceling the contract,
although Filipino newspapers checking public records in the
U.S. report that the contract has not in fact been canceled
as of September 22. (Note: In any case, given that the
contract was signed in late July and with the first three
months paid up, the contract apparently lasts until October
at the least. End Note.) He clouded up the situation
further, however, by asserting that "private donors" (whom he
would not identify) and not the GRP had paid for the
contract.

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Senate Holds Gonzales in Contempt
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5. (SBU) Matters came to a head late September 21 when
Gonzales was held in contempt and detained by the Senate for
failing to answer questions regarding the contract. Under
intense questioning by the Committee on Accountability
(a.k.a. the "Blue Ribbon" Committee) on live TV, Gonzales --
for three long hours -- refused to answer several direct
questions, including who exactly was funding the contract,
whether it had actually been canceled, under whose authority
he signed the contract, etc. Gonzales' refusal to answer
these questions was taken by the senators present to be
evasive and to be disrespectful of the institution, and it
was agreed -- even by pro-administration lawmakers -- to hold
Gonzales in contempt. Going one step further, senators
ordered the Sergeant at Arms to detain Gonzales. (Note:
While rarely used, the Senate and the House have the power to
detain. It is the first time in recent history that the
power has been used against a Cabinet-level official,
according to reports. End Note.) Gonzales, pleading health
problems, was subsequently taken to a hospital where he
remains as of late September 22 still technically under
detention. Malacanang has protested the Senate's actions,
asserting that they were improper and in conflict with normal
relations between the legislative and the executive branches.
Seeking to calm the waters by showing that the GRP was being
transparent, Executive Secretary Eduardo Ermita announced on
September 22 that the GRP -- in addition to its involvement
with Venable -- has contracts with the firm
Burston-Marsteller to do public relations work and with the
law firm of White & Case in regard to the contract for
Manila's new airport terminal.

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Comment
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6. (C) Mission has met with Venable representatives at their
request on occasion in recent months (see refs c-d). In
these meetings, they made clear that they believed the U.S.
government should see Arroyo in a positive light. They were
never clear as to whether they were working directly for her
or for the GRP. Much of the damage that Malacanang is
incurring is due to its bumbling efforts to explain itself.
Gonzales, for example, has had an excruciating problem in
getting his story straight, either because he is protecting
Malacanang or because of his inarticulateness or a mixture of
the two. This has given an opening to the administration's
legion of critics and even disturbed some of its nominal
allies. In the process, the story has developed some legs.

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