US embassy cable - 05MANILA4464

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 
---------------------------------- 
 
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? 
----------------------- 
 
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. 
 
--------------------------------- 
Senate Holds Gonzales in Contempt 
--------------------------------- 
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 
------- 
 
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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You can also access this site through the State Department's 
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JOHNSON