The Multinational Monitor


T H E   F R O N T

Buying Manila

Westinghouse engaged in a scheme of bribery and corruption to win a contract to build a nuclear facility in the Philippines in the mid 1970s, charges a lawsuit brought against the company by the Republic of the Philippines. Documents from the case, scheduled to go to trial in February 1992, were recently unsealed as the result of a suit brought by Public Citizen on behalf of Public Citizen and Essential Information, the publisher of Multinational Monitor. The documents suggest that Westinghouse officials were aware that "commission" payments made to its "special sales representative" (SSR) for the project were being passed on to former Philippine President Ferdinand Marcos. Marcos awarded the nuclear plant contract to Westinghouse on a turnkey basis without considering the proposals of competitors and contrary to the recommendations of the Philippine National Power Corporation (NPC) and members of his own cabinet.

The plant, a $2.1 billion drain on the Philippine economy (and racking up huge interest charges daily), has never been put into operation. Completed in 1985 amid charges that it was poorly constructed and is unsafe, the plant suffered from dramatic cost overruns, eventually costing more than three times the original Westinghouse price estimate. Philippine and U.S. nuclear experts maintain that the plant is unsafe to operate. It is situated just five miles from an active volcano and within 25 miles of three geologic faults. Nuclear specialists charge Westinghouse with shoddy construction, pointing to deficiencies in wiring, in brackets that support pipes carrying steam and water (some of it radioactive) and in underground vaults carrying cables between buildings.

According to court documents filed by the Philippines, Westinghouse played on the Marcos government's corruption by hiring Herminio Disini, an associate of the Marcos family, as an SSR to sell the Westinghouse nuclear project directly to the president. Westinghouse maintains that its officials were unaware of any business relationship between Disini and Marcos and that Disini was hired solely to represent Westinghouse, and not to serve as a conduit for funds from the company to the president. However, internal Westinghouse documents indicate that company officials may have been aware that the Herdis Management and Investment Corporation, the holding and management company apparently owned by Disini which received the commission payments, was, in fact, controlled by Marcos.

At a March 1974 meeting in San Francisco, Westinghouse managers met to formalize the hiring of Disini as SSR. A document was distributed describing "The Disini Group of Companies," including Herdis; the group's assets were listed as totalling 1.86 billion pesos. Notes taken at the meeting by the International Marketing Manager of Westinghouse's Water Reactor Division report that Manila-based District Manager Leonard Sabol described Disini as a "front man for Marcos" and a "front man for Marcos' industries managed by Disini (assets 1.86 x 10-9 pesos)." Lawyers for the Philippines argue that since the asset value (1.86-billion pesos) is the same for both companies, it is obvious that "Marcos' industries" and "The Disini Group of Companies" are one and the same. The notes from the meeting further describe Sabol as saying that "Disini full charge is running [sic] Marcos companies."

In a deposition, Sabol testified that he was aware of a past business relationship between Disini and Marcos but was told by Jesus Vergara, president of Asia Industries, Westinghouse's Philippine distributor, that the relationship had been terminated prior to the hiring of Disini. Vergara flatly denies Sabol's claim in a 1988 affidavit. He stated that "At no time did I ever advise Westinghouse that Disini and Marcos had no business relationship, that Marcos had no financial interest in Disini's companies, or that Marcos had terminated a prior business relationship with Disini.... I am certain that I never advised Westinghouse that the relationship between Disini and Marcos was strictly personal."

Vergara, who acted as a consultant to Westinghouse throughout its bid for the nuclear project, further stated in his 1988 affidavit, "No one involved in our arrangements for the nuclear project was naive enough to believe that President Marcos bestowed his favors upon Westinghouse ... simply out of friendship or respect for Herminio Disini.... [Westinghouse] personnel with whom I dealt knew that most of the payments made to Disini would be passed along, directly or indirectly, to President Marcos. It is obvious that Disini was a conduit through which money was passed to the President, and a number of people in Westinghouse ... were aware of it."

In an October 1977 letter to Far East Zone Director Llewellyn Saunders, Sabol wrote, "Our SSR (The Herdis Corporation) is a privately owned company. Hermi Disini has a very close relationship with Pres. Marcos so I will leave to you the speculation as to how and who hold [sic] the shares of Herdis."

Jonathan Schiller, attorney for Westinghouse, says, however, that Vergara, who is a key witness for the Philippines, has never testified to any personal knowledge that money paid by Westinghouse was channelled to Marcos, and further that there is an "inconsistent pattern" to statements made by Vergara.

Schiller points to an earlier (March 1987) affidavit in which Vergara testified, "I have no personal knowledge that Westinghouse directly or through Asia, or Herdis, made payments to any Philippine government official in connection with the PNPP contract." Schiller emphasizes that Vergara has testified that he was under considerable pressure from the Aquino government (which, he said, froze his bank accounts and prevented him from leaving the country) when he produced his 1988 affidavit for the Philippines.

In a statement released in November 1991 in response to the unsealing of the documents, Westinghouse acknowledged that the "suggestive and colorful" phraseology of some of the documents, if taken out of context, "could convey a mistaken impression" about the activities of the company in the Philippines. Westinghouse attorneys maintain, however, that it is the sworn testimony of every Westinghouse employee witness that no one at the company ever intended to bribe Marcos. Sabol, for example, stated in his deposition that "At no time, ever, in my career with Westinghouse did I have any reason to believe or any reason to suspect that President Marcos was to participate in any commission payments made to Mr. Disini or the Herdis group."

According to the plaintiffs' suit, Marcos awarded the contract to Westinghouse without considering the technical and commercial merits of the company, without considering the proposals of competitors (General Electric (GE) in particular) and against the advice of his cabinet members. Westinghouse submitted a four-page "proposal" letter to Marcos and made a brief presentation to the president and his cabinet. GE, meanwhile, had submitted an extensive, three-volume proposal.

Marcos ordered the award of the contract to Westinghouse against the advice of his cabinet and other government officials who argued that the National Power Corporation would have more bargaining leverage in setting pricing and financing terms if the awarding of the contract was delayed. However, on the basis of the Westinghouse "proposal" and presentation, Marcos ordered NPC to award the company the contract on June 6, 1974.

According to the suit, Westinghouse also assisted Burns & Roe Enterprises in obtaining a contract to act as consultant to NPC on site selection, preparation of bid specifications and evaluation of supplier proposals. Samuel Hull, director of international operations for Burns & Roe, testified that Westinghouse was concerned that its strategies might be frustrated if an independent company received the consulting contract. Hull further testified that he agreed to pay Disini commissions amounting to 10 percent of the consulting contract. Hull stated that he believed some of the commission payments would go to Marcos and that he believed "the arrangement of payment to Disini, who I knew to be a business partner of President Marcos, was improper and illegal." According to Hull, Sabol said that Disini "was in fact a business cronie of Marcos and they shared business interests."

Schiller dismisses Hull's statements as "speculative" and "hearsay" and notes that Hull had no direct knowledge, and has never testified to having any direct knowledge, of any payments made to Marcos in connection with the nuclear project. Schiller further points out that Hull was paid in excess of $75,000 by the Philippines to prepare his affidavit.

The suit alleges that Westinghouse paid approximately $14.3 million to Herdis in varying amounts between September 1976 and February 1985, and over $2.9 million to Asia Industries, a Herdis subsidiary, between 1976 and 1983. The suit also alleges that Marcos benefitted personally from nuclear project subcontracts awarded by Westinghouse and Burns & Roe.

Under the Racketeer Influenced and Corrupt Organizations (RICO) statute, the Philippines could recover as much as three times the cost of the plant, which would come to $6.3 billion. No dollar figure for damages has been attached to the suit. In September 1991, U.S. District Judge Dickinson Debevoise of the District of New Jersey denied Westinghouse's motion for summary judgment, ruling that lawyers for the Philippines have presented ample evidence to support a trial.

- Holley Knaus

The James Bay Disaster

A coalition of indigenous people, environmentalists and U.S. labor organizations are fighting to block the construction of Phase II of Hydro-Quebec's massive James Bay hydroelectricity project. Opponents claim that the project threatens the traditional indigenous way of life in the James Bay area, will damage thousands of square miles of pristine sub-Arctic wilderness and will harm the economies of both Quebec and the northeastern U.S. states which are planning to buy power from Hydro-Quebec.

Phase I of the project, known as La Grande, has been completed, flooding thousands of square miles of land. Phase I diverted several rivers into the La Grande river, changing flow patterns and displacing several Cree villages which were in areas that are now flooded or prone to flooding. La Grande interfered with Cree fishing, hunting and trapping activities by disrupting animal habitats including fish spawning grounds, migratory bird staging areas and caribou migration routes.

The project has also released toxic mercury compounds from the ground into the waters of the area. According to Steven Hazell of the Ottawa-based Canadian Arctic Resources Committee, this problem blind-sided the project developers, and has had a devastating impact on native communities. "Some large fish have been found with 4-5 parts per million mercury, more than 10 times the legal limit for the sale of fish in Canada," Hazell says. Hazell cites 1984 statistics which indicate that 98 percent of the people in Great Whale, a Cree village in the affected area, had mercury levels that exceeded the World Health Organizations standards. Since that time, the Cree have stopped eating fish from the rivers, although it was a major staple of their traditional subsistence diet.

Phase II of the James Bay Hydropower project, which consists of two parts, Great Whale and Nottaway-Broadback-Rupert (NBR), threatens to make the situation even worse. Hydro-Quebec, the giant, provincially owned power company, wants to begin construction on the Great Whale segment in 1992. If completed, the James Bay Project will flood an area the size of Connecticut, and disrupt the environment and wildlife habitats over a much larger area.

Matthew Coon-Come, the Grand Chief of the Grand Council of the Crees of Quebec, believes that stopping the second phase of the project will be crucial to the survival of the Cree way of life. "The land needs time to heal; because they have reshaped the geography of the land, made rivers flow backwards, ... [forced a] rearrangement of migration routes, and it takes time for the animals to adapt to that." He adds that the new roads have also brought an influx of thousands of sport hunters and fishermen, who interfere with Cree subsistence activities.

The Cree have been fighting the project since the early 1970s. A Cree lawsuit filed after the plan was announced forced the provincial government to negotiate, and resulted in the 1975 James Bay agreement. Cree leaders charge that the province of Quebec is disregarding portions of the agreement that protect indigenous rights and the environment. According to Coon-Come, the Quebec government has brushed aside "social and environmental impact assessments," which were a cornerstone of the 1975 agreement. "The government of Quebec said they were going to do a 'global environmental assessment,' but with the same breath they said they were going to stick to their commissioning date.... [Regardless of the findings,] they intend to give themselves a permit within a year and to start building Great Whale."

The Cree have filed a second lawsuit in an effort to stop Phase II of the project. A recent Canadian federal court ruling in favor of the Cree would require a federal environmental review of the project. The province of Quebec is appealing the ruling, but says it will do its own "global environmental assessment."

Phase II of the James Bay project would develop power primarily for export to the United States or for sale to large, internationally financed metal smelters. U.S. activists have focused on cancelling long-term contracts signed by New York and some New England states to buy power form Hydro-Quebec, arguing both that the purchase will hurt the Cree and the environment and that spending money on conservation and independent generation would save money and create jobs in the United States. Without these contracts, they claim Hydro-Quebec will be unable to muster the financing and the political support to complete phase II.

The New York Power Authority, a state agency which reports directly to Governor Mario Cuomo, has signed two contracts with Hydro-Quebec for a total of $19.5 billion worth of power over 24 years. In a victory for opponents of the James Bay development, the state recently obtained permission from Hydro-Quebec to extend its deadline for cancelling the contracts by one year, to November 1992. Vermont also has a contract for Quebec electricity, which can be cancelled until 1992. Maine cancelled its long-term contract last year. Hydro-Quebec has also negotiated with the New England Power Pool.

U.S. labor groups are concerned that spending money on Quebec hydropower will reduce the number of jobs in the United States. Ian Goodman, an energy economist with the Boston-based Goodman Group who has worked both with the Cree and with U.S. labor unions, has estimated that a dollar spent on energy conservation would produce four times as many jobs as a dollar spent on imported hydropower. "The only way we could produce less jobs in the region would be to take [the money] and dump [it] in the Atlantic Ocean," Goodman says. Among the labor groups opposing phase II are the Utility Workers of America and the Tri-Cities Building and Construction Trade Council.

The James Bay Project is only one of many planned or recently built hydropower projects in Canada's huge northern regions, populated largely by indigenous people. In Manitoba, seven huge dams were built in the 1970s and eighties, and 11 more are planned. Like the James Bay project, these dams produce electricity largely for export to the United States. There are other large-scale dams in the planning stages in Quebec and Ontario, as well. Matthew Coon-Come says that Canada's exploitation of the resources of the North is a form of environmental racism. "Projects on this scale can only be built in areas which are inhabited by indigenous peoples."

Winona La Duke, an Aninshabe from Minnesota and president of the Indigenous Women's Network, describes Canada's northern hydropower development as "a big experiment. Nobody's ever done anything on this scale in a sub-Arctic environment, and they don't know what to expect." What is at stake are the lives and cultures of Canada's indigenous people.

- Jonathan Dushoff

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