REBUTTAL TO GGDC ALLEGATIONS
During the week of 8 September a barrage of articles hit various media outlets throughout the Philippines concerning a dispute over the development of the Global Gateway Logistics City (GGLC) Project at the Clark Freeport Zone, Pampanga. These articles contained untrue statements and unsubstantiated allegations. They were released and heavily biased against the developer and prime contractor, Peregrine Development International (Peregrine), an American owned firm. Not a single outlet contacted Peregrine for comment before these articles were published.
At issue is a dispute between Peregrine and the project owner, Global Gateway Development Corporation (GGDC) who committed to fund and finance the 177 hectare green-field site adjacent to the Clark International Airport that has become known as GGLC. It is important to know that Peregrine conceived the project in 2006 and paid 20,000 US Dollars for the right to develop the site. Through 2007, Peregrine conducted environmental and land use studies, developed a master plan and financial models and sought out third party investors. In the course of this search Peregrine identified and selected the Kuwait group known as KGL. One of the affiliates of KGL, KGL Investment Company (KGLI) then agreed to carry the investment. The parties then memorialized their agreement in an Engineering Procurement Construction Management (EPCM) contract in 2008 which stipulated that Peregrine would retain exclusive rights to be the developer and prime contractor while KGLI would fund and finance the project for the duration of the 50 year lease. KGLI initially funded the project through a private equity fund called The Port Fund (TPF) and a local entity established in the Philippines, GGDC.
A dispute arose over a notice of termination that GGDC sent to Peregrine in April. The EPCM contract does mandate that all disputes were subject to arbitration. This is a key point since Philippine law does recognize the authority of arbitration tribunals, which has now been legally constituted in Singapore. Thereafter, in May, GGDC filed for Arbitration in Singapore.
UNSUBSTANTIATED ALLEGATIONS – FACT CHECK
Statement: The press releases recently published in local and national papers failed to verify and fact check certain information or contact Peregrine for comment. Consequently, we feel that these have mislead the public to have a very wrong impression of Peregrine, much to its damage and prejudice. For example, this past week stated that GGDC had assumed “operational control” of the 177-hectare GGLC project in Clark after obtaining a favorable ruling from the Court of Appeals against project developer and contractor, Peregrine. This takeover was allegedly based on a 60 day Temporary Restraining Order issued by the Court of Appeals. However upon a thorough reading of the TRO one learns that the Appeals’ Court TRO only temporarily set aside for 60 days the previous rulings of the Regional Trial Court (RTC) where Peregrine had initially filed its complaint. The articles failed to note that Peregrine had filed, and is still pending an Urgent Motion for Reconsideration (MR). They also failed to point out what the CA TRO did or did not do. Please consider the following.
Fact Check: On 12 August 2014, the Court of Appeals, upon GGDC’s application, issued a Temporary Restraining Order to enjoin the enforcement of the RTC’s orders, to wit: “WHEREFORE, after deliberating on the petition for certiorari with application for temporary restraining order and preliminary injunction and supplement filed by petitioner Global Gateway Development Corporation (GGDC), the Opposition and Supplemental Opposition filed by private respondent Peregrine Development International, Inc., the Reply of petitioner and Consolidated Comment of private respondent, this Court Resolved to GRANT the petitioner’s application of temporary restraining order and ISSUE A TEMPORARY RESTRAINING ORDER, as prayed for, which shall be effective for sixty (60) days from filing and approval of the required bond, enjoining and preventing respondents from implementing the assailed Orders dated June 13, 2014 and June 27, 2014 as well as the writ of preliminary injunction dated June 30, 2014 issued by respondent Judge Omar T. Viola in SCA Case No. 14-480 entitled, “Peregrine Development International, Inc., versus Global Gateway Development Corporation”, and from conducting further proceedings in said case as well as in the related case of petition for indirect contempt in Case No. SCA 14-483. Petitioner is directed to post a bond, within a non-extendible period of five days from receipt of this resolution, in the amount of Ten Million Pesos (P10,000,000.00) executed by private respondent to the effect that petitioner will pay to such party all damages that the latter may sustain by reason of this TRO if this Court should finally decide that petitioner was not From the foregoing, it is evident that:
1. The CA’s TRO is only effective for sixty (60) days. Thus, it is only temporary.
2. It DID NOT permanently nullify or set aside the orders issued by the RTC. The said orders simply may not be enforced at this time. Indeed, it is possible that the CA may ultimately rule on the MR to affirm or uphold the RTC orders.
3. The CA DID NOT direct Peregrine to vacate the GGLC project site or remove it from possession.
4. The CA DID NOT authorize GGDC to take over the project site.
5. The CA DID NOT give license to GGDC to bring in new contractors, security force, or other workers to the project site.
6. The CA DID NOT rule that the EPCM Agreement has been validly terminated. This is a matter that has to be resolved by the Arbitral Tribunal in Singapore, a proceeding that has been initiated. The issue of the validity of the alleged termination was brought to the Arbitral Tribunal by GGDC itself. It is stressed that the CA’s TRO only enjoins the RTC orders from being implemented. However, this DOES NOT mean that Peregrine no longer has any right under the EPCM Agreement. Again, this will only be resolved in arbitration. GGLC has no final legal court order or arbitral award, hence it has no right to disregard or throw away Peregrine, who has a contractual right to be the sole developer and prime contractor. For six years, Peregrine has been the sole EPCM contractor for the GGLC project. GGDC has no legal right to introduce new contractors or usurp the rights of Peregrine as the exclusive developer and prime contractor.
Statement: In many of the press releases this past week, GGDC cited alleged breaches by Peregrine including cost overruns, dealings unbeneficial to GGDC, the use of GGDC-funded assets for non-GGDC projects, failure to comply with applicable laws which materially affected the project’s implementation, failure to faithfully observe the procurement and bidding procedures to ensure competitive bidding, and willfully committing other acts inimical and adverse to the best interest of GGDC. Had these allegations been fact checked and looked into more closely, it would never have been printed.
Fact Check: Peregrine vehemently denies the allegations made by GGDC. The truth is, for the past six years GGDC has evaluated Peregrine’s performance on a quarterly basis based in large part based on monthly independent audits that GGDC itself conducts. These quarterly performance evaluations of Peregrine by GGDC reflect ratings of 100% for the last 10 consecutive quarters through the first quarter of 2014. The evaluations are based on Peregrine’s strict adherence to Schedule, Cost Control, Value-Added and Overall Performance. The cumulative average for all six years, through the first quarter of 2014, of Peregrine’s performance rating from GGDC is 96.8%. This fact cannot be denied by GGDC as it is supported by monthly budget, cost and independent audit reports and on site ocular visits. Further, GGDC has also asserted and certified, each and every year, in their annual GGLC project audited financial statements that they “are free from material misstatements whether due to fraud or error”. When taken together, GGDC monthly audits, their own audit certifications and their evaluation of Peregrine each and every quarter that their allegations are blatantly false, especially considering that their quarterly evaluations are not gratuitous as they equate directly to financial incentives that GGDC then must pay to Peregrine. A simple fact check of the audit reports and GGDC’s own Award Fee reports demonstrates that the GGDC allegations are baseless.
Peregrine’s stellar six year cumulative track record of 96.8% with the last ten successive quarters through the first quarter of this year rated at 100% seriously call into question GGDC’s statements that Peregrine has a history of contract violations and breaches. There have been NO cost overruns, NO use of GGDC assets for non-GGDC projects, NO failure to faithfully observe the procurement and bidding procedures to ensure competitive bidding, NO failure to comply with applicable laws or regulations, and NO willfully committing other acts inimical and adverse to the best interest of GGDC. There is not one single incident, example or proof that GGDC can offer. A simple fact check of the GGDC audited and certified GGLC financial statements, audited monthly budget, cost and audit reports and Award Fee evaluations will substantiated that Peregrine does not have a history of contract violations and breaches, not one single incident.
Similarly, on closer scrutiny of the termination notice sent by GGDC to Peregrine in April 2014, readers would quickly realize that the only reason cited in the termination notice was that the EPCM agreement was being terminated unilaterally because 51% of GGDC’s ownership had supposedly been sold to an alleged third party. There was no mention of any performance issues, impropriety, irregularity, contract violations or breaches or any wrong doing by Peregrine at that time. The allegations of breaches were belatedly made by GGDC over six weeks later, and only after Peregrine contested GGDC’s attempt to terminate the EPCM agreement as illegal and invalid.
Statement: Many of the press releases this past week also stated that Peregrine failed to abide by the termination of the agreement and has reportedly caused millions of dollars of unnecessary losses to GGDC. Peregrine rejects GGDC’s allegations because in fact, it was GGDC who failed to abide by the terms of the contract when it inappropriately issued its termination notice. In reality, it is Peregrine that is, and continues to be, seriously and irreparably harmed by the illegal and invalid termination of the EPCM contract by GGDC.
Fact Check:Further to GGDC’s improper and invalid termination, on June 3rd maliciously removed over a million US Dollars from the Working Capital Account (WCA) that was used to fund and finance the project. This money was previously budgeted, allocated and approved by GGDC, including over a million of this for ongoing construction work that had been performed on the Medical City hospital. A review and audit of the WCA checking account will illustrate that on June 3rd millions dollars was in fact withdrawn by GGDC. It was GGDC’s own unilateral act that caused 14 checks previously drawn on the account to immediately bounce for insufficient funds. In good faith, and with hope that issues could be resolved, Peregrine continued to fund work through June and July using its own funds. Notably, while Peregrine had been granted a Writ of Preliminary Injunction by the RTC of Angeles that required GGDC to reconstitute the status quo, GGDC refused to comply. In August, Peregrine was left with no choice but to suspend all work and to lay-off 170 workers. It was a sad event to layoff so many loyal workers because the investor, GGDC, not only stopped funding the project, but took back over a million dollars on June 3rd that had been previously budgeted, authorized and approved for work. The layoffs were the direct result of GGDC withdrawing all the funds from the WCA and their continued refusal to comply with the RTC orders to reconstitute the status quo. This is what caused the suspension of all work, this is what caused the loss of over 1,000 jobs, this is what caused the bounced checks, this is what caused many vendors and suppliers to go unpaid and the accrual of millions of dollars of claims with corresponding economic problems for those who worked and supported GGLC for the past six years.
Peregrine holds current liabilities of over $5 million dollars that have been expended in direct support of the GGLC project for work performed since April when the dispute began. This includes the monies that they removed from the WCA on June 3rd in addition to work performed since that date in Peregrine's attempt to keep the hospital on track, and of course the rapidly accruing claims. Peregrine uses these funds to execute all work for the GGLC project. To date GGDC refuses to pay, yet as project owner, it is solely their responsibility to pay to Peregrine through the WCA. Initially Peregrine tried to keep the project going using its own funds, unfortunately however, Peregrine could not maintain this for an extended period. Losses and damages continue to accumulate which can be summarized with the loss of over 1000 direct and indirect project employees and many Filipino companies who have not been paid for services performed.
Statement: The articles go on with statements indicating that GGDC intends to invest another $150 million in the Global City project by the end of 2015. Consider that in six years, actual expenditures on the horizontal infrastructure at Clark’s GGLC project is just over $50 million US dollars, with an additional $20 million US dollars in the hospital along with $20 million in debt financing. This amounts to just over $10 million US dollars a year. That is their track record.
Fact Check: To date, after a full six years of ownership, the Kuwaiti investor can only show that only 35% of the horizontal infrastructure is complete and only one building, a hospital, which is about 95% completed. This can be validated by an ocular visit and audit of Peregrine’s records. In contrast, during this same period of time, CDC and CIAC have essentially sold out the entire Clark Freeport Zone to locators such as Texas Instruments, Yokohama, Phoenix Semiconductor, Singapore Airlines, Donggwang, HLD Steel, Viskase and various other large foreign investors.
Statement: GGDC pledged $1 million US dollars for disaster relief and rebuilding efforts in communities affected by Super Typhoon Yolanda. This information can be found on their web site and also in many of the press releases as late as a few weeks ago.
Fact Check: Ten days after Yolanda hit the Visayas region, Peregrine deployed a convoy of relief aid to Balangiga, Samar, via Ormoc, Leyte and Baybay, Leyte. This initial relief convoy carried eight tons of rice, two reverse osmosis water filtration units, generators and other emergency relief supplies. Once supplies were dropped off in Ormoc and Baybay, the convoy proceeded to Balangiga, Samar. Peregrine then worked with the Mayor Viscuso De Lira of Balangiga to scope out several CSR projects, to include rebuilding city hall, the public market and schools. Peregrine pledged and expended $150,000 of its own money for this work, but much more was needed. Peregrine then approached GGDC to join in Peregrine’s own corporate efforts and to utilize GGDC’s $1 million dollar pledge to help rebuild Balangiga. This was agreed to. However, when GGDC withdrew millions of dollars from the WCA, Peregrine was left with no choice but to suspend ongoing work in Balangiga on the portion funded by GGDC which left two school buildings only partially reconstructed and the church work totally suspended. Peregrine was left with no choice but to pay the outstanding bills to local contractors and suppliers out of their own pocket that should have been on the GGDC ledger because GGDC decided to take back the money that had been committed for the work in Balangiga. To date, GGDC has only expended $300K of their $1 million pledge. This can be confirmed by an audit of the GGLC and Peregrine CSR records and by talking with the mayor of Balangiga and PARR Secretary Panfilo Lacson who officiated at the turnover of the city hall and public market buildings.
Statement: Many of these same press releases state that GGDC is a company originally founded by The Port Fund, a private equity fund managed by KGLI whose investors largely consist of the shareholders of government entities of Kuwait and other GCC countries.
Fact Check: A review of public documents in Kuwait will show there are no less than four active investigations by the Kuwait Ministry of Justice (MOJ) into complaints against KGL and The Port Fund for charges ranging from embezzlement, misappropriation of public funds, and financial and administrative violations that have resulted in damage to Kuwait public funds. Two of these MOJ investigations were opened based on the complaints of two of the Kuwait government entity shareholders to The Port Fund, the Kuwait Ports Authority (KPA) and the Public Institutions for Social Welfare (PIFSS). KPA has subscribed to the Port Fund for $85 million dollars, but based on a Kuwait State Audit Bureau report that revealed encroachments committed by the Port Fund, has filed a complaint claiming violations committed by the fund and decline of its capital. The PIFSS invested $40 million dollars into the Port Fund and has also filed a complaint based on financial and administrative violations against KGL that have resulted in damage to public funds.
Statement: In the last week of August in a DOTC hearing at Clark attended by House Transportation Committee Chairman Cesar Sarmiento, Representative Yeng Guiao and other members of the Central Luzon Alliance of Congressmen, KGLI Asia and GGDC reiterated their commitment to stay in the Philippines and to heavily invest in the development of Clark and to generate more jobs and contribute to the growth of the Philippines.
Fact Check: GGDC’s investment, over the exact same time frame, should be compared to our own Philippine government stewards at CDC and CIAC who have virtually sold out all their lands to include billion dollar investments by Texas Instruments and Samsung, and multi millions by the likes of Yokohama, Singapore Airlines, HLD and many, many others. It was GGDC, by its removal of millions from the GGLC working capital account that precipitated the laying off of 1000 direct and indirect employees with the accrual of some $5 million in current liabilities.
Statement: Other papers reported Mark Williams, GGDC President, said they need the GGLC lease annotation to strengthen their leasehold rights over the 177-hectare logistics city.
Fact Check: As BCDA President Casanova rightly pointed out in his official response to GGDC’s repeated requests for BCDA to annotate their lease agreement for the 177-hectare GGLC site, “If you have the financial capability, there is no need for the annotation.” He went on to say “Other investors inside the Clark Freeport Zone like Yokohama and Texas Instruments have no annotation for the property they occupy under lease agreements”.
Statement: KGLI and its Port Fund, whose investments in the Philippines include the GGLC project and an investment in the 2GO Group, committed $1 million for disaster relief and rebuilding efforts in communities affected by Super Typhoon Yolanda (Haiyan).
Fact Check: One of the saddest and most unnecessary losses as a result of GGDC’s removal of the millions from the WCA on June 3rd reconstruction efforts which were underway in Balangiga, Samar. Peregrine had donated $150,000 of its own money in relief goods and the rebuilding of the Balangiga City Hall. After Peregrine noticed that GGDC pledged $1 million in disaster relief, Peregrine approached GGDC to join in Peregrine’s already ongoing CSR efforts in the town of Balangiga. GGDC agreed which led to commitments to proceed with rebuilding the Public Market and three school buildings and later the restoration of the church. Unfortunately, only $300,000 of the $1 million dollar pledge from GGDC was utilized when GGDC closed the WCA thereby forcing the suspension of all works in Balangiga. However there still was thousands of dollars of outstanding bills to be paid which left Peregrine no choice but to intercede and pay these out of their own funds.