The Supreme Court last week ordered a temporary halt to the US$330 million (€239 million) contract with Zhong Xing Telecommunication Equipment (ZTE) Corp. amid allegations of bribery and overpricing.

Joey de Venecia III, son of House Speaker Jose de Venecia and co-founder of the company that lost the bid, told a Senate investigation that Elections Commissioner Benjamin Abalos and Jose Miguel "Mike" Arroyo were involved in trying to persuade him to abandon the deal.

He said under oath that during one meeting, Mike Arroyo shoved a finger in his face and told him to "back off" from the deal.

"It was the first gentleman who told me to back off," said de Venecia, co-founder of Amsterdam Holdings (AHI) Inc. He said the president was not involved and may have not been aware of her husband's "bullying."

President Gloria Macapagal Arroyo on Tuesday ordered Transportation and Communications Secretary Leandro Mendoza to explain the contract at the Supreme Court.

"In a democracy, it is natural to have a clash of views and positions," she said in a statement. "What is important is there are courts and processes under the law to decide a deal in a peaceful way, in accordance with law and evidence, without politicking."

The hearing rattled financial markets, with the main index dropping 0.5 percent.

"The market hates surprises, and this is another surprise," said Westlink Global Equities Chairman Rommel Macapagal.

De Venecia said his company should have won the contract because it submitted the first complete unsolicited proposal for the project and offered to build the national broadband network at no cost to the government, unlike the ZTE deal that required the government to secure a US$330 million loan from China.

"It was Chairman Abalos who was pushing for the ZTE proposal," de Venecia said. "It was also Chairman Benjamin Abalos who stood to receive for himself any kickbacks from the colossal overpricing of the NBN project.

"Neither I nor my foreign partners would accede to a sweetheart proposal that was riddled with graft, corruption and the massive plunder of taxpayers' money," he said.

ZTE issued a statement last week in which it denied any irregularities in the contract.

Abalos and other officials boycotted Tuesday's hearing. Abalos did not explain his absence, but other officials invoked a presidential decree barring them from testifying without Arroyo's permission.

Newspapers reported Mike Arroyo left the country Monday on an undisclosed trip.

The revelations were the latest to hit the scandal-ridden president's husband.

Mike Arroyo, an attorney from a prominent family, has no official powers but is regarded as an influential back-room operator and a vocal backer of his wife against political rivals.

Two years ago, media reported that he was influence-peddling and receiving illegal gambling kickbacks at the same time that allegations broke that his wife had fixed the 2004 presidential election.

He denied the allegations, but left the country for three months to ease the political pressure on the president.

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