An opposition Senator, who recently aired alleged ransom payment to the extremist Abu Sayyaf, yesterday dragged President Gloria Macapagal-Arroyo and two top ranking defence officials into the controversy.

According to Senator Sergio Osmena III, Arroyo, Defence Secretary Angelo Reyes and Armed Forces chief Gen. Diomedio Villanueva knew of the negotiations and subsequent payment of ransom to the Abu Sayyaf in June in exchange for the release of businessman Reghis Romero III.

Osmena said of the P17 million ($.32 million) paid for Romero's release, P10 million($.19 million) went to the Abu Sayyaf, P5 million ($96,153) to the military and the remaining P2 million ($38,461) to the local government of Basilan.

"I am calling on Reyes and Villanueva to resign," Osmena said following his revelation on the two officials' involvement.

The Senator said the President knew that negotiations were taking place in early June for the Abu Sayyaf to release Romero, a businessman who had cornered lucrative government contracts due to his closeness to past administrations.

But in an interview with reporters, Arroyo denied Osmena's allegations. "I do not have personal knowledge of the ransom payment for the release of Romeo," she said.

Arroyo's spokesman Rigoberto Tiglao said Osmena's claim was "preposterous" and "a big insult to the military" that had suffered horrendous casualties during several attempts to rescue hostages from the Abu Sayyaf.

"We hope that the Senator will come up with evidence rather than hearsay. Hurling charges against the President is getting to be a habit of some critics and I hope they realise the impact of their statements," he said.

Tiglao said the Arroyo administration has not been involved in ransom payments to kidnap groups and extremists such s the Abu Sayyaf. Reyes and Villanueva for their part said that they welcome any investigation on Osmena's allegation.

Over national TV yesterday, Reyes challenged Osmena to resign. "He should be the one to resign for telling lies," he said. Last Saturday, Osmena revealed the alleged ransom payment, five months after the incident supposedly took place.