OFWs warned against placing funds in pseudo-investment firms

The Department of Foreign Affairs has issued an advisory to all Philippine consulates abroad, warning overseas Filipino workers (OFWs) against investing in pseudo-investment firms masquerading as legitimate multilevel marketing companies.

The move was in response to the request of the Securities and Exchange Commission (SEC) for all foreign service posts to disseminate the list of corporations engaged in illegal solicitation of investments, in order to prevent OFWs from being victimized by ponzi or pyramiding schemes.

The SEC has received reports that thousands of OFWs were swindled by these Ponzi or pyramid scheme operators with their enticing come-ons that offer to make huge profits from a small investment.

Pseudo-investment firms usually solicit investments ranging from P10,000 to P100,000, with a promise to investors their money will earn interest as high as 15 percent monthly. The firms usually do not clearly explain how they can give high interests to investors.

OFWs are easy targets because of their desire to make a lot of money in just a short amount of time.

In its letter to DFA undersecretary Jose S. Brilliantes, the SEC named 31 corporations believed to engage in unregistered investment activities. These included Atlantic Invest, Florentino Mateo Lending Services Inc., Golden Firebird Marketing, Vefloni Lending Services Inc., Asian Media Development Group Inc., Asian Islands Management Inc., BXI Properties and Holdings Inc., CITP New Century International, Crisis Solution Inc., Good Harvest Orchard Inc., Lead Lending Corp., Speed Credit and Collection, Access Credit & Development Group, AVG Group of Companies, MMC Investment and Finance Corp., Multitel Investment Corp., Multitel Investors Corp., Multitel Lending Corp., Phil-Asia Lending Investors Inc., Zurich Investment Group, AVG Lending Investors Inc., BGA Lending Investors Inc., Coinís Account Lending Services Inc., Red Dragon Lending Corp., Five Vision Consultancy Inc., Intercontinental Services Inc., Conrad Group and Associates Inc., Servlink Cargo Inc., Overseas Workers Stock Capital, Mateo Management Group, Tibayan Group of Companies.

Among these corporations, the SEC has so far issued cease-and-desist orders against Glasgow Credit and Collection Services Inc., CyberWeb Group, the Multitel Group of Companies, MMG or the Mateo Management Group of Companies, Tibayan Group, and Five Vision for illegally selling securities without proper registration.

The SEC has also discouraged OFWs from dealing with Powerhomes Unlimited Corp., which is suspected of engaging in pyramid activities. The corporate regulator, however, is unable to take enforcement action against Powerhomes because of an existing injunction issued by the Court of Appeals.

In view of this, the Philippine Consul in China immediately issued a circular, warning the Filipino community against placing any transaction with operators of pyseudo-investment scams. It also asked members of the Filipino community to immediately report any ongoing business involving these firms.

In recent months, reports of massive swindling and large scale estafa complaints involving Ponzi and pyramid scams have victimized housewives, employees, retirees, teachers, and even high ranking military police officers, with little opportunity for investment of capital.

Most of the victims have invested their life savings or money they earned working abroad in several get-rich-quick schemes in the hopes of getting extraordinarily high profits within a short period of time.

A Ponzi scheme is a type of investment fraud wherein the operator promises high financial returns that are not expected from traditional investments. Instead of investing victims’ funds, the operator pays the original investors with the money given by subsequent investors. Usually, enough money is returned to the original few investors to make them believe that profits are actually being realized.

Alarmed over the growing number of pseudo-investment firms in the country, Congress is drafting a bill that will ban "pyramid sales schemes and chain distribution plans" to protect the public from deceptive multilevel investment opportunities.

The SEC also underscored the need to come up with legislation that would strengthen the powers of regulators in going after pseudo-investment firms. The Commission said it can only regulate "Ponzi schemes" and pseudo-investment firms once these scams collapse and leave investors with bouncing checks.

House Bill 5601 aims to amend Republic Act 7394, or the Consumer Act, by declaring pyramiding sales schemes as forms of economic sabotage.

Under the measure, it would be illegal for any company to earn profits and revenue from the introduction of a new person into a sales scheme. It would also be unlawful for any entity to require its participants to sponsor a fixed number of new participants, each of whom must in turn sponsor another group of members, in order to earn income.

The bill also gives both the Department of Trade and Industry (DTI) and the SEC motu propio powers to cancel the registration of erring companies, and order their permanent closure to safeguard the assets.

Aside from the cancellation of registration, operators of pyramiding schemes shall be fined as much as P1 million, and a maximum imprisonment of one year. Under the existing Consumer Act, any individual that would be caught engaging in pyramiding operations would be fined by a few thousands of pesos and could be jailed for not less than five months but not over one year.

The SEC, meanwhile, is planning to ask the Integrated Bar of the Philippines to provide free legal assistance to victims of pseudo-investment scams, who can not afford to engage the services of a lawyer because of their current financial quagmire.

To expedite the filing of criminal cases against pyramiding operators, the SEC is also planning to ask the Department of Justice to provide a lawyer who would solely be in charge of preparing the complaints to be filed against perpetrators of fraudulent investment schemes.