Never since the late 70s when Agrix Marketing, Inc., the first recorded pyramiding case in the Philippines, duped thousands of too-trusting fishermen, farmers, rural teachers and pensioners has there been a resurgence as far-reaching as today’s.
As early as April of 2002, the Securities and Exchange Commission (SEC) issued an advisory, albeit apparently not heeded, that warned of schemes masquerading as "investment opportunities" but in reality were scams of the highest order.
Overnight, retirement pays and life savings were trapped and their recovery near impossibilities. After Rose Baladjay’s Multinational Telecoms Investors Corp. (Multitel) caved in, others soon followed – the Mateo Management Group, the Tibayan Group and the Maria Teresa Santos Management Group.
It is amazing to note that investigating authorities estimate the total damage cost arising from the collapse of these pyramid companies to have reached hundreds of billions of pesos. Makes you wonder where all this money came from and went.
Whilst amounts reported by media appear overstated and dramatized, what is real are the thousands of "investors" that were badly burned.
It won’t be surprising if some of these gypped investors will remain unidentified because they are either too embarrassed at having been conned or could endanger their political careers after being projected as intelligent elected officials.
But the profile of the average ensnared victim surprises us. The duped "investor," it turns out, is a member of the middle class, educated and often highly regarded in his respective community.
Perhaps Filipinos are by nature excessive risk-takers and gamblers. Many of those who were lured knew the risks, and had vowed to "invest" for just one month. But when the first interest paycheck came, the temptation to stay on was just too hard to resist.
Some who were recruited by Multitel as early as 2000 already earned hundreds of thousands, if not millions, of pesos in interest for their initial investments. Emboldened by astounding gains, the victims kept on rolling over their principal, praying for luck, until it was too late.
Never mind that the SEC, Bangko Sentral ng Pilipinas and the Department of Trade and Industry have issued warnings to the public to avoid companies that promise higher-than-market interest rates. Never mind that these scams do not produce goods or services, or have no licenses to sell securities.
"Investing" after all in these pyramiding companies is no different from being a part-owner of the neighborhood paluwagan that preys on people who are willing to pay P200 interest a day on borrowings of P1,000, whether because of an emergency or to use as capital for a small business.
Yes, usury is alive and kicking, and numbing people’s sense of reality. When such practices as "5:6" (making a daily P1 profit for every P5 loaned out) abound, the highly attractive profits promised by pyramiding companies become believable and acceptable.
Take note that regular savings earn less than a percent per annum when you subtract the 20-percent withholding tax. A 30-day placement in time deposit earns only six percent per annum, or 0.4 percent monthly, when you subtract all taxes.
For someone with half a million peso savings and trying to live on interest earnings alone, a promise of P50,000 a month returns from what is initially described as legitimate multi-level or network marketing company is a temptation difficult to resist.
Now you can understand why there are more pyramids in the Philippines than in Egypt. The only difference is that local pyramids don’t last.
Starting Monday, Isyung Kalakalan at Iba Pa will highlight the issues surrounding the mining industry. Is this sector worthy of development? Or is this another area where a developing country like ours will just be exploited and environmentally ravished by foreign mining speculators. Watch it.
Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reygamboa@linkedge.biz. If you wish to view the previous columns or telecasts of "Isyung Kalakalan at Iba Pa," you may visit my website at http://bizlinks.linkedge.biz.