SEC conducts probe of Legacy group owners, officials

The Securities and Exchange Commission (SEC) is conducting an investigation into possible criminal wrongdoing by the owners and officers of the Legacy group whose pre-need outfits closed shop without the consent of the corporate watchdog.

An SEC official said the Commission received complaints from several investors claiming they were defrauded millions of pesos by the group’s “double-your-money program”.

Under the program, investors will supposedly double their investment in three years and immediately get 10 percent of the plan maturity value. The balance of 90 percent will be paid in 12 equal installments through post-dated checks issued by the group’s pre-need firm Legacy Consolidated Plans.

“As you can see, their program is similar to a Ponzi scheme,” the SEC official said.

A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit. It usually offers abnormally high short-term returns in order to entice new investors.

The same SEC official said only the first three or four of the 12 checks issued by the group were successfully encashed.

“We’re still checking whether the Legacy group can be held liable for estafa. Hopefully, we can come up with something next month,” the SEC official said.

Legacy reportedly was once chaired by businessman and now mayor of Bicol Celso G. de los Angeles, The group comprises 10 banks which were ordered closed due to insolvency.

These banks were Rural Bank of Parañaque, Rural Bank of San Jose (Batangas), Rural Bank of Carmen (Cebu), Pilipino Rural Bank, Philippine Countryside Rural Bank, Rural Bank of Calatagan (Batangas, now Dynamic Rural Bank), Rural Bank of DARBCI, Rural Bank of Kananga (Leyte, now First Interstate Rural Bank), Rural Bank of Bisayas (Minglanilla, Cebu, now Bank of East Asia), and San Pablo City Development Bank.

These banks reportedly offered returns of as much as 30 percent per annum on huge deposits and misused collaterals surrendered by clients.

Last Dec. 20, Legacy Consolidated Plans Inc. Scholarship Plan Philippines Inc. and All Asia Plans Corp. filed for dissolution with the SEC due to tight liquidity problems but failed to inform the regulator when they closed down their offices.

Planholders of these three pre-need firms were directed to submit to the SEC their present and complete mailing addresses and contract numbers together with a copy of their plan contracts, certificates of full payment and other relevant supporting documents. They were also asked to file by March 31 their sworn complaints against the three companies.

Meanwhile, Congress should investigate allegations of irregularities involving the so-called Legacy group of rural banks.

The Philippine Deposit Insurance Corp (PDIC) expressed apprehensions that the conduct of hearings on the Legacy Group would delay the passage of the proposed amendments to the PDIC charter.

Also pending before Congress are the proposed amendments to the Bangko Sentral ng Pilipinas (BSP) charter intended to strengthen the central bank’s regulatory powers.

PDIC president Jose Nograles said over the weekend that the PDIC supports the Congressional initiative to investigate the alleged irregularities in the Legacy Group-affiliated banks recently placed by the Monetary Board under PDIC receivership.

However, Nograles said the approval of the PDIC Charter amendments should not be conditioned on these investigations.

“The Charter amendments are pre-emptive, proportionate responses to address the deepening global financial crisis,” Nograles said. “It is aimed at bolstering confidence in the stability of the banking system..this is needed at a time like this when the world faces a borderless crisis of confidence.”

According to Nograles, Congress should pass the proposal to increase the maximum deposit insurance coverage (MDIC) to P500,000 and to grant institutional and financial strengthening measures to PDIC in order to support the deposit insurance increase. – With Des Ferriols