There are a lot of “criminal geniuses” all over the world, and they mostly prey on the greed of people for easy money and quick profit. More likely than not, this was probably the reason why Legacy Group owner Celso de los Angeles – called a “criminal genius” by an exasperated lawmaker – was able to convince a lot of people to deposit their money in his banks, offering unbelievable interest rates and dangling cellphones, laptops and even cars as incentive. Of course, these people got the shock of their lives when these rural banks suddenly declared a bank holiday – leaving thousands of depositors empty handed.
What’s worse are subsequent revelations that the pre-need companies by Legacy have also collapsed, with 50,000 plan holders now left hanging and unsure about the future of their sons and daughters. Apparently, the Legacy Group engaged in pyramiding in its operations, attracting investors with an illegal “double your money” operation not registered with the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas.
A pyramid scheme promises high interest rates to initial investors who, more often than not, are encouraged to convince others to invest as well. Unknown to these people, the high interest rates given to initial investors come from the money put in by subsequent investors. Such schemes have been going on for so long it’s surprising that a lot of people still fall for it, even smart people like Speaker Prospero Nograles who reportedly invested as much as P20 million into the Legacy Group.
As a matter of fact, the US is full of “criminal geniuses,” from Charles Ponzi who is acknowledged as the “genius” who perpetrated this financial fraud, down to Bernard Madoff who capitalized on his reputation as a financial whiz to defraud rich businessmen, banks and even shrewd fund managers of $50 billion. The FBI said Madoff was able to deceive investors “by operating a securities business in which he traded and lost investor money and then paid certain investors purported returns on investment with the principal received from other, different investors.”A lot of Madoff’s victims come from the elite rich who frequent the exclusive enclaves of Palm Beach and Long Island, including a high-flying British fund manager and a tycoon investor.
But what’s worse is when these criminal geniuses snitch money out of poor people, like the beneficiaries of charitable institutions, schools and even a cancer foundation defrauded by Madoff. Even pension funds have not been spared, with a town in Connecticut reportedly losing $42 million worth of its assets. In the Philippines, those hardest hit by the Legacy Group’s bankruptcy include depositors and hapless parents who scrimped and saved to buy college educational plans for their children – who now might be facing a bleak future.
The world is certainly learning the hard way that free enterprise does not always work, especially when financial activities are allowed to go unregulated and uncontrolled. In the case of Madoff for instance, the US Securities and Exchange Commission is being sued for negligence and dereliction of duty for failing to detect the deception that has been going on for decades. Blame shifting and finger pointing certainly seems to be the order of the day, with a fund company going after its own auditors, blaming them for not detecting the fraud masterminded by Madoff.
Of course, the same goes for our own Securities and Exchange Commission whose chairman got quite a tongue lashing for the SEC’s alleged inability to safeguard public interest. Planholders claim they have alerted the SEC as early as 2006 about the problems with Legacy, but nothing came out of their complaints and Legacy was still allowed to sell policies to people. As a matter of fact, the complaining planholders were even reportedly threatened with libel by De los Angeles.
There’s a lot of sense in the suggestion of legislators for an independent body that can effectively regulate and control the pre-need industry and make sure that these firms do not squander their trust funds. Whether it’s the Insurance Commission as some have suggested or some other agency, what’s clear is that government has to step in and address this long-standing problem that has been bedeviling the pre-need industry since 2004 when big firms like College Assurance Plans and Pacific Plans Incorporated (PPI) collapsed.
In the case of PPI, however, the 300,000 planholders are seeing a tiny light at the end of the tunnel with the acquisition of the pre-need firm by our friend Noel Oñate. Noel is taking on the role of a hero – a knight in shining armor – trying to give these parents a lifeline by offering to return their money plus a 15 percent interest. Noel is a maverick who thinks out of the box, and his track record certainly attests to the fact that he has the talent to turn adversity into opportunity.
Of course, holding dialogues with the plan holders is a step towards the right direction because he can have them engaged in the new company’s 10-point action plan to turn the beleaguered company around in perhaps two to three years. If Noel can pull this one off, then I take my hat off to him for taking on a noble but nevertheless risky venture. But then again, good karma will surely come back to him for trying to help these people enjoy the fruit of their hard-earned investment.
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Email: babe_tcb@yahoo.com