Too good to be true: Why the government is shutting KAPA down
MANILA, Philippines — President Rodrigo Duterte last week said he wants KAPA-Community Ministry International, Inc. shut down amid allegations that the non-stock corporation is operating a fraudulent investment scheme.
Duterte issued the order during his interview with religious leader Apollo Quiboloy. The president also said he wants other investment scams closed.
KAPA stands for Kabus Padatoon, which is Bisaya for "make the poor rich," but authorities warn it will actually not do that.
Here’s an overview of KAPA’s woes and why it was targeted by authorities.
What corporate regulators say
The Securities and Exchange Commission on Monday said the Court of Appeals — acting on a petition filed by SEC and the Anti-Money Laundering Council — issued a freeze order on several banks accounts and other assets linked to KAPA.
The country’s corporate regulators earlier revoked the certificate of incorporation of KAPA for "serious misrepresentation as to what it can do or is doing to the great prejudice of or damage to the general public."
According to SEC, KAPA was found to have recruited and encouraged members to "donate" any amount in exchange for a 30% monthly return for life, without having to do anything other than invest and wait for the payout.
SEC said such a scheme constituted the sale and offer of securities in the form of investment contracts, adding that KAPA solicited investments from the public despite not having the secondary license to do so.
KAPA continued its operations despite being issued a cease and desist order by the SEC on February 14. The commission also revoked its certificate of registration in April.
"KAPA is running a scam. Its financials do not show that it has a capability to deliver. We have to put a stop to it, otherwise there will be more victims who will be recruited and bring in money," SEC Chairperson Emilio Aquino reportedly said.
FROM BUSINESSWORLD: SEC goes after religious group operating scam
Ponzi scheme?
SEC explained that KAPA’s activity also constituted a “Ponzi” scheme, an investment program that offers impossibly high returns and pays investors out of capital contributed by newly recruited members.
The SEC also noted that KAPA’s investment scheme is “unsustainable.”
“To illustrate, KAPA will need P15 billion a month to pay five million members, who have contributed at least P10,000 each. Without recruiting new members or soliciting more investments from the public, the pooled funds will not last beyond three months,” corporate regulators said.
"In offering and selling securities, KAPA committed an ultra vires act exceeding the privilege granted to it and misrepresented itself to the public by concealing this investment scheme in the guise of a donation to entice the public to donating when in truth and in fact they are investing," they added.
KAPA says open to probe
With its assets frozen, KAPA will no longer be able to give investors the returns they were promised. The SEC said investors may file a class suit against the group to recover their investments.
SEC’s Aquino said they are in the process of filing criminal charges against KAPA and its officials, but declined to specify what the charges will be.
In an interview with CNN Philippines Tuesday, KAPA member and Ahon sa Kahirapan Movement convenor Danny Mangahas denied that the religious group’s founder, Pastor Joel Apolinario, is running an investment scam.
“Bukas naman po kami sa imbestigasyon, bukas naman po ang aming founder na buksan ang aming mga opisina,” Mangahas said.
(We’re open to any investigation. Our founder is willing to open our office.)
Philippine National Police Chief General Oscar Albayalde reportedly said they are already building up the case against KAPA. — Ian Nicolas Cigaral with a report from BusinessWorld
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