RP's Madoff

Top officials of the Securities and Exchange Commission, the Philippine Deposit Insurance Corp. (PDIC), and the Bangko Sentral ng Pilipinas (BSP) were grilled in Congress for the past two weeks. Our lawmakers are taking them to task for their failure to protect the public from what is turning out to be a pyramiding scam by the bankrupt Legacy Group.

What is becoming clear from these public hearings is the fact that these government regulators detected the scam as far back as 2005. But the irony of it all is that the principal owner of Legacy, Celso de los Angeles, was able to continue with this get-rich-quick scam without losing his shirt. In fact, he even won a local elective post in 2007 and got richer.

At the first Senate hearing last week, the political affiliation of De los Angeles, the town mayor of Sto. Domingo in Albay, became a side comment between Senators Mar Roxas II and Chiz Escudero. Under questioning by Chiz, De los Angeles disclosed he belongs to the Liberal Party-wing of Department of Environment and Natural Resources (DENR) Secretary Lito Atienza. “Ah, LP ka pala,” Chiz chirped. But Mar merely smiled and did not make any comment for obvious reasons.

Both Mar and Chiz, as we all know by now, have moist eyes trained on the May 2010 presidential elections. Mar, who is LP president, is the declared presidential timber of their party. Chiz, meanwhile, along with Sen. Loren Legarda is being considered by their Nationalist People’s Coalition (NPC) party as their presidential standard bearer in next year’s elections.

The Senate inquiry into the Legacy case is jointly undertaken by the Senate Committee on Trade and Commerce — chaired by Mar — and by the Senate Committee on Banks, Currencies and Financial Institutions, chaired by Chiz. Though De los Angeles is a fellow Bicolano of Chiz, in his usual fast, humdrum monotone speaking, was not sparing on his sharp questions on the Legacy chief.

Mar has been impassioned in his perorations against the government regulators. SEC officials led by chairperson Fe Barin got most of it from Mar who expressed in strongest terms the public’s frustration over their not being able to protect the hundreds of pre-need plan holders of Legacy who lost their life-time savings in this Ponzi-like scam.

Their House counterparts have also conducted their parallel public hearings on the Legacy case. When De los Angeles finally appeared yesterday at the House hearing, Nueva Vizcaya Rep. Carlos Padilla raised the issue of the Legacy chief’s testimony at the Senate where the latter presented himself as a “victim” and not the “predator” who preyed upon their unsuspecting pre-need planholders.

This was because at the Senate hearing, De los Angeles turned the table against BSP officials. He claimed that the brother of former BSP deputy governor Alberto Reyes, Efren, had sought two loans amounting to P2.53 million from his banks in 2003 and that every time he demanded for payment, the BSP would suddenly seek a “special audit” of all his banks. De los Angeles also claimed that this “harassment” on his companies were allegedly continued by Reyes’ successor, incumbent BSP deputy governor Nestor Espenilla who rejected his application for the merger of his banks on several occasions.

Reyes and Espenilla vehemently denied the allegation when they testified Monday at the House hearing. As described by the Monetary Board, chaired by BSP Governor Amando Tetangco, the Legacy group operated like one big, organized syndicate that kept their money spinning around the firms that could not even be traced to De los Angeles. It drew comments from one of the congressmen that De los Angeles is a “criminal genius” in the molds of accused Wall Street swindler Bernard Madoff.

But at least in the case of Madoff, his assets were temporarily frozen by court order two months ago. The 70-year old Madoff, the former Nasdaq stock market chairman, is facing criminal and civil charges at the US District Court in Manhattan. This, after US authorities said in December last year that he admitted to running a Ponzi scheme over many years with losses of $50 billion.

Madoff is under house arrest and 24-hour surveillance in his luxury Manhattan penthouse apartment following his arrest for what authorities have called the biggest Ponzi scheme in history. In a Ponzi scheme, early investors are paid with the principal received from newer clients.

But De los Angeles is a free man and is not facing any criminal cases. He has a mansion in Cebu, a yacht, a fleet of expensive cars and even monetized his ownership of a mansion in the posh Ayala Alabang one week before his companies closed down. This came out at the resumption of the Senate hearing on Legacy yesterday.

The BSP filed over the weekend before the Department of Justice (DOJ) criminal charges of falsification of public and commercial documents against 18 executives and employees in four of the rural banks owned by the Legacy Group. And since he is not a listed official or stockholder in any of the Legacy conglomerate, De los Angeles was not included. This naturally drew questions how come De los Angeles appeared to be untouchable.

The SEC says, they too, will soon file a different set of criminal cases against Legacy and De los Angeles. The PDIC, on the other hand, announced they will start the payout of depositors of 15 rural banks that closed under the Legacy Group. The PDIC, headed by Jose Nograles, brother of Speaker Prospero Nograles, will settle the P14-billion in total insurance claim of depositors in the 15 Legacy rural banks. The first payments will be made to those who have P100,000 or less in deposits.

By the way, the Speaker is among those who were victimized by De los Angeles. As per De los Angeles’ own admission, his company still owes the Speaker at least P10 million under this double-your-money scheme in three years time. The PDIC has validated at least 35,000 small accounts under the Legacy banks which closed down in the last two months. While it will be good news for the victims of De los Angeles, we, the taxpayers will have to shoulder it. In the meantime, we could only speculate how the lawyers of De los Angeles could save him from even serving jail term. But then, again, he may run for another term in public office in May 2010. That’s how crooks usually get loosed from their crime here in our country.