Witchhunt

Imputing guilt by association is the easiest thing to do. It is also an endeavor most prone to irresponsibility and injustice.

It always happens, when a scandal breaks out: the culprit is roasted, often justly, and then all his friends are burned regardless of their proximity to the crime. In the midst of an uproar, we often fail to distinguish between proximity to a person and proximity to a crime.

Lynching mobs do not make such fine distinctions. But those distinctions are also grave. They may unjustly smear the truly innocent.

Even worse, the wholesale slaughter of reputations resulting from reckless imputation of guilt by association also succeeds in obfuscating the real issue at hand.

Take the case of the Legacy scam, for instance.

The principal architect of this scam, Celso de los Angeles, deserves to be raked over the coals. He piloted a ship that leaked like a sieve. Everyday, it seems, we are treated to new evidence about how company funds were siphoned off to private hands, resulting in great personal enrichment even as the companies quickly sunk.

This should be a classic case study in bad corporate governance for use in all our business schools. The sidestreaming of company funds was systematic and occurred on a horrendously blatant scale. The financial products sold to unwitting clients were all so unsustainable that, even absent the sidestreaming, those companies would have collapsed anyway.

Instead of carefully dissecting the elements of this fraud, media coverage here tends towards indolent speculation on who de los Angeles’ friends were. Politicians were quick to jump onto the bandwagon, seizing every opportunity to link their rivals to the scandal simply by personal association.

The billion-peso scam pulled by de los Angeles is a minor replica of the billion-dollar scam pulled by Bernard Madoff in New York. But the treatment of the two cases by their respective publics could not be more different.

First of all, Madoff is now in jail. His personal wealth has been garnished. The man could not issue a check to anyone and every attempted transfer of valuables to family and friends has been intercepted by the authorities.

De los Angeles, by contrast, entertains himself by attending congressional hearings and offering to cut a deal with the authorities in order to get off with lighter penalties. He grandstands by promising his depositors that they will all get paid — out of public funds, of course. Once, with such arrogant air, he sent over one of his many luxury vehicles to be abandoned at the offices of the PDIC.

There is very little media discussion about who Madoff’s friends are — and not only because he probably had very few. Anyone who understands finance knows that one evil genius can single-handedly pull off a very large scam.

Over here, by contrast, politicians seem to be intent on sensationalizing this case of fraud by dragging into the case anyone who might have wandered within ten feet of the principal architect of the scam. In the meantime, the evil genius remains out of jail while the public remains unenlightened about the truly important aspects of this issue: what are the mechanics of this scam and how may it be prevented in the future so that credibility might be restored to our capital markets.

This is perhaps because the politicians who have appointed themselves co-investigators of this scam are more interested in sensationalizing the case and raising their own media visibility than in educating the public on the need to build strong regulatory institutions.

For instance, I do not see the relevance of dragging into the arena of public scorn the husband of SEC chair Fe Barin. His “crime”, it seems, was that he sold an old vehicle to an employee of the Legacy group years ago.

Unless it is established that the battered vehicle was sold at many times its true market value — which is a shrewd way to taking a bribe — then there is really nothing irregular in the transaction. No one has told us that the vehicle was oddly priced at the moment of sale.

This is quite unlike the case of the property supposedly purchased by SEC commissioner Jesus Martinez from Legacy. From the pictures, it seems the property was sold way below market price. But we have not been provided the important facts on this either.

Another probable victim of this reckless spree of imputing guilt by mere association is Parañaque Rep. Ed Zialcita.

One, as they say, cannot choose one’s relatives. For better or for worse, it turns out Zialcita is a second-cousin of de los Angeles. There is nothing that suggests he is an investor in the Legacy group, although much unjust hay has been made about one Legacy rural bank being located in Parañaque.

Like most politicians, Zialcita runs programs for the poor in his district. Like everybody else, he relies on people with some money to spare to keep those programs running. It turns out, de los Angeles donated money for these programs. Zialcita claims he never personally profited from the donations.

He did not, as some parishes do when they accept money from jueteng lords, inquire into the quality of corporate governance of his donors. At any rate, the congressman was in no position to influence regulatory actions on this particular donor.

The only conceivable way he could have assisted his distant relative was by passing a law legalizing pyramiding scams — which he cannot, of course, do. But, by trusting the generosity of donors as most of us usually do, Zialcita now finds himself vulnerable to imputation of guilt by mere association by those with other political agenda to pursue.