Waging a war on investment scams

The Securities and Exchange Commission is working double time to educate the public against various investment scams.

“We regularly issue advisories that show more or less the scheme,” said SEC chairperson Teresita Herbosa.

Aquino said more people were now reporting fraudulent scams to the SEC.

“People are becoming more aware,” said SEC Enforcement and Investor Protection Department director Jose Aquino.

However, more than the advisories, what is necessary for investment schemes to end is the issuance of a cease and desist order, one of the victims of an investment scheme said.

“The SEC should issue CDOs so the companies can no longer operate,” said a victim of an investment scam who is also working for a government agency.

But the SEC said this was easier than done.

“Before we issue a CDO, there should be a probable cause. We need to have very sufficient evidence and not just base our actions on complaints,” Aquino said.

He said there should already be criminals that have been named as well as the victims.

“For example, we should already have sufficient witnesses that have executed their sworn statements,” Aquino said.

The process starts with the SEC’s EIPD filing a case and having it approved by the commission en banc. The complaint will then be filed before the Department of Justice (DOJ) for a preliminary investigation to start.

This year, the SEC has so far issued CDOs to 16 companies which include My Super Saver Co. Ltd., Seven Star General Merchandise, Dragon One Network Trends Corp., Pretty Pink Holdings Co. Inc., Goldxtreme Trading Co., Starjed Micro Financing Corp., Grandtime Automobile Inc., Techno Innovation Marketing Enterprise Corp., Satarah Wellness Marketing, Satarah Investment Group Inc. and Satarah Wellness International, Jacama Sales and Marketing, Klikmart, Success 200 International Corp., Grandtime Automobile Inc. and Bacoor Doctors Medical Center Inc.

As of the end of December last year, the SEC had 23 investment scam cases pending before the Department of Justice and 41 in various courts.

Sometimes, the cases drag on for various reasons such as when witnesses back out, or when the victims agree to a settlement.

One such case was against Rosario Baladjay, the so-called pyramid scam queen.

“In the case of Baladjay, we filed more than 100 cases but we won only around 65 cases because other witnesses disappeared,” Herbosa said.

Several estafa cases were filed against Baladjay for duping thousands of people to invest in her “pseudoinvestment” company, Multinational Telecom Investors Corp. (Multitel) which offered high interest rates to attract potential investors.

In December last year, the Makati City Regional Trial Court sentenced Baladjay and her husband Saturnino to at least 455 years in prison for 65 counts of violations of the Securities Regulation Code.

The court also ruled that the Baladjays are to be held civilly liable to indemnify the complainants with an amount totaling P8 million.

Lalaine Monserate, assistant director for the SEC’s EIPD, said each count of violation of the SRC (selling or offering for sale or distribution unregistered securities to the public) is punishable by seven years imprisonment.

The Makati Prosecutor’s Office, after receiving a complaint from the SEC, charged Saturnino and Rosario for violations of Section 8 of the SRC.

Each violation of the SRC is punishable, upon conviction, with a fine of not more than P5 million or imprisonment of seven to 21 years, or both, the SEC said.

Monserate said the SEC filed 127 counts of SRC violation against the Baladjays but only 65 prospered.

“Many of the complainants have refused to continue with the case because it had already dragged on for so long and they believe their money will no longer be returned,” she said.

Originally, the couple operated Multitel, which was not registered with the SEC.

The SEC then issued multiple CDOs against Multitel and its officers, leading the accused spouses Baladjay to register Multitel International Holdings Inc. ( MIHI) with the SEC.

The MIHI, though registered with the SEC, used several conduit corporations to continue their illegal operations.

Despite the SEC’s efforts, however, officials lamented that more often than not, the victims do not get their money back.

For instance, in the case of Jose “Jay” Penaflor, the former Philippine Stock Exchange employee whom authorities described as the Philippines’ version of the Wolf of Wall Street, was estimated to have duped victims of P100 million to P300 million.

He is currently facing a string of cases including a syndicated estafa complaint filed by his cousin-in-law Francis Cruz, whose family alone was duped of an estimated P12 million.

Another syndicated estafa complaint was filed by a Filipina-Chinese victim who claimed to have lost P10 million in principal and interest to Peñaflor.

Peñaflor, in his counteraffidavit submitted to the DOJ, admitted taking investments from investors but denied duping them.

Scamming tactics

According to the Washington-based National Crime Prevention Council, there are different tactics employed by scammers.

These include compassion or using messages that appeal to the heart, phantom riches or dangling the prospect of wealth, highlighting source credibility by stressing positions of authority which means that person is trustworthy and another tactic is appearing to be the victim’s friend to gain trust.

SEC commissioner Ephyro Amatong, for his part, said there were many legitimate investments such as the Philippine Stock market where investors could put their money instead of these scams.

He said investors should check and double-check the transactions they enter into and not be swayed by these get-rich-quick schemes.

At the end of the day, SEC’s Herbosa said: “If it’s too good to be true, it must be a scam.”