Investors “lost” $250 million in PIPC scam – Senate probe

Investors ‘lost’ $250 million in PIPC scam — Senate probe


An estimated $130 million to as much as $250 million worth of savings by private individuals were “lost” in the so-called Performance Investment Products Corp. (PIPC) scam, the company that a number of prominent personalities poured their investments into, the minimum amount of which was pegged at P2 million each.

Initial findings during a hearing yesterday by Senate investigators yielded this information alongside the assessment that the firm allegedly designed a scheme to dupe hundreds of persons from the very start.

Sen. Manuel “Mar” Roxas II, chairman of the committee on trade and commerce, noted the apparent failure of governance by concerned agencies that led to the commission of one of the controversial investment schemse that could also be considered another form of so-called pyramiding plot.

“Any recovery of the money invested into this, I think is nearly impossible. I don’t think there’s anyone who can realistically expect recovery (of their money),” the senator told reporters after the hearing, adding Singaporean Michael Liew who owned PIPC could no longer be found since his reported disappearance last July after the controversy first broke out.

Roxas, however, said they would continue with the inquiry despite a seeming gloomy ending for the “victims” of PIPC as his panel is also considering taking up a similar case, that of the infamous FrancSwiss company that alleged to have engaged in pyramiding scheme.

“The hearings are not yet over, but we already saw there was a grand design to dupe people in our country. Corporations keep changing their names and they used many schemes to lure investors,” he added.

The senator stressed they expect that criminal cases will be filed with the appropriate agencies “but in the meantime, we will look for ways to prevent this from happening again by coming up with stricter laws.”

“There are indications of possible remedial legislation because the laws in the books right now do not reflect the kinds of transactions that are being promoted by these entities,” Roxas said, adding the Securities and Exchange Commission (SEC) is expected to adopt in the future a more proactive stance on matters concerning this kind of transactions.

The committee, in its first public hearing, learned that the PIPC, registered as a research company and alleged local subsidiary of PIPC-British Virgin Islands, was not allowed to engage in foreign exchange services or to deal with securities such as investment contracts.

Yet, it actively sought prospective clients of investment products worth at least $40,000 each, with a promised high return of 12 to 15 percent annually, the senator said.

In their devised scheme, Senate investigators were told that their transactions involved trading of so-called future derivatives either through dollar, euro, yen or pound currencies or precious metals such as gold.

Roxas said they were also told that not only one company is involved in this issue but many others, including those operating in other countries such as Japan, India and China, all commonly being owned by Liew.

He added the laws on investment products must be strengthened to prevent the proliferation of similar “Ponzi” scams.

Regulators, such as the SEC, must also take a more proactive stance for the public.

“We also look upon the SEC to adopt a more proactive stance. SEC simply says, ‘well, unless there’s a complaint, we can’t do anything about it.’ Of course, during the good times, the interests were high, no one is complaining. But when the time comes someone files a complaint, it’s too late, the alleged perpetrators are no longer to be found,” he added.

Angie M. Rosales

Government freezes accounts of PIPC execs

Government freezes
accounts of PIPC execs
By Jun Vallecera

Regulators have frozen the bank accounts of people with established links to the Philippine operations of Performance Investment Products Corp. (PIPC) and related companies in the British Virgin Islands, Hong Kong and Japan.

The Anti-Money Laundering Council has frozen the bank accounts of whistle blower Cristina Gonzales-Tuason, PIPC incorporators Ernest Sy and Janice P. Silvestre and that of PIPC chairman and president Michael H.K. Liew, who absconded with the money.

The value of the frozen accounts was not revealed, but the different accounts in 15 banks and financial institutions operating in the country were cited.

These included accounts opened in Asia United Bank, the Bank of the Philippine Islands, Equitable PCI Bank, which has been folded into Banco de Oro (BDO) Universal Bank, the International Exchange Bank, the Metropolitan Bank and Trust Co., Rizal Commercial Banking Corp., Union Bank of the Philippines and the United Coconut Planters Bank. Also covered by the freeze order were accounts opened with HSBC Savings Bank, Citibank NA, Banco de Oro Private Bank, Pru Life Insurance Corp. of the United Kingdom and BDO.

Of the estimated $138 million allegedly hoodwinked from up to 3,000 moneyed Filipino investors, only some $2 million remained intact, according to earlier reports.

Finger Pointing

When the house of cards fall… the finger-pointing begins.

Investment fund manager says she was victim, too
By Tina Santos
Last updated 06:23am (Mla time) 07/31/2007
DESPITE investors’ claims that it was she who enticed them to invest their money in the foreign exchange trading firm Performance Investment Products Corp. (PIPC), Cristina Gonzales-Tuason, the company’s general manager, insisted Monday that she, too, was a victim of the investment scam.

Accompanied by her two lawyers, Mario Bautista and Gener Ballesteros, Tuason appeared at the National Bureau of Investigation anti-organized crime division (AOCD) at 10 a.m. Monday. She, however, refused to answer questions from the media.

“She’s definitely a victim,” Bautista told reporters, adding that his client went to the NBI in response to the subpoena issued by the bureau last Tuesday.

“We wish we knew,” he said when asked if Tuason knew where Michael Liew, the Singaporean owner of PIPC who allegedly disappeared with at least $250 million of investor money, was.

“We were the ones who asked the NBI to look for Liew. We’re looking for Mr. Liew. He just disappeared with all the money,” Bautista said.

Oscar Embido, assistant regional director and chief of the NBI-AOCD, said Tuason inquired about the nature of the complaints filed against her by at least five investors.

Four of the five investors filed their complaints Monday. The fifth, a businessman in his 30s, lodged his charges last week.

“Ms Tuason asked for five days to file a counter-affidavit to refute whatever charges the complainants had filed against her,” Embido said, adding that he expected her to personally appear at the NBI again on Friday morning.

“She has to come because she has to give [her statement] under oath,” he said.

The NBI, meanwhile, has set up a public assistance center at a hotel to entice investors to come out in private and cooperate in the probe.

The center is in the Azure function room on the 8th floor of The Pearl Manila Hotel which is across from the NBI headquarters on Taft Avenue, Manila. Tel. Nos. are +63 2 4000088, local 3010 and 3011, and +63 927 4845883.

The center will receive complainants round-the-clock Monday to Friday, the NBI said.

“We wanted to provide a private space for investors who might want to but are hesitant to come out and speak up regarding their PIPC investments,” said lawyer Ruel Lasala, head of the NBI National Capital Region.

Lasala was quick to add, however, that the creation of an assistance center in a hotel was not meant to give the investors special treatment.

“Most of them were mum about the issue so we thought of a friendly approach. This is our way of encouraging them to cooperate with us,” he said. “Besides, they’re complainants, not suspects.”

Reynaldo Esmeralda, NBI deputy director for regional operations services, said the center’s expenses will come from the bureau’s intelligence fund.

At the Senate, Sen. Juan Ponce Enrile wants the chamber to investigate PIPC in aid of legislation “to determine the machinations used by PIPC to perpetrate its scheme and circumvent the law.”

In a resolution he filed Monday, Enrile said PIPC had illegally engaged in foreign exchange trading even as it was registered with the Securities and Exchange Commission for the last nine years as a “research company.”

Enrile said the Senate would look into the “alleged illegal investment syndicate involving the PIPC which has caused losses of millions of dollars in foreign exchange trade, with the end in view of recommending remedial measures to protect the investing public.”

With a report from Dona Z. Pazzibugan

Asian Investors Rattled by Dow’s Plunge

Asian Stocks Tumble in Wake of Wall Street’s Plunge; Nikkei Down 2.4 Percent

By Mari Yamaguchi, Associated Press Writer

Friday July 27, 4:23 am ET

TOKYO (AP) — Asian markets tumbled Friday in the wake of one of Wall Street’s biggest losses of the year, with Japanese stocks also taking a hit on the yen’s recent strength and uncertainty over weekend elections.

Markets in Hong Kong, Australia, South Korea, Taiwan, Singapore, Malaysia and the Philippines also fell sharply. Mainland Chinese stocks, however, remained flat.

Investors were rattled after U.S. markets plunged Thursday amid worries over the U.S mortgage and corporate lending markets. Those woes could cause global liquidity to dry up as international investors pull out of riskier assets, including Asian emerging markets, analysts said.

“If big foreign funds have selling orders, they tend to go by region. If they sell Asia funds, they do it to reevaluate portfolios or cover losses in the U.S.,” said Rommel Macapagal, chairman of Westlink Global Equities

“But for local investors, it’s a sentiment. When big drops occur, they tend to get jittery because of expectation of foreign funds selling. They tend to get out,” he said.

In Tokyo, the Nikkei 225 index sank 418.28 points, or 2.36 percent, to close at 17,283.81 — nearly a three-month low. Losers included Honda Motor Co., Toshiba Corp. and Nikon Corp.

Philippine stocks suffered their biggest percentage drop in 10 years, sinking 3.9 percent. Taiwan’s benchmark index fell even more, dropping 4.2 percent.

The sell-offs also came after stunning rallies in Asian markets — stocks in South Korea, China and India hit records just this week — and some investors viewed Wall Street’s drop as a good opportunity to sell and lock in their profits.

South Korea’s benchmark index dropped 4.1 percent, its biggest drop in more than three years. In afternoon trading, Hong Kong’s Hang Seng index was down 1.9 percent, while Indian shares fell 3 percent in morning trading.

Chinese markets, however, shrugged off the declines. The benchmark Shanghai Composit Index slipped just 0.03 percent after hitting an all-time record high on Thursday.

In Tokyo, Japan’s Chief Cabinet Secretary Yasuhisa Shiozaki, brushed off concerns about the influence of the U.S. stock market on Japan’s economy. The Dow Jones industrial average plunged 311.50 points, or 2.26 percent, Thursday to 13,473.57, its biggest point drop since Feb. 27.

“The Japanese economy is expanding stably and I have not heard that there have been any major fluctuations in other key countries,” Shiozaki said.

Investors in Japan were also unnerved by the yen’s recently appreciation against the dollar, which erodes overseas income at the country’s key exporters. The dollar fell to 118.70 yen in afternoon trading in Tokyo, down from 119.46 yen late Thursday in New York.

“A stronger Japanese yen has a greater impact on today’s Nikkei than overnight losses on U.S. stocks,” said Hiroyuki Fukunaga, chief strategist at Rakuten Securities.

There was also anxiety in Japan about Sunday’s upper house elections. Recent newspaper polls have predicted that the long ruling Liberal Democratic Party could win fewer than a third of the seats contested in Sunday’s upper house elections.

A defeat would not immediately threaten its hold on power, but Prime Minister Shinzo Abe could face pressure to resign from other leaders within his party and from the public.

Associated Press Writer Hrvoje Hrjanski in Manila contributed to this report.

Subprime Woes Go Global…

Subprime Woes Go Global…

Good day… Without any data in the U.S. and a slow data day in Europe, the currency markets continued to track along their recent trend lines, which are US$ negative. The mood of the markets continues to be one of trepidation as traders wait to see just what the subprime mortgage mess will bring next. Traders continue to come to the realization that the U.S. housing slowdown and subprime mortgage mess will not go away quickly.

Data due out today and tomorrow will do little to calm their fears. The ABC Consumer Confidence number and Richmond Fed Manufacturing Index are the only two reports which will print today, and neither is expected to show much strength. Tomorrow we get a snapshot of the housing market with the release of MBA Mortgage Apps. & Existing Home Sales in the morning, followed by the release of the Fed’s Beige Book in the afternoon. Existing Home Sales will be the driver of the markets and are expected to show a month-on-month drop of 2.1% in June.

With the markets nervous about this week’s housing reports, the dollar weakened against all of the 109 most active currencies. Even the Japanese yen got in on the fun as it strengthened to a two-month high vs. the greenback. The dollar’s slide accelerated after the dollar reached levels that triggered automatic sell orders.

News released yesterday shows the subprime rout is going global, as Reuters reported that Basis Capital Fund Management Ltd., an Australian hedge fund, is hiring Blackstone Group LP to advise the fund on limiting its losses. It seems Basis Capital Fund bought into the CDO markets, and these investments are falling fast. I also read that Japan’s nine biggest banking groups have more than 1 trillion yen of combined holdings in products backed by U.S. subprime mortgages.

This is an interesting twist to the mortgage mess, as foreign investors are starting to feel the pain. These foreign investors have been pouring money into the U.S. markets, supporting our deficits and keeping our dollar strong. We have been talking about how these foreign investors will start moving away from their U.S. investments on interest rate differentials, and this latest report of subprime losses will only serve to accelerate these sales.

In the category of ‘what is he smoking,’ U.S. Treasury Secretary Henry Paulson was on CNBC yesterday and said that problems in the subprime mortgage loan sector could be contained and would not hurt the overall economy. I think Mr. Paulson should try and tell that to investors in his former firm’s hedge funds! Confirming our assertion that the Treasury Secretary must have been on something, he followed up his subprime comments with a statement that a strong dollar was in the best interest of the U.S. Tell that to the manufacturers who are trying to compete with Asia!

Dollar losses vs. the euro were limited as offsetting economic reports released this morning made it difficult for traders to establish a direction in early trading. The conflicting data started on the consumer side as French consumer spending surprised to the upside rising 1.6% from the .7% which was expected. This was the best reading since August 2006 and was buoyed by a sharp reduction in French unemployment. On the other hand, Italian Retail Sales showed a far more tepid rise of just .1% vs. .3% projected.

Other data this morning showed growth in Europe’s manufacturing and service industries slowed more than economists expected in July. The Royal Bank of Scotland Group Plc’s combined index fell to 57.3 from 57.8 in June as reported by Reuters. While this index did fall, any reading above 50 indicates expansion. This negative data was offset by German import prices, which increased more than economists expected in June. German prices rose 1.3% in the year, the biggest gain since December of 2006. These price gains will continue to put upward pressure on the euro.

The pound sterling rose to the highest in 26 years against the dollar on further speculation the BOE will raise interest rates at least once more this year. Much of this recent movement in the pound is due to momentum as data released today should have been somewhat negative for sterling. British factory orders unexpectedly fell in July, but currency traders largely ignored this data and continued to make bets the pound will rise. The BOE will meet next on August 2nd but will probably wait until September to make their next move up.

Two other currencies which have been benefiting from interest rate differentials are the New Zealand and Australian dollars. The New Zealand dollar moved over .81 cents for the first time last night before moving back down in early European trading. The Australian dollar also continued to gain and hit a new 18-year high. Both currencies continue to benefit from some of the highest interest rates in the industrialized world. The New Zealand central bank is expected to boost its key rate a quarter of a point this week. New Zealand’s dollar will extend its rally to 83 cents, said John Key, the leader of the nation’s opposition party and former European head of global foreign exchange at Merrill Lynch.

The Aussie dollar gained yesterday after a govt. report showed producer prices rose by more than economists expected in the second quarter. A report tomorrow is expected to show Australian inflation accelerated last month. Australia’s consumer price index probably gained 1 percent in the second quarter, compared with .1 percent in the first three months of the year. These higher inflation numbers will continue to push the Reserve Bank of Australia into raising its overnight cash rate at their next meeting on August 8.

In preparation for my presentation later this week at the San Francisco Money Show, I ran a spreadsheet calculating the currency returns for all of our different Index CDs. I was happy to see that all of these indexes had returned over 9% annualized on a year-to-date basis. The Commodity Index was the top performer, with a currency-only return of 9.63% during the first seven months. Our new WorldEnergy Index was second with a currency return of 9.29% and the Prudent Central Bank was number three at 8.54% so far in 2007. Even more impressive are the total returns (including interest) for these Index CDs. The Commodity Index was still the top at 14.38%, followed by the WorldEnergy at 13.61% and then the Prudent Central Bank at 12.09%. GREAT STUFF!!

Currencies today: A$ .8847, kiwi .8082, C$ .9565, euro 1.3812, sterling 2.0602, Swiss .8298, ISK 59.15, rand 6.8237, krone 5.7313, SEK 6.6390, forint 178.15, zloty 2.7226, koruna 20.4079, yen 120.80, sing 1.5059, HKD 7.8217, INR 40.2325, China 7.5685, pesos 10.7742, dollar index 80.22, silver $13.335, and gold… $682.97

That’s it for today… We are back at full staff this morning, so it should be a better day on the desk. The big boss Frank Trotter emailed me from Vancouver last night where he is one of the key speakers at the Agora Wealth Symposium. He is expecting some great crowds out there. I still have to finish the presentation for San Francisco, so got to get to work! Hope everyone has a great Tuesday.

Filling in for Chuck Butler:

Chris Gaffney, CFA
Vice President
EverBank World Markets

The US Dollar: On the Edge of the Abyss

We are literally about half a point from seeing the US Dollar break its single most important support level. Here, eighty is the magic number, watch the USD fall below 80 and you have witnessed the beginning of the end of the dollar and the dawn of a terrific run in gold prices that will take the yellow metal to an all time high in a surprisingly short period of time.

Over the last year, as the chart below demonstrates, we have watched the dying dollar make lower lows and lower highs. The USD occasionally makes a pathetic attempt to break its 200dma, but that has only happened a couple of times over the last year. Indeed, the USD has not been above its 200 day moving average since the 50dma crashed down through the 200dma in early April 2006.

On the Edge of the Abyss

The USD has fallen over two points in the last fortnight or so, and this rate of decline will continue if it breaks the support level at 80. When the USD was testing this support at the beginning of 2005, it went on a terrific run to 92.63 but somehow we do not think that the dollar will be able to pull another rabbit out the hat as it did then. More and more investors are coming around to the fact that the USD is dead and people do not want to hold this rapidly devaluing paper anymore. When the USD breaks 80, the whole world will see a big sell signal and this influx of people dumping dollars will send the greenback down into the abyss and its anyone’s guess how far it can fall, but it will fall…a lot.

The US Dollar - On the Edge of the Abyss

However there is one fan of the USD, a fan that will try and keep the dollar up or at least “manage” its invertible collapse. That of course is the US Government. Armed with Ben Bernanke’s Plunge Protection Team, you can bet you bottom dollar (although shortly it might not be worth much) that they will do everything possible to make sure their currency does not have a full blown crash. They would rather that USD gradually floated down in a way that would benefit US exporters. Trying to manipulate the market is a dangerous game, as no person, company or government is bigger than the market and eventually the market will fight back and win.

In fact the more an entity tries to suppress something, whether this be the financial market or something as simple as an idea, the more drastically the suppressed force will fight back. Therefore all the Plunge Protection Team are doing by trying to prop up the dollar or the stock market is delaying the invertible and making the backlash reaction all the more dramatic. You can try to push the bad times back, but this will just make the bad times worse when they eventually come around.

It is crucial to remember that the United States on America is not the only government with an interest in which way the dollar goes. With their hands on over $1.2 trillion dollar bills, the Chinese Government must also be watching the USD like hawks having lost $100 billion of value in less than a year. The government in China is very concerned at keeping “social unrest” at a minimum so how do you think the Chinese people will react if the USD continues declining further and further down bringing their foreign currency reserves closer and closer to worthlessness. China must be looking to transfer their dollars into something that retains its value or perhaps even increases in value, after all isn’t that what investments are supposed to do?

China will look to get out of dollars and into anything that isn’t falling as fast as the USD. The private equity group Blackstone, made the biggest US IPO of the year recently and Beijing swiftly swooped in and bought a 9.9% stake in the company, using $3 billion of its foreign exchange reserves. It is likely that we will see more examples like this of China buying companies, commodities and whatever they can to get out of the dollar. Gold and silver bullion or the mining companies in the precious metals industry are obvious candidates for a piece of China’s USD pie as they move up and as the greenback moves down so they are the most logical hedge against a declining dollar.

If China and other countries holding large USD reserves shift even a small proportion of their dollars into the precious metals, it will have massive effect on gold prices and silver prices. Governments aside, individuals around the world will be looking to trade any dollars they have for a piece of gold or some gold stocks rapidly increasing in value.

So do we think the USD will break 80 in the next few days?

No. The PPT will probably buy it back up a couple of points but then it will drift down again to test the eighty level and will probably break it in the coming months. However now is the time to buy gold and silver and gold stocks and silver stocks.

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Sam Kirtley