PIPC: Government regulators remiss in their duties

Government regulators
remiss in their duties
FAILURE OF S.E.C., N.B.I. TO PIN DOWN MICHAEL LIEW LED TO P.I.P.C. SCAM-SOLON
 
By Butch Fernandez
Reporter

THE chief investigator in the Senate’s on-going investment scam inquiry found that strategic government agencies, including the Securities and Exchange Commission and the National Bureau of Investigation have been remiss in their duties to check the proliferation of pyramiding, Ponzi and related investment schemes.

Sen. Mar Roxas reached the conclusion after the first hearing on the alleged investment scam allegedly perpetrated by a Singaporean executive of the Performance Investment Products Corp. who is said to have absconded with $250 million of PIPC investors funds.

The trade and commerce committee, chaired by Roxas, conducted the first hearing into the alleged PIPC scam on Wednesday based on separate resolutions filed by Sens. Juan Ponce Enrile and Loren Legarda.

What emerged from the hearing, Roxas reported, was that several personalities led by a Michael Liew were already the subject of complaints from investors since 1999.

“But because of the inability of government agencies to pin down Liew and his cohorts [right away], they were able to continue collecting money from unsuspecting investors using various company names the latest of which was PIPC.

Appearing before Senate investigators, PIPC officers led by general manager Cristina Gonzales-Tuason, however, washed their hands off the scam, claiming they too were victimized and filed separate complaints with authorities when Liew fled with their money.

According to Roxas, while the PIPC was registered as a research company, it actively sought prospective clients of investment products worth a minimum $40,000 each, with a promise of unusually high returns of between 12 percent and 15 percent annually. The Roxas committee also learned that these juicy terms attracted a number of gullible investors including members of the so-called upper crust of society.

Testimonies by PIPC officials confirmed that these investments were then executed with Performance Products Investment Corp. in the British Virgin Islands (PPIC-BVI) which is not licensed to do such business in the Philippines.

Briefing reporters after the hearing, Roxas said laws on investment products must be strengthened to guard against the proliferation of similar Ponzi scams. “What we saw on the first day of inquiry is that we lack the laws to combat defrauders in the country,” he said, adding that there are a number of remedial legislation that could be crafted to plug the loopholes.

For instance, Roxas recommended that the SEC should take a more pro-active stance in dealing with complaints about irregular investment schemes. “The SEC simply says, “well, unless there is a complaint, we cant do anything about it.”

 

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

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

09/13/2007

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

http://www.tribune.net.ph/nation/20070913nat1.html

Government freezes accounts of PIPC execs

Government freezes
accounts of PIPC execs
By Jun Vallecera
Reporter
 

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.

PIPC’s wicked pitch

PIPC’s wicked pitch

By Gerry Geronimo

Source

Fans call it the curve ball, that baseball pitch that makes the ball travel on a seemingly straight and horizontal trajectory and then “break” abruptly as it nears the home plate. The batter sees the ball dropping sharply but he is unable to adjust his swing on time. Instead of hitting a home run, he finds himself silly hitting striking nothing but air. That was exactly how Performance Investment Products Corp. pitched its scam to its investors.

The sleuthing by Sheer Luck Holmes shows that the prospect is initially given by PIPC Corp., PIPC’s local arm, a dignified-looking three-section packet thick enough to assure any curious George that contained therein is everything one needed to know to make big money quickly, easily and safely the PIPC way.

As soon as the front leaf is folded out, the prospect is faced with a somber page that is conspicuously headed “Important.” The text that follows bears the fingerprints of a lawyerly hand, possibly in the practice of English securities law.

“This brochure,” goes the opening line, “is furnished on a confidential basis to a limited number of sophisticated investors.” The flattery drips: the prospect is esteemed by PIPC as belonging, not to the vulgar many but to the select few, to the small circle of trustworthy keepers of secrets, to the class known as “sophisticated investor.”

The use of the term “sophisticated investor” is obviously not unintended. Addressed to us ordinary Pinoys, it means nothing, except, at most, the opposite of baduy. But in other countries with English-based law on securities, a “sophisticated investor” is someone who can take care of himself and his money and therefore needs not the protective care of the regulatory authorities. By using it, PIPC is saying it intends to address itself only to the investment savvy who, by the way, the government need not protect.

Then follow familiar disclaimers and advisories. “The purpose of this brochure… is to provide an overview of certain information about [PIPC’s] investment programme… [but which information alone, however] does not constitute an offer to participate…[ instead] prospective investors should determine whether to invest on the basis of information contained in this brochure… with specific information, including the risk warnings contained in the Information Memorandum distributed together with this document…”

The legal mantras are dutifully recited. “…There is no guarantee of the future results…Investors should not rely upon actual or hypothetical past performance data in analyzing the potential benefits and risks of an investment in the Programme… Neither [PPIC or the Group] guarantees the performance… no information or opinions set out herein will form the basis of any contract… no representation, express or implied, is or will be made in relation to, and no responsibility or liability is or will be accepted… in relation to the accuracy or completeness of this (sic) documents.”

Everything looks straightforward, doesn’t it? In fact, the legalese is familiar to the intended market, namely, the hijos and hijas of the buena familia living in exclusive villes and condos. But as soon as they are read, these cautions are, however, relegated to the back, figuratively and literally, when the investor folds out the leaf to read the inside of the packet for a description of the PIPC’s wonderful Programme.

Inside, more buzz words. The Programme is allegedly “managed with the intention to offer investors a superior short-term rate of return on capital with only moderate expected volatility…” Any wandering the thought of the possibility of loss is swept away by the Programme’s claimed performance: “Over two years prior to inception… the programme has achieved a return of over 22 percent per annum… [and] since inception… has delivered a net annualized return of 30.01 percent…”

Wondering how any program can achieve any return prior to inception? How stupid can you be! Are you saying they are liars? Read the paragraph’s asterisk note: “The underlying programme referred to is hypothetical and consists of aggregated actual historical performance…”

That having been said, the wonderful feature of the Programme is thereafter presented. “…The Investment Manager has carefully selected a special group of highly professional currency traders [who] generally have distinctive and complementary investment styles. Exposure can be limited to “an eight-calendar weeks lock-in period… however, the recommended investment time horizon is six to 12 months…”

The investor is even shown in detail the “Investment Flow.” The money of the investor “will be placed into a fixed deposit account with PIPC designated bank and shall not be exposed for trading purposes… [instead] PIPC designated bank shall then extend a margin line request for trading based on the deposit… PIPC shall open a separate account… of not more than 30 percent of its own funds to serve as a profit and loss account… trading will commence with PIPC designated bank closely monitoring the performance to ensure that if losses are incurred, trading will stop immediately should they hit 20 percent…” So how could you lose when it is not your money being traded and any trading loss (which will stop at 20 percent) is absorbed by PIPC’s own funds?

In time, the contract documents are pulled out for the prospective investor to sign. And just as the top spin generated by the twist of pitcher’s wrist creates an imbalance between the air flow on top of the ball and air flow at the bottom, the spin in the brochure causes a mismatch between what is promised and the documents presented to the investor for his signature.

The primary agreement, which establishes the relationship between the investor and PIPC, is a so-titled “Portfolio Management Partnership Agreement.” It creates between the parties an “investment partnership on a case to case basis.”However, not indicated in the brochure is that PIPC is given a power of attorney “for the management of the trading account, … to perform the investment activities and to act for [the investor] as if [the investor] is personally present to perform the same.” This seemingly innocuous clause will constitute PIPC’s authority to touch the investor’s money on deposit, without the investor knowing about it.

The partnership period is expected to be filled in, presumably by the investor’s hand, but the brochure has declared that it cannot be for less than eight weeks. What the brochure has not said is that the agreement to be signed provides that the period is “automatically renewed unless written termination notice is given by either party fourteen (14) days prior to expiry.”

The parties agree to invest the funds… with an investment loss not exceeding 30 percent of the total invested funds… and… all the losses up to 30 percent… shall be borne by” PIPC. The brochure says, “… trading will cease immediately should the 20-percent stop limit is [sic] hit.” But, the agreement signed says PIPC will “cause all investment activities to stop” when 30 percent is lost.

In addition to a partnership agreement, the investor also signs a “Security Agreement” wherein the investor agrees to deliver to PIPC a specified amount to constitute as “Margin Deposit” for foreign exchange trading which shall be used by PIPC “in relation to the trading activity.” The investor then “assigns and transfers, by way of security in his favor,” to PIPC the margin deposit. This is contrary to the assurance in the brochure that the fixed deposit made by the investor “shall not be exposed for trading purposes.”

Whatever residual investor hesitation remains is swept away as PIPC, in a grand gesture, issues its “Declaration of Trust.” Therein PIPC is to “expressly declare” that the money in the designated bank account “does not belong to us, but to (handwritten name of investor) … referred to as ‘the beneficial Owner’” and PIPC agrees “to transfer, pay, dispose of any of the said sum of money upon the satisfactory (sic) of the terms and conditions stated in the clauses in the Partnership Agreement and the Security Agreement as the Beneficial Owner shall from time to time direct.” But didn’t the said “terms and conditions” in the partnership and security agreements precisely direct PIPC to put the investor’s money at risk?

Sure, in many instances, samples of the legal documents were in fact given to some of the prospects. But who is the investor who would think of actually reading and understanding the legal documents when, by the time he gets hold of them, ringing in his ears is the sound of potential profit after potential profit?

With such a curve ball in the PIPC repertoire, it is obvious how easy it was for Michael Liew and his cohorts to win the game like the pitcher against Mudville’s nine in Ernest Thayer’s Casey at the Bat. The execution was perfect: concede a couple of minor victories in the beginning by allowing that lulu Flynn to go on to third and putting that cake Blake on second.

But when the big investors came in, PIPC let go the curve ball replicating Thayer’s lines:

“And now the pitcher holds the ball; and now he lets it go; And now, the air is shattered with the force of Casey’s blow.”

In the end, there was no joy in Mudville, and neither in our own very mad villes and condos when one of their kith and kin announced in mid-July that Michael Liew and their money were nowhere to be found.

LAND SCAM: Is PRCI board trying to hide something?

Another real-estate-scam-in-the-making being done by the Malaysian scammers.

AS I SEE IT
Is PRCI board trying to hide something?

By Neal Cruz
Inquirer
Last updated 01:49am (Mla time) 08/27/2007

MANILA, Philippines – Last August 8, this column reported an emerging scam in the attempt of the Malaysian-led majority members of the board of the Philippine Racing Club, Inc. (PRCI) to swap the PRCI’s 26-hectare Sta. Ana racetrack worth 12 billion (that’s billion) with a P25-million moribund firm called JTH Davies Holdings.

Minority shareholders, who have been kept in the dark about the deal, asked for full disclosure of the details and documentation on the proposed exchange of properties. But the majority and management denied the requests. So the minority shareholders went to court which then issued a temporary restraining order on the deal and a subpoena duces tecum to the management to show to the minority shareholders all the documents pertaining to the two deals. The Malaysian-led faction of the board then filed a motion to quash the subpoena with the Court of Appeals. Obviously, the Malaysian faction is bent on preventing the minority shareholders from gaining access to information regarding “business transactions.”

The row has opened a Pandora’s box of violations of corporation laws. First, the Philippine Stock Exchange (PSE) bared that PRCI has breached the constitutional cap of 40 percent foreign ownership following a surge in unregistered foreign holdings in 2005—the year PRCI’s Malaysian-led group bought JTH Davies.

The row also brought into full view the personalities representing the Malaysian interest in PRCI. And the interesting discovery is that the controversial Datuk Surin Upatkoon a.k.a. Lau Khin Koon of Temasek Holdings fame sits on the board of the racing club. (Read August 8 column.)

The business community’s view is that the row should not have reached this level of intensity if only the Malaysian-led group had simply recognized the rights of the minority.

It seems that the Surin Upatkoon group, which includes the Westmont Investment Corp. (Wincorp) stalwarts led by Santiago Cua Sr. or Cua Sing Huan, failed to recognize the trend toward transparency in the Philippine corporate setting. And part of the move toward greater transparency is the protection of minority shareholder rights.

Cua Sr. is at present honorary chairman of PRCI while son Solomon is president, son Simeon is executive vice president, and son Santiago Jr. is director and treasurer.

There is now a silent revolution of reforms in the Philippine corporate world. Unknown to many, this is an initiative and a collaboration of the Securities and Exchange Commission, PSE, the Bangko Sentral ng Pilipinas (BSP) and other such organizations.

That revolution began with the passage of the Securities Regulation Code (SRC) or Republic Act 8799. The Code set new provisions including the clarification of the scope of insider trading and market manipulation and the protection of minority investors.

Also part of the reforms was an SEC requirement for publicly-listed companies to have a “Manual of Corporate Governance” which guarantees corporate records to be “available for inspection by any stockholder of the corporation at reasonable hours on business days.”

In addition to the SRC, the Corporation Code (CC) also protects minority shareholders. Both the SRC and the CC guarantee the minority’s “right to information and inspection, right to vote, legal process for redress and the right to bring derivative/class action suits.”

This means that when the Filipino shareholders of PRCI asked that they be given full disclosure regarding the purchase of the moribund P25-million JTH Davies Holdings for P450 million, they were merely exercising the right guaranteed by the SRC and the CC.

They were also exercising that right when they asked for full disclosure of the aborted swap deal that would have made the moribund JTH Davies a billionaire firm overnight. And they were exercising the same right when they brought the derivative action against the Surin Upatkoon/Santiago Cua Sr. group.

The reform environment initiated by the SEC, BSP and PSE is the reason the business community tends to view arguments by the lawyers and public relations people of the Malaysian-led group as comic and absurd. The group branded the Filipino shareholders as a “noisy minority” and questioned their move asking for full disclosure. Are the Malaysians aware of the reforms in the corporate world?

These reforms are obviously an offshoot of the Enron and WorldCom scandals that rocked corporate America. The image of senior executives being led away in handcuffs by FBI agents continue to haunt not just the US but the global business world.

The Surin/Cua group has boasted that it has asked the Court of Appeals to quash a subpoena issued by the regional trial court. This legal maneuver can only be viewed as an effort to block full disclosure.

And when one is trying to hide something from the full light of day, the logical question is: “Are they trying to hide something?”

As lawyer Brigido Dulay Jr., a PRCI director representing minority stockholders said, “if the Malaysian-led group has nothing to hide, why are its lawyers going out of their way to quash a court order for them to show the documents related to the deals?”

The lawyers of the Surin/Cua group would do their clients a great service if they are educated on Philippine corporate reforms. This should correct current perceptions regarding both their moves and their principals.

These lawyers should play their cards right. A miscalculation might propel the PRCI now into the local version of the Enron scandal. Transparency would help deter such fate.

For starters, they can help us understand how a P25-million firm could be bought for P450 million and later exchanged for a P12-billion chunk of prime real estate.

Bre-X’s Felderhof found not guilty

Bre-X’s Felderhof found not guilty

Acquitted on all 12 counts

Peter Brieger
Financial Post

John Felderhof in the photo.
CREDIT: (Photo: CanWest File)
John Felderhof in the photo.

TORONTO — The Ontario Securities Commission said it is considering whether to appeal Tuesday’s verdict in which John Felderhof was found not guilty of insider trading and misleading investors in the multibillion-dollar Bre-X gold fraud.

“We’ll take a look at the decision and see what are options are,” said OSC lawyer Emily Cole, who has worked on the case since it resumed in 2004. “It’s a very important case, a very unique case and a complex set of facts.”
The former Bre-X geologist has been found not guilty of insider trading and issuing false press releases, a decade after the company was exposed as a massive fraud.

Mr. Justice Peter Hryn cleared Mr. Felderhof of all eight charges laid by the OSC in May, 1999.

Regulators allege Mr. Felderhof sold $84-million worth of Bre-X stock based on information not disclosed to the public. He was also charged with four counts of issuing false press releases, which reported growing gold reserve estimates.

Outside the courtroom, Ms. Cole said the OSC may appeal Judge Hryn’s ruling. “We worked very hard,” she told reporters. “We put the evidence before the court. It was the judge’s decision to render.”

“I find Felderhof has proven he took reasonable care,” Judge Hryn told a Toronto courtroom.

Bre-X, a one-time market darling, collapsed in the spring of 1997 after its Busang property was revealed as a fraud, erasing more than $6-billion in shareholder value. At its height, shares in the Calgary company climbed above $280 as investors latched on to reports the company’s mine contained a startling 50 million ounces of gold.

Mr. Felderhof, who lives in Indonesia and did not attended the trial regularly, faced jail time and millions of dollars in fines if convicted.

Joe Groia, Mr. Felderhof’s lawyer, argued that Ontario’s securities regulator could not prove Mr. Felderhof knew the mine was a fake, considering some of the world’s top geological consultants initially signed off on the property.

The OSC answered that argument by saying it didn’t have to prove Mr. Felderhof is guilty beyond a reasonable doubt — as in most criminal trials. Instead, the OSC set out to prove Mr. Felderhof fell short in his duties as an officer and director of the now defunct company.

The Bre-X geologist is the only person who has ever been taken to trial over his alleged role in the fraud: Company founder David Walsh died in 1998 and geologist Michael de Guzman, who was suspected of masterminding the gold fraud, allegedly threw himself out of a helicopter over the Indonesian jungle in 1997. Last year, reports surfaced that Mr. de Guzman may be hiding out in Brazil.

Mr. Felderhof was also the one who gave final approval to various press releases touting the amount of gold at the mine, the OSC said.

Ontario’s market regulator said it is “not an unreasonable burden” to make company officers and directors responsible for material information that is released to investors.

© Financial Post 2007

Finger Pointing

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

Investment fund manager says she was victim, too
By Tina Santos
Inquirer
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