Calling a spade
Business World, 14 November 2012


If the news reports are to be believed, something like ₱12 billion was the amount bilked from our local “suckers” by the operation, which apparently started in Pagadian City, Zamboanga del Sur sometime in February this year, and then spread to three other provinces in Mindanao. While the amount may be small compared to other Ponzi scams that have been perpetrated all over the world, it casts into the shade what was lost by Filipinos in earlier Ponzi scams — about ₱1 billion in the FrancSwiss scam in 2007, and at least ₱7 billion scarcely one year later in the Performance Investment Products Corp. scam.

It is not only the amounts bilked which were different between the earlier and present schemes. It seems that the target population was also different. While the earlier schemes were concentrated in Metro Manila, the Aman scheme seems to have focused mainly on Mindanao, although the firm had branches in Cebu and Manila.

There is still another difference that I can see, which made the exploitation by the Aman group much easier: it was made to appear (if it was not real), in billboards and tarps, that the scheme had the imprimatur of officialdom (the permits given by Pagadian Mayor Samuel Co and the DTI were advertised). There was even a video ad in saying: “Aman Future Trading Patuloy Sa Serbisyo Pampamayaman sa Zamboanga del Sur” (Aman Future Trading continues its service of making Zamboanga del Sur rich).

No wonder, given that kind of advertising campaign — unstopped or unregulated — that at the height of its operations, long lines of investors who believed that they would be doubling their investments in a month or two, were already queuing up in front of the Aman office even before it opened its doors in the morning.

But one thing is sure: while the number of not-wealthy investors were much greater than those who were more affluent, there is no way that their combined savings/borrowings could amount to ₱12 billion. So where did the rest of the money come from? If it came from businessmen, there is no problem, because the businessmen should have known better. If it came from politicians who used their own private resources, there is no problem either, because it would be a case of easy come, easy go. But if it came from politicians who dipped into government coffers for their “puhunan,” thinking that they could return the initial investment and keep the profits, then there is a huge problem: because now there will be no money in the local government coffers to use for budgeted expenditures. So the non-wealthy get hit twice: having lost their savings, now they lose whatever services the government were supposed to provide but can no longer do so because its money has disappeared.

But shouldn’t the ordinary, average citizen also be excoriated for “not knowing better?” Maybe, but in any case, not too much. Why? Because they were the victims of a demonstration effect. A Ponzi-type scheme starts with getting the small investors to put in their money, and getting it back as advertised — sort of like priming the pump (for an old fashioned pump to operate, the suction valve must be moistened, or “primed”). In the Aman case, market vendors of Pagadian were reportedly enticed, and were then given the promised return, promptly. Money out from the Ponzi schemers, in order to get more money in. And sure enough, the word spreads (the demonstration effect), and others clamor to get the same deal — as witnessed by the long lines waiting to give their money to the Aman group. The Ponzi schemers bank on the investors not getting their money out, but rather adding more money, hoping to get rich or richer even more quickly. And if they do want to get their money out, the hope is that there are more investors coming in with additional funds, which can then be used to pay those who want to get out, as well as fill the pockets of the schemers.

So let us not blame the ordinary, average citizen. Rather, the government should have made sure that they are protected from the financial predators. Unfortunately, it seems that in this case, the government, through sins of omission and commission, not only did not protect the citizen, but helped the predators.

Only consider: why did Mayor Co of Pagadian consent to have his picture used in ads set up by the Aman group; and why did the DTI allow its business permit to be used by the Aman group as an indicator that all was well? Why did the DTI, and/or the SEC, and/or the BSP, and/or the DoJ, not get into the picture the moment they heard or read about the high yields being promised? There is, after all, no possible legitimate investment project that will yield a return of 4.5% a day. It smacked of fraud from the very beginning, and yet nothing was done. The “warnings” came too late, and the action even later.

PNoy was quoted as saying, in regard to the investigation of the Robredo death, that if only the government agencies had done what they were supposed to do with respect to regulation and monitoring and implementing of the civil aviation rules, then Jesse Robredo would be alive today. Well the same thing can be said with regard to the latest Ponzi scheme. If only the government agencies and officials had done what they were supposed to do, then the Filipino investor would have been protected from Aman scheme would not have succeeded.