Scams Galore: From Madoff to Legacy


Bernard Madoff from cityfile.com


Celso De Los Angeles from the website of Sto. Domingo, Albay.

I haven’t blogged in almost two weeks and I miss it. Unfortunately, the demands of adjusting to a new work environment has kept me busy and too mentally exhausted to keep up with the news. I literally haven’t seen a weekday sunset for the past month.

In an effort to catch up, I checked out Manolo Quezon’s blog. The shock of seeing all the crisis situations which unfolded over the past week or so was like a kick in the balls. Between the tanking economy and retrenched jobs, to a spate of bank failures, the perennial problem of corruption in high places, to the specter of narcopolitics, my anxiety level shot through the roof. I wanted to draw the blinds and crawl back to my La-Z-Boy. I get the feeling that the worst is yet to come.

As we lurch from one economic catastrophe to another, we can take cold comfort in the fact that financial scams are not unique to us. In terms of scope, nothing can beat the con perpetuated by Bernard Madoff, until recently a lion in Wall Street, who turned out to be a rat. With apologies to the intrepid New York City rats. In yet another variation on the time-worn Ponzi scheme, Madoff scammed an estimated U.S.$ 50 billion from various institutional and individual investors spanning the globe. Madoff defrauded Jewish charities, European royalty, prominent politicians and celebrities like Steven Spielberg and Larry King, even Arab banks. According to the criminal complaint filed against him, Madoff “deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars.” Basically, as he himself admitted, he ran a Ponzi scheme on a large, complicated and transnational scale. But like any Ponzi scheme, it was a fraudulent set-up where investors are paid out of money taken from subsequent investors instead of real business profits. Bamboozling Pedro to pay Juan, and so on. At some point, all Ponzi schemes are bound to collapse like the proverbial house of cards.

Major banks worldwide which were affected include the Spanish bank Grupo Santander SA, at least four French banks including BNP Paribas and Societe Generale, Britain’s HSBC Holdings PLC and Royal Bank of Scotland Group PLC, and Japan’s Nomura Holdings. Even financial powerhouse J.P. Morgan almost got burned but managed to pull out a few months before Madoff was arrested, under suspicious circumstances and without informing its clients who remained exposed to the risks of Madoff’s spurious hedge funds. Not a few Morgan investors who lost their shirts are now contemplating a lawsuit against the bank.

The breadth of Madoff’s hoax is breathtaking, as is his chutzpah. From reports, he has not shown an iota of remorse. In fact, the talented Mr. Madoff could well be a financial psychopath who may have stolen simply for the fun of it, “a greedy manipulator so hungry to accumulate wealth that he did not care whom he hurt to get what he wanted” in the words of the NYT.

As the global financial crisis comes home to roost, and people seek to recover and hold on to their cash, our local Ponzi schemes have started to implode. Crashing spectacularly was the Legacy Group, owned and headed by Celso De Los Angeles, Ateneo and AIM alumnus, one of Erap Estrada’s jueteng collectors, per Chavit Singson, and orchestrator of one of the bigger Ponzi schemes of recent times. He is similar to Madoff in that he has a veneer of legitimacy, having been able to present a facade of respectability and cultivate influential people. House Speaker Prospero Nograles, according to Ramon Tulfo, is a partner of De Los Angeles in the failed Ponzi hustle and is in deep shit among some of his colleagues in the House of Representatives who he inveigled into investing in Legacy. Nograles was able to pull his money out before the collapse but not so the other congressmen who are now understandably incensed at having been duped.

According to a four-part report which recently appeared in the Inquirer, the banks under the Legacy Group- Rural Bank of Parañaque, Rural Bank of San Jose (Batangas), Rural Bank of Carmen (Cebu), Pilipino Rural Bank, Philippine Countryside Rural Bank, Rural Bank of Calatagan (Batangas) [now Dynamic Rural Bank], Rural Bank of DARBCI, Rural Bank of Kananga (Leyte) [now First Interstate Rural Bank], Rural Bank of Bisayas Minglanilla [now Bank of East Asia], San Pablo City Development Bank, Bicol Development Bank, Nation Bank and Rural Bank of Bais – were involved in “fictitious deposits, rotating collateral from one bank to the other, unsafe and unsound banking practices and improper documentation” quoting former Philippine Deposit Insurance Corporation (PDIC) chief Ricardo Tan. Legacy was also making double-your-money pitches at incredible interest rates and marketing aggressively, giving away appliances and even cars. In other words, all the hallmarks of a Ponzi scheme. Hence, the BSP decision to close the 13 rural banks across the country, now effectively bankrupt, just a few days before the long holiday break of December 2008.

How did the talented Mr. De Los Angeles get away with it for so long ? The same way Madoff did, by deception, manipulation of his public image and being close to government regulators and the powers that be. Amazingly, De Los Angeles was already banned from banking almost 25 years ago, when he was found to be behind a similar machination also involving rural banks.
He was able to return, of course, as many scoundrels do in this country and was allowed to perpetrate an even bigger sting on a long-suffering and unsuspecting public.

De Los Angeles has used his ill-gotten gains to reinvent himself as public servant and is now mayor of Sto. Domingo, Albay. Meanwhile, he has left his thousands of depositors holding the bag. And stuck the rest of us with the bill for making some form of limited restitution to his former clients, to the tune of P14 BILLION, to be paid out by the PDIC. Talk about rubbing salt into our wounds.

Expect more scams to come to light as the worldwide economic recession deepens.

Update: Today’s Inquirer (03 February 2009) carries the headline: “Legacy Head Hit for Fraud

Sen. Manuel “Mar” Roxas II, chair of the Senate trade committee which conducted a hearing to look into the matter, concluded: “Mr. Angeles is engaged in a fraudulent scheme to defraud all of these investors.” At the end of the daylong joint hearing, the Senate committees on trade and commerce, and banks, financial institutions and currencies said that they uncovered a “conspiracy” between De los Angeles and government regulators in defrauding pre-need plan holders.

3 thoughts on “Scams Galore: From Madoff to Legacy

  1. Celso de los Angeles jr . is the current president of Balikatan Housing Finance, Inc. .

    To be president he must have sizeable stake in this corporation which if you consider what it is involve into could generate a return of investment from 300 to 400% .

    My sixth sense tells me that whatever gains/proceeds Mr. De los Angeles got from his “Ponzi type scam” using a web of Legacy corporations ….. he must have invested some with Balikatan Housing Finance, Inc.

    Pllease try to tie the connection of legacy missing funds (billions) to Celso’s involvement with Balikatan Housing Finance, Inc. beiing it’s President .

    I just can’t take it in my heart that this guy is trying to get richer from money earned honestly from the sweat and blood of my filipino friends and relatives .

    Joelory
    Simi Valley, CA

  2. Pingback: SEC Commissioner Jesus Martinez In Bed With Legacy’s De Los Angeles All Along » The Warrior Lawyer | Philippine Lawyer

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