A recent news item says that more pilots have been leaving the country for greener pastures overseas. Philippine Airlines, Inc. (PAL) has lost about 20% of its pilots over the last three years and more are about to fly the coop. This is an alarming development in our continuing brain drain. Even our best trained and highest compensated professionals are packing their bags. A desperate policy resolution from the Philippine Overseas Employment Administration limiting the number of pilots who can work for international airlines has failed to stem the tide.

Things have apparently gotten worse since. Over the weekend, at least 23 international and domestic PAL flights have been cancelled due to the fact that there were no pilots to fly PAL planes. Eight more flights were cancelled today.

Apparently, a critical number of PAL’s A320 Airbus pilots resigned and immediately left for more lucrative posts overseas, without giving sufficient notice or allowing for enough time to bring replacements on board. This prompted PAL management to threaten legal action against the fleeing aviators, citing flagrant violations of their training and employment contracts. Unfortunately, going to court won’t solve PAL’s woes. The judicial process will just drag on without addressing the fundamental reality that PAL cannot compete with the wages and perks being offered by other airlines in the Asia-Pacific region and the Middle East. Market forces are at work here which will not bend to PAL’s will.

A restrictive employment covenant in their employment contracts may prevent some of these aviators and other skilled workers from transferring to competitors abroad. This is a common enough clause in contracts for so-called “mission critical” workers, or those who are considered integral to an industry’s sustainability. But this will not solve the problem. PAL cannot seek judicial enforcement of every agreement that may be breached by its pilots. And under settled cases, the employer has the burden of proving that the restriction is valid and reasonable and does not impose an “undue burden” on the employee. It can be convincingly argued that working in the Philippines constitutes an undue burden.

Sadly, this goes beyond mere inconvenience and embarrassment. It’s a major setback for the air travel and tourism industries. And it actually places the flying public in grave danger as PAL and other airlines might be tempted to allow underqualified or raw pilots to handle its planes.

This trend has grave implications, not the least of which is its effect on domestic air travel safety. With our best pilots and flight engineers gone, can the airlines ensure that the riding public is given a safe ride ? We foresee turbulence ahead for the airline industry.

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The global economic downturn doesn’t seem like such a bad thing after all, if you’re an associate at Skadden, Arps, Slate Meagher and Flom, the largest U.S. law firm in terms of revenue. Due to the recession, which would predictably cut into its projected revenues, Skadden has offered its 1,300 associates worldwide 80,000 U.S. dollars each to take the year off. They’re encouraged to find pro-bono work and render meaningful service to any cause of their choice although “the lawyers could also spend the year catching up on every episode of “Top Chef” that they missed during the boom years, or traveling around the world“.

To sweeten the deal further, any associate on sabbatical will be spared from downsizing and will have their jobs waiting when they return. If every associate would take the partners up on their offer, it would cost the firm U.S.$ 104,000,000, not exactly chump change but still a mere 2% of its annual earnings. It seems lawyering, at least at the level of Skadden, is recession-proof. The Skadden Insider, a blog purporting to be run by two of the firm’s associates, crowed a few months back that “the firm’s business is strong and that billable hours are essentially the same compared to the same period last year”.

But since, according to its Wiki page, Skadden “has played a significant role in U.S. and international business”, one wonders how much it has contributed to the present financial debacle. Given the scope of the firm’s practice, it’s inconceivable that it was not involved in a major way in the U.S. mortgage bonds meltdown that resulted in the global financial crisis. But being good lawyers, the members of the firm would surely have insulated themselves from the fallout.
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The hard times will of course impact fashion. Amando Doronila wrote a recent piece on the rise and fall of women’s hemlines which mirror the bleak global economic outlook. Expect a less flamboyant look for the coming year and for so long as the downturn continues. A more muted and conservative image would be in keeping with the difficulties we all face.

Doronila observed that dominant colors of women’s dress were now black and white, brown and grey and posits that this is a reflection of the grim mood that has engulfed the world as the recession deepened.

And now we have recession beards. According to Emily Farris in Scanner, it does make sense that as more men lose their jobs they quit shaving. The NPD Group, a marketing research company, reports that sales of electric shavers and men’s facial trimmers in the U.S. have dropped twelve percent in the last year.

All the better to get that “prophet-in-the-wilderness” look appropriate for an unfolding doomsday scenario.

But here’s the silver lining. According to Penelope Trunk, more people will now be having sex.

When I was a Boston Globe reporter, one of my best interviews was with David Blanchflower, professor of economics at Dartmouth , who has analyzed the relationship between money and sex.

He says that more money does not get people more sex, it merely gets them more choices of people to have sex with. This makes sense. I’ve never heard of someone abstaining from sex until they make enough money to date a model. And anyway, we know from Dan Airley’s research that if someone has too many choices, they don’t do anything. Sure, this research applies to jam samples in grocery stores, but maybe someone should investigate if people actually have less sex when they earn so much money that they can choose from anyone.

Okay. But back to the recession. Amazingly, it turns out that less money equals more sex. I am not totally sure why this is, because the research comes from what is now one of my most favorite resources, Durex condoms, a site that does provide a lot of qualitative analysis for their statistics.

Still, Durex reports that drugstore sales of their condoms were up 6% during the time Lehman went under. And sales in the New York City sex toy emporium Babeland increased 25% in that same time period. So the deeper the recession, the more sex people are having.

Will the gloom be followed by a baby boom ? Abangan.

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Have you read my other popular articles like Libel on the Internet under Philippine Laws (Part 1), Libel on the Internet under Philippine Law (Part 2) or on Freedom of Expression?

“Some of the characteristics you see in psychopaths are lying, manipulation, the ability to deceive, feelings of grandiosity and callousness toward their victims,” says Gregg O. McCrary, a former special agent with the F.B.I. who spent years constructing criminal behavioral profiles.

Mr. McCrary xxx says Mr. Madoff appears to share many of the destructive traits typically seen in a psychopath. That is why, he says, so many who came into contact with Mr. Madoff have been left reeling and in confusion about his motives.

“People like him become sort of like chameleons. They are very good at impression management,” Mr. McCrary says.

But other factors are at play. Like all predators, they actively seek their prey. The sad thing is that their victims oftentimes come to them, like bugs to a Venus fly trap.

There are a number of innocents who may have been truly duped by the false facade presented by Ponzi con artists. But generally people are greedy and will not readily pass up a chance for easy money. Even if there’s something fishy about the deal. Like being offered rates of return which are way above that prevailing in the market.

And these are not limited to investors commonly believed to be financially unsophisticated, like the government employees, OFWs and small entrepreneurs which were victimized by Legacy. Business executives and high government officials, including a fair number of our honorable congresspersons, were sucked in too. And the most savvy capitalists and bankers in the world financial markets were also caught up in Madoff’s web of lies.

Remember the Multitel pyramid swindle ? And just a little over a year ago, the Performance Investment Products Corporation (PIPC) scam, a Ponzi set-up masquerading as a foreign exchange firm which victimized members of Manila’s so-called high society ? All variations on the same old theme, based on a “rob Peter to pay Paul” model that continues until the tout can’t raise enough money from new investors anymore to pay the earlier investors. Everyone then starts screaming for their money and the whole house of cards collapses.

Greed has a short memory, further diminished by our get-rich-quick mentality. This dumb-ass mindset was beautifully captured in a comment sent to Inquirer’s Money Smarts section:

What’s wrong with Ponzi and HYIP schemes? They can make Filipinos richer and give us better returns than the paltry interest the banks are giving. Earnings from them can send our children to school and build our houses. If we know that they are risky and still want to plunk in our money, then we have the right to invest. After all, it’s our money.

HYIP stands stands for “High-Yield Investments Programs”, another euphemism for Ponzi.

A major element in this sorry state of affairs is weak or indifferent government regulation, abetted by corruption. Our alleged watchdogs, the officials of the Bangko Sentral and the SEC, were caught with their pants down and their dicks in their hands. Again. Despite red flags popping up all over for years. And this is the charitable view. The other way of looking at it is that they were in cahoots with the scammers from the beginning.

But in this regard we are at least not alone. The Frequent Critic, writing of the Madoff mess, laments:

What I don’t get is how, in this day in age with all kinds of supposed financial controls, that no one caught this sooner. Publicly held companies have to be audited regularly to make sure that everything is kept on the up and up, and that there is no fraud. I am not sure if Madoff’s company was considered public or private, but regardless, isn’t anyone watching these kinds of businesses or investments? Is our financial world so filled with MBAs that are so out of touch with the real world that they can’t spot fraud and deception? I just don’t get how Madoff “made off” with so much money with no one even blinking and eye. Had the stock market not taken a massive nosedive, precipitating some of those investors asking for their money, the scheme may have gone on a lot longer.

Think that after all the pain, anguish and shattered dreams wrought by these a-holes that this will never happen again ? Think again. The next Ponzi scheme is just around the corner.

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.

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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.

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Have you read my other popular articles like Libel on the Internet under Philippine Laws (Part 1), Libel on the Internet under Philippine Law (Part 2) or on Freedom of Expression?

Garcia, after all the sound and fury generated by the GSIS bid to take over Meralco, which led to all sorts of mischief and even dragged the judiciary down, sheepishly explained to the press that the government pension fund decided to sell out after all. The GSIS has entered into an agreement with San Miguel Coproration for the sale of the former’s 27% stake in Meralco for around P30 billion. SMC agreed to pay P90 per share for Meralco, more than double the utility company’s closing price of P44.50 at the start of the week.

Which is very odd indeed.

In a bear market, with stock prices tanking, why would SMC pay more than a 100% premium for a stake in Meralco ? Granted that it’s a block sale, but still, San Miguel could have gotten a better deal, and helped the stock market index rise, by buying over the counter. It would have given the market, and the economy as a whole, a boost at a time when it most needs it.

Many are skeptical, and see a political and financial motive behind the sudden sellout by the GSIS.

Albay governor Joey Salceda, a savvy market analyst and one of President Arroyo’s most trusted economic advisers (and who is confident enough to call her a “bitch“) , was surpised:

Something is not right with the picture. The price is bizarre. Such moves in the middle of a market meltdown would only heighten suspicions rather tha assure. Smells like a pre-nuptial deal.

Indeed, many believe San Miguel was convinced or coerced, whichever, to play the role of white knight. SMC essentailly saved Meralco from the continuing take-over threats of Garcia. Malacanang appeared to have been a key player, as Garcia, one of GMA’s most rabid attack dogs, backed down immediately, although with his usual bluster. But the shotgun wedding of San Miguel and Meralco is a done deal.

The Lopezes need all the help they can get at the moment. In a two-part article in BusinessWorld (October 22 and 23 issues) Bernardo V. Lopez (no relation, I suppose) chronicled the travails of the teetering Lopez empire, which he predicts will go the way of Lehman Brothers due to over-borrowing and its foreign partners saying adieu. The Lopezes have been selling their businesses, even the more profitable ones, like the Northern Luzon Expressway (NLEX) concession bought by Manny Pangilinan’s Metro Pacific, to raise cash. The family is not willing to hand over its crown jewel, Meralco, to the grubby paws of Mr. Garcia. Hence, the need to hop into bed with SMC and Danding Cojuangco. Somewhere along the way, it’s entirely conceivable that a few people in high places made a tidy sum brokering the deal. At the same time, the Lopezes now owe some people who might call in their chips any time they need the backing of the family’s formidable ABS-CBN media empire.

With the Filipino consumer, as usual, sold down the river. Now we not only have to pay San Miguel for the beer but also for the electricity to keep it cold.

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Have you read my other popular articles like Libel on the Internet under Philippine Laws (Part 1), Libel on the Internet under Philippine Law (Part 2) or on Freedom of Expression?