Thursday, November 15, 2012

Reposting: Aman Futures and the 3rd Deadly Sin

I feel the need to repost this as hubby and I now are both beginning to invest and work on with our funds and hard-earned money. This is a must-read. Please do. Be wise and be safe.

Read more HERE.

The first rule of money, according to lay evangelist and entrepreneur, Bo Sanchez is, “If you earn it, don’t lose it.”

The caveat would seem useless now for thousands of people who plunked their lifetime savings in a get rich scheme run by Aman Futures Group Philippines, Inc. The Pasay City-based trading firm thrived in Pagadian City until the managers could no longer pay investors. The police are looking for Aman Futures top guy Manuel Amalilio and his cohorts who have all quickly disappeared. Meanwhile, Interior and Local Government Secretary Mar Roxas assured investors the government will do everything to collar Amalilio and recover their money.

I commiserate with the victims, but my readings about pyramiding scams tell me that recovery would translate to the Tagalog saying, “Pagputi nang uwak, pag-itim nang tagak.” (When the crow turns white and the heron turns black).

Get rich schemes, known as pyramiding, also known as Ponzi, are nothing new.
One of the biggest investment scandals that rocked the country was the operation run by Multinational Telecom Investors Corp. Multitel’s Rosario “Rose” Baladjay duped not just ordinary people but also businessmen, politicians, Cabinet members and celebrities who lost an aggregate of P25 billion to the scam.

Although the massive investment rip-off was discovered in 2002, Multitel ran an underground operation as early as 1988. Investments as low as P2,000 and as high as P10,000 earned a monthly interest of 1 percent or 12 percent per annum. Baladjay lent the money to businessmen at a rate of 2.5 percent a month or 30 percent per annum.

The lending investor hit the jackpot when it offered huge interest rates of 30 percent to 40 percent in 45 days. Double your money schemes offered 80 percent to 100 percent returns if the investment is locked in for 18 months. In 2002, the pyramid collapsed under the weight of clients’ demands for profits. Baladjay was convicted for the crime of syndicated estafa and was sentenced to 12 years imprisonment and maximum penalty of life imprisonment.

Some people think Pinoys fall easy prey to pyramiding schemes because they are presented like investment and stock markets plans. This is partly true.

In July 2009, I wrote about Bernard L. Madoff and how his Ponzi-style investment caper ripped off an estimated $65 billion from reputable banks and investment houses in the United States and Europe, including celebrities, retirees, and charitable institutions.

The key to getting their trust was Madoff’s credentials because he was a skilled stock broker and financial adviser who later went on to become chairman of the US stock exchange NASDAQ. The moneyed class viewed him as a modern day Midas, whose touch turned any investment portfolio worth bars of pure gold. Madoff ran the enterprise for years and delivered on the promise of 30 percent to 40 percent profits within 45 days, or 100 pecent returns within 90 days.

The term Ponzi is attributed to the con man of the ’40s, Charles Ponzi who was able to pay off dividends by using funds from early investors. But yet, Ponzi was not even original because in 1899 there was William F. Miller, a Brooklyn accountant who pocketed $1 million through the pyramid scheme.

With such important lessons from the past, we wonder why ordinary people, but especially professional investors and financial experts would still fall for the scheme. We often hear the admonition to be wary with offers that sound too good to be true, but some investors practically pleaded with Madoff to accept their money.

And so the question is, was Madoff so glib that he was able to dupe investors and bankers, or were his victims so stupid that they were deceived by a financial plan with con game elements written all over it?
Was Amalilio’s driver and janitor such a sweet-talker that people waited outside the office of Aman Futures at 3 a.m. just to give him their money?

Far from it. The experience of peoples who lost everything in get rich schemes is rooted in the third deadly sin, greed. People are drawn to the promise their money will earn much “while they sleep.” Common sense tells them otherwise, but they don’t care how the investment planner would raise 30 percent to 100 percent interest for as long as the profits kept coming. They know the plan is bound to fail, but they were fed with initial sums, and they thought it would last a lifetime.

While Madoff’s victims pondered their fate in the spring of 2009, CNBC ran a series entitled, “The American Greed.” I had the privilege of watching one feature, about Texas billionaire and offshore banker Allen Stanford, who used practically the same scam in duping clients in the US and in Antigua. Stanford endeared himself to the island government in the Caribbean region by buying real estate and involving himself in philanthropic activities.

He was eventually knighted by the island state, and later allowed to buy a small island.
Stanford had wanted to corner the port services of Antigua but was derailed by a top department official who smelled something fishy.

As the Madoff caper unravelled, Stanford’s clients in the US and Antigua also lined up to withdraw their investments but as this predictable story turned out, they were not even worth the paper they were printed on. The CNBC series was supposed to bring to light the “dark side of the American Dream.”

Madoff’s saga ended in June 2009 after a federal judge sentenced him to 150 years in prison. Nothing could alleviate the pain of victims, but Judge Denny Chinn saw to it that the scam be remembered for all time, to serve as lesson and warning. He pronounced the crime as extraordinarily evil.

In concluding the article, I wrote that Hollywood celebrities like Steven Spielberg, who also lost millions in the Madoff caper, should be able to put a more thoughtful spin on the American Dream, “the supposed inner soul or essence of every American to achieve a better, richer and happier life.”

Being rooted in the US Constitution that all men are created equal, the national philosophy is an inspiration for many poor Americans, especially blacks and white immigrants, who rose from rags to riches through hard work and perseverance.

Sadly, these virtues that launched the US to the top of the world are waning and instead, there is a growing unscrupulous desire for more wealth and power.

This is a malady not just in American society, but in many cultures around the world including our own. As shown by the Madoff caper and Philippine versions, Multitel and Aman Futures, the value of hard work and sacrifice has lost its meaning, while material riches have become man’s obsession.

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