by Atty. Julius Gregory B. Delgado

LEGACY, AMMAN, KAPA, ALMAMECO, RIGEN, FOREX:

SURVEY OF JURISPRUDENCE ON PONZI SCHEME

(Last of Three Parts)

In People vs. Baladjay, G.R. No. 220458 (26 July 2017), Rosario “Rose” Baladjay, through so-called “counselors”, solicited funds from the public without any secondary license from the Securities and Exchange Commission (SEC). Baladjay, used as a conduit to attract investors her company named Multitel which is supposedly engaged in telecommunication business and had an office in Enterprise Building along Ayala Avenue in Makati City. 

In the said case, there were three (3) complainants, Rolando, Estella and Henry, which were promised varying interest rates or returns. Rolando was initially promised 5% per month which led him to invest Php100,000.00 at first.  Later, a counselor, Gladina Baligad, talked to him and convinced him that Multitel is legitimate since it is engaged in a stable industry. Upon being promised 8-12% monthly interest, Rolando invested a total of Php3,200,000.00. The second investor Estella was asked by another counselor, Carmencita Chan, to course her investment through One Heart Multi-Purpose Cooperative. Chan explained that One Heart is authorized to receive investment for Multitel. Together with her husband Manolito, Estella was promised 6% monthly interest which led them to invest Php3,280,000.00 or US$7,520.00. Finally, Henry, through counselor Gladina, invested a total of Php1,050,000.00 on a 5% per month interest. Multitel stopped payment and while the counselors held several investors’ meeting to assure them, Baladjay was nowhere to be found. He would later be arrested, charged, convicted and both the Court of Appeals and the Supreme Court affirmed her conviction.

In People vs. Baladjay, supra, the Supreme Court cited the cases of Balasa, Menil and Tibayan which we already discussed in the previous parts. The Supreme Court ruled that similar to these cases, Baladjay was engaged in a Ponzi Scheme. The Court went on to state that the gravamen of the offenses charged in the afore-mentioned cases is the employment of fraud or deceit to damage or prejudice another. The Court observed that Multitel was engaged in a modus operandi that does not deviate from schemes in the afore-mentioned cases. Here, using Multitel as their conduit, Baladjay and her more than five (5) counselors employed deceit and falsely pretended to have the authority to solicit investments from the general public when, in truth, they did not have such authority. The deception continued when Baladjay’s counselors actively solicited investments from the public, promising very high interest returns starting at five percent (5%) per month. Convinced of Baladjay’s and her counselors’ promise of lucrative income, the private complainants were then enticed to invest in Multitel. However, unknown to them, the promised high-yielding venture was unsustainable, as Multitel was not really engaged in any legitimate business. Eventually, Baladjay and her cohorts ran away with the complainants’ money causing them damage and prejudice.

The latest case on Ponzi Scheme was decided last year in the case of People vs. Aquino, G.R. No. 234818 (05 November 2018). This case is connected or related to People vs. Baladjay, supra, since the principal accused Felix Aquino used as a defense that he was also a victim of Baladjay. Aquino, who solicited investments through her conduit corporation Everflow, alleged that he also invested the amounts he gathered to Baladjay’s Multitel. Everflow solicited investments on various dates between years 2000 and 2002. The complainants were promised that their money will earn a monthly interest of 5% and will be doubled after a year. Because of this enticement, the complainants invested a total of Php5,161,211.28 or US$90,981.00. Evergrow closed and cases for Syndicated Estafa were filed against Felix Aquino, his wife Iris and the Board of Directors who eluded arrest and continue to be at-large to this date.

The Supreme Court affirmed the conviction of Felix (his wife Iris died in detention) for 21 Counts of Syndicated Estafa and sentenced him to Life Imprisonment for each count. The Supreme Court further held that not all proposals to invest in certain business are tainted with fraud. Actionable fraud arises when the accused has knowledge or knows that the venture proposed would not reasonably yield the promised results, and yet, despite such knowledge, deliberately continues with the misrepresentation. The Court went on to say that business investments ordinarily carry risks; but for as long as the incipient representations related thereto are legitimate and made in good faith, the fact that the business fails to succeed or skews from its intended targets does not mean that there is fraud.

As discussed in these cases decided by the Supreme Court, Ponzi Scheme can come in different forms. It may be through vehicles such as rural banks, cooperatives, foreign exchange trading companies, and corporations about to start a greenfield project and in need of start-up capital. The safest way to know if the solicitation for investments is legitimate is to inquire with the Securities and Exchange Commission (“SEC”) if the said person or entity soliciting investments has a secondary license. Primary license, i.e., Certificate of Registration, Articles of Incorporation and By-Laws, is not an assurance that it is legitimate. When you say secondary license, it is a Certification from the SEC that the said person or entity is authorized to sell to the public securities, stocks, futures, and investment instruments. Absent any secondary license, public should be wary of parting their hard-earned money and should be guided by the principle in Law on Sales called caveat emptor or “buyers beware”.