Con artists in tuxedoBy Raul J. Palabrica Jr.
Philippine Daily Inquirer
There is something about summer in our country that draws representatives of foreign banks to visit and promote their products to well-heeled members of our society.
It’s understandable for officials of multinational companies based in the United States and Europe, with offices in this part of the world, to time their coming here in December, January and February in order to escape harsh winter conditions in their countries.
The same strategy is used by staffs of international organizations that provide financial and technical assistance to developing countries. They actively offer consultancy services during those months to government offices or NGOs engaged in activities that are within their area of expertise.
The line often used to make the offer acceptable is, the costs of their services shall be covered by the grant or loan that their organization will extend to them. Securing approval of that facility will, of course, be the responsibility of the prospective consultant.
That the official-cum-pleasure trip or consultancy contract usually ends around the same time the climate in their home countries eases or spring comes is no coincidence. It’s planned ahead of time.
For “portfolio bankers” (or representatives of multinational banks with offices in Hong Kong, Singapore or Tokyo who fly around the region), summer is the best time to come here to look for clients for their products.
This is the time of the year when the wealthy sector of our society is in a relaxed and expansive mood. With schools closed and vacation resorts beckon, the “can afford” are less stingy with their money.
Until government regulators closely monitored their activities some time ago, these bankers announced their coming through splashy advertisements, extravagant media releases and glossy flyers.
They conducted investment briefings in five-star hotels, complete with sumptuous meals, attractive female assistants and expensive giveaways. Their target market was the country’s financial elite or people awash with money but do not know where to put them.
The bankers sold foreign equities, securities and a myriad of financial products that promised hefty returns that are immune (so they claim) from detection by the tax or anti-money laundering authorities.
The glib presentations of the bankers, who skillfully exploit the prestige of the financial institutions they represented, succeeded in enticing countless numbers of rich Filipinos into buying their products.
Initially, things went well. There were hardly any complaints about the viability of those investments. Either the returns were paid as promised, or the maturities were still far ahead and therefore there was no reason to get worried yet.
But the roof fell in 2008 when, in the aftermath of the near meltdown of the US economy, some of the iconic financial institutions that sold those instruments either closed, declared bankruptcy or were taken over.
Suddenly, the portfolio bankers who were once available 24/7 were too busy to return calls or nowhere to be found. The local branches of the multinational banks washed their hands off from any involvement in the transaction. The parent banks disclaimed any responsibility over the financial instruments and pointed to the regional office to which the portfolio bankers were assigned as the accountable parties.
Faced with a blank wall, the gypped investors filed suits against the local branches of the multinational banks. The Senate even looked into the matter and summoned the local officials of the multinational bank concerned.
Four years and countless suits later, majority of these investors are still holding the proverbial empty bag. Chances of recovering their investments are from zero to nil.
There are reports that the “con artists in tuxedo” are back in town, but this time in a less conspicuous manner.
To keep the authorities off their track, they have refrained from openly advertising their presence. Instead, they’re sending e-mails and courier-delivered letters to prospective clients informing them of “by invitation only” investment briefings to be held in posh hotels and resorts.
They know that offering to sell or selling securities in the Philippines without registering those instruments first with the Securities and Exchange Commission is contrary to law.
To avoid getting into trouble, their modus operandi is: Sell securities issued by foreign companies or are registered in, say, Hong Kong or Singapore. Sign the investment contract in the place where the securities are issued or registered. Payments shall be in US dollars or euros. Settlement of the account shall be made in a bank outside of the Philippines.
By making it appear that all the significant elements of the transaction are foreign in nature or are concluded abroad, the bankers can raise the argument that the sale of securities is not a domestic transaction and therefore beyond the coverage of Philippine law.
For good measure, if the bank the bankers represent have a local branch or office, no mention is made at all of such relationship or participation of the latter in the deal. This way, the local bank or office can disclaim any liability in case things later get awry.
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