SORRY TO start off your week with a couple of sad stories, but these stories beg to be told. Mind you, they are true stories, which happened here in Manila recently.

Story 1
A widow in her sunset years has a small house and lot in her name. That is her only asset and it was given to her by her late husband.

The widow entrusted the land title to her daughter for safekeeping, who kept it in her own home she shared with her husband.
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Celso de los Angeles, owner of the Legacy group of companies, appears to be a financial genius. He created a scheme that fell through the regulatory cracks, and stumped both the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas.

From the Senate hearings, here is the anatomy of de los Angeles’ perfect scam:

1. His companies sell a pre-need plan to an investor.
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When you’ve been socking away money religiously to pay for an education or pension plan, sacrificing personal comfort and doing away with little treats in the process, and you find that dream of security snatched away by a corporate failure, you don’t just hurt. You are likely to lose belief in the system. You are likely to blame everyone you can think of—the government, the agent, the company. You may even lose belief in yourself and in the very basic principle of preparing well for the future.

I have learned to live with my investment mistakes, but it hasn’t been a walk in the park. I have decided that there’s nothing else to do but learn from it and start over.

If I had known some of the things I know now, I would have handled the situation in a more mature way. I would have been more empowered and less freaked out! So, here’s a quick guide for those who find themselves victimized by failures of pre-need plans:

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In reaction to my previous post, “Tales of woe from Legacy scam victim,” some of you asked whether Letty’s “lucky” that her pre-need plan has been converted to a time deposit because the Philippine Deposit Insurance Corp. (PDIC) will now be required to pay her back.

I wish, for Letty’s sake and many others who were caught in the same crazy scam that that will be true.

Unfortunately, based on my interviews with sources at the PDIC, it will not be that simple. PDIC is, even as I write, going through the bank’s records with a fine-toothed comb to make sure it pays only “clean” accounts—meaning those that were deposited in good faith, with sufficient documentation (i.e. signature cards), adjusted for all interest due or deducted with loan payments due to the bank. That’s the mandate of the PDIC: pay only real depositors and make sure precious taxpayers’ money is not paid out to fictitious accounts or even to accounts that are the result of fraud.
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There’s no place good enough for scam artists but the darkest, foulest, living hell where cretins that go bump in the night are more sinister than the exorcist and the predator combined.

Leticia Catalan, a reader, emailed me she now will put money under the mattress rather than trust anyone to grow her money.

When my daughter was a few months old, I bought this Educational Plan from Scholarship Plan of the Philippines from the Legacy Group of Co. I will get my investment once my child reaches college. For my P25,000 in 14 years I would have P125,000.  The agent was a friend. I cannot exactly recall the reasons why the agent converted our policy to a time deposit with the Rural Bank of Paranaque.  But I remember the agent asking me for the insurance policy. When she returned it to me she exchanged it with five time deposit certificates. Kind of stupid of me, right?

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I watched with rapt attention in the last few days as Wall Street reported the arrest of former Nasdaq chairman and veteran money manager Bernard Madoff last Thursday, who has duped a wide range of investors—from a Jewish youth charity in Boston to major banks like HSBC and BNP Paribas, as reported by Associated Press.

The extent of losses is still unknown. As of now, though, the figures are eye-popping. Banco Santander, Spain’s biggest bank, may have a $3-billion exposure. HSBC at $1 billion. Royal Bank of Scotland $98 million. France’s Natixis investment bank, already brought low by subprime losses, $606 million. Japanese financial giant Nomura $303 million and officials in South Korea said financial institutions there a total exposure of some $95 million.

How did he do it? Using the good ol’ Ponzi scheme, says US authorities. That means paying off his investors with unusually large returns, consistently, using money from new investors. As we have already discussed extensively in this blog, this form of scam always ends in tears.
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(This post is written by Bianca for Money Makeover)

May you live in interesting times, is one Chinese saying, or curse, whichever way you want to look at it. We do live in interesting times. Just when we thought that we are probably getting it right, calamity struck. Our car was taken. It was not insured.

A little background.

The hubby drives a 9-year-old truck that was the apple of his eyes. His brother handed it down to us four years ago. We paid the balance whenever we could and had already given a total of P90,000, the last installment just very recently. There is, of course, the cost of maintaining it which ran up to some P200,000 over the years. He had dreams of “dressing” it up – in March, he bought it a P20,000 set of wheels filled with nitrogen. He wanted it “lifted”, repainted, made into a macho monster truck. It was a constant companion when we moved furniture, or people, from here to there, and a comfort in the many times that my much-older car has broken down or was being repaired. He never wanted a new one. He was content and happy, my boo.
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Almost everyone wants to be told what to do.

Put P10,000, P100,000, P1 million here, here and here. Choose this company, dump that one. Buy now, sell in three years. Sell Glutathione while it’s hot…

Attend a seminar to find your life-partner. Write your dreams, send your thoughts out to the cosmos at four in the morning everyday so that the universe can respond to your desires and one day you will wake up a multi-millionaire with a house in Ayala, Alabang.
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(Photo credit: AFP)

I missed seeing this article in the Philippine Daily Inquirer when it came out in end-March, but I think it’s worthy enough to be shared again in MoneySmarts, just in case you guys missed reading it too.

Say it with me. “If it’s too good to be true…”

Enjoy reading!
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(Scam artists can make frogs look like princes in 10 seconds, so just walk away. Photo from AFP)

It’s true. I’ve been scammed several times. Don’t laugh at me, okay? This is a public confession of my extreme stupid moments!

When I was a college student, I gave the gold necklace I was wearing to an old lady I met at the Shopping Center in the University of the Philippines who said she would only “borrow” it so that she could pay someone to open her car door. For some reason, she was locked out and could not go home. Duh moment! She spoke in even tones and was very persuasive, but let me tell you it was my stupidity that got the better of me. She looked pretty decent, too.

That was a pretty simple scam, but con artists can get creative in their efforts. Another fraudster was a contractor for a big telecommunications company who installed our DSL modem. He seemed like a harmless guy and I didn’t think there was anything wrong in telling him about my line of work as well as my husband’s. Besides, he was in my home on official business. Unfortunately, he was part of a gang that preys on househelp. He or a member of his group pretended to be my husband, gave a story about being in a car accident and instructed the househelp to bring cash and valuables to a shady place in Caloocan, a city just 30-minutes away from us.
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