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Legacy head hit for fraud

By Michael Lim Ubac, Christine Avendaño
Philippine Daily Inquirer
First Posted 01:24:00 02/03/2009

MANILA, Philippines—Celso de los Angeles Jr., founder of the Legacy Group that includes rural banks and pre-need firms, Monday said he sold a property in Ayala-Alabang in Muntinlupa City worth P57 million a week before Legacy applied for voluntary dissolution last December.

The Bangko Sentral ng Pilipinas (BSP) ordered Legacy’s 13 rural banks, which have a combined P14.03 billion in insured deposits in 132,642 bank accounts, closed just before last Christmas for being insolvent and for engaging in unsafe and unsound practices.

Legacy’s pre-need firms (Legacy Consolidated Plans Inc., Scholarship Plan Philippines Inc. and All Asia Plans Corp.) that have some 50,000 plan holders have also ceased operations. Pre-need plans (education, pension and memorial) are contracts that provide for future services or payment of money at the time of actual need.

At the Senate hearing on pre-need firms, Angeles, a mayor of Santo Domingo, Albay, justified the sale of his 3,000-square-meter property, saying he and his spouse had to divide the conjugal property as part of legal separation proceedings.

When he could not adequately answer why he did not include this as part of the Legacy Group’s trust fund, Sen. Manuel “Mar” Roxas II, chair of the Senate trade committee, said: “Mr. Angeles is engaged in a fraudulent scheme to defraud all of these investors.”

Roxas said the property should have been “attached” to the Legacy Group’s assets if only the Securities and Exchange Commission (SEC) did its homework.

In his defense, Angeles said he had other assets amounting to P1 billion, net of liabilities.

Jose Aquino, director of the SEC nontraditional securities and instruments department, said his office should not be blamed for this failure to attach De los Angeles’ assets because the “filing of a dissolution was not submitted to us but to other departments.”

Guardians of public interest

SEC Chair Fe Barin drew most of the flak from Senate President Juan Ponce Enrile and Senators Roxas and Francis Escudero for the SEC’s failure to act as “guardian of the interest of the public.”

Roxas particularly did not like Barin’s assertion that its job was to “balance” its twin objectives of protecting plan holders and developing the capital market.

Roxas asked Barin whether the SEC’s loosening of its regulation affected the interest of the public—something which he said happened in 2005 when Pacific Plans and College Assurance Plan collapsed.

Enrile told Barin that the SEC should be the “guardians of the interest of the public.”

“My goodness, when there is danger (that Legacy will not be able to comply with its obligations to its clients) why not stop the predators from continuing their acts to protect the innocent public?” Enrile asked.

Barin said that until last year the SEC had issued Legacy a license to sell its plans. She said the SEC only learned of the firm’s financial woes when it sought a voluntary dissolution in the first week of December last year.

Barin said her office was surprised when Legacy could no longer sustain its operations, as she noted that it had been compliant in contributing to the trust fund it put up for its plan holders.

Legacy had been “compliant” with the required trust fund contribution up to August or September last year, according to Aquino.

“It was only two months before they announced its closure that they have not been contributing the necessary amount in the trust fund,” he said.

Sufficient source of money

A trust fund, an asset account that includes stocks, real estate and bonds, must provide a sufficient source of money at any given time to pay for current and future obligations.

Senators asked why SEC officials were unable to detect Legacy’s troubles earlier.

Barin said the SEC had “no watch list” and “based its reports on what we get” as well as complaints filed by plan holders.

Roxas asked why SEC officials allowed Legacy to continue selling its plans but Aquino said the firm was trying to comply with the requirements, including contributing to the trust fund which he said was “more than sufficient” to meet its “present liability value.”

Salaries, commissions

Barin said the firm was required to give 5 percent to the trust fund in the first year of the plan and admitted that 95 percent then go to the company for its expenses such as salaries of its personnel and commissions of its agents.

But Enrile said Section 16.3 of the SEC rules allowed pre-need firms to deposit more than or less than the requirement to the trust fund as determined by actuaries or the commission itself.

This was confirmed by SEC officials but they said that so far pre-need companies had deposited more in trust funds, with Barin saying this was being done because these firms “realized they have to deliver their promise” to the plan holders.

Invested in Legacy banks

Aquino said that the trust fund of Legacy had been invested partly in the banks owned by De los Angeles and that he had directed shareholders or trustees that this should not be the case.

“I directed them but in some cases they complied,” Aquino told senators, prompting them to ask why the SEC allowed Legacy to continue selling if it was “in violation” of SEC directives.

Aquino replied that the investments of Legacy in these banks were “small” compared with its investments in government securities.

De los Angeles told senators his company owed P1.1 billion to plan holders, the longest term plan ending in 2020.

Of the 50,000 plan holders, he said 70 percent (or 35,000) had pension plans, 20 percent (10,000) had education plans and 10 percent (5,000) had memorial plans.

As of last Dec. 31, De los Angeles said that his company’s contributions to its trust fund amounted to P330 million and that this would grow in 10 years to meet its P1.1-billion obligation.

Wiped out

The P330 million included an estimated P100 million from the value of a Mastercard franchise called One Card that the company owned.

De los Angeles said One Card was owned by Legacy Consolidated, which in turn was owned by CGA Holdings, which was majority owned by him. Asked about the company’s assets, De los Angeles also said that it had P725 million in corporate assets.

He said the net worth of the company was P55 million but conceded that its equity had gone down or even wiped out.

De los Angeles blamed the financial woes of Legacy to “regulatory harassment, adverse and irresponsible media reports, extortion, and the general economic situation.”

In a statement, Catanduanes Rep. Joseph Santiago said the business model of pre-need providers appeared “questionable” and should be corrected right away by regulators to build up the industry and safeguard plan holders.

“Pre-need firms are investing only 45 to 51 percent of plan holder contributions. For every P100,000 paid by plan holders, only P45,000 to P51,000 is actually put to work in a trust fund,” Santiago said in a statement. The rest goes to commissions and operations.

But the Philippine Federation of Pre-Need Plan Companies insisted in a position paper presented to the Senate that the major cause of any deficit that shall arise would be the “mismatch” between the yields that were assumed could be earned in the future and what could actually be earned.

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.

Roxas said the SEC “conspired in the cover-up, so that this scheme will continue.”

February 2, 2009 - Posted by | Philippine Newspapers/Web News | , , , , ,

3 Comments »

  1. Celso de los Angeles is currently the President of Balikatan Housing Finance Corporation. Considering the business Balikatan is involve in, the roi (return of investment) could be 300 & 400%. My six senses tells me that this is where Delos Angeles move the proceeds of his “ponzi” type scam in form of investments with Balikatan where he is currently the President. Can anyone investigate & tie this with the missing billions on the legacy funds.

    Comment by joe ruperto | February 5, 2009

  2. The transfer of NPLs from the NHMFC to Balikatan Housing Financing Corp. is anomalous. I called up NHMFC branch here in Cebu and they told me that they have sent a letter dated November 9, 2005 notifying all the defaulted borrowers about the transfer. I did not received that letter from the NHMFC. But when Balikatan and its implementing company, Bahay Financial Services, Inc.(BFS), sent me a letter dated August 1, 2008, they attached the Nov. 9, 2005 letter into their letter. Worst was that the BFS letter of August 1, 2008 was only received by me on Dec. 27, 2008 or a very late delivery of 5 months to be precise. On Dec. 29, 2008, when I called up BFS to make some clarification, the lady who handled my account kept on insisting that I already abandoned my property even if I told her that I did not and have not abandoned my property from the time I lived on it since 1993. I suspect Balikatan and/or BFS have other agenda rather than to help the housing loan borrowers. I cannot elaborate it here as it is very sensitive. But in proper time and forum I will expose these people.

    Comment by Ramrod | March 26, 2009

  3. Philip’s No is 09175016508. We shall be setting up a new office soon–hopefully.

    Comment by Winnie | March 27, 2009


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