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4 more pre-need companies on brink of collapse

The Philippine Star
By Aurea Calica Updated February 11, 2009 12:00 AM

MANILA, Philippines – Four more pre-need companies are on the verge of collapse, one of which was already paying off plan holders with medicine and cooking gas because it no longer had funds to deliver the promised benefits.

Securities and Exchange Commission chair Fe Barin and Jose Aquino, SEC director of the Non-Traditional Securities and Instruments Department, identified one of the beleaguered firms as Pryce Plans Inc. that could no longer meet its obligations to plan holders and started giving away medicine and cooking gas.

During the resumption of the Senate public hearing on the pre-need industry, Barin and Philip Piccio, president of Parents Enabling Parents Coalition, each said the other should identify the pre-need companies in trouble.

SEC and Bangko Sentral ng Pilipinas (BSP) officials were grilled as to when would be the right time to disclose that a pre-need firm was in trouble to save both the company and the plan holders.

“How come the SEC is not even announcing that there is another pre-need company that will collapse anytime now? The smoke is so strong, every day for the past year we get complaints of them not being paid. Can you imagine they offer to pay in kind and not money anymore. They offer a lot of things. They are fooling the people,” Piccio said during the hearing.

After Barin and Aquino identified Pryce, the SEC chief said she did not know about the three other companies that Piccio was talking about.

“Maybe Mr. Piccio would know because he was the one saying it. Of course we’re supposed to be monitoring all the pre-need plan companies,” Barin told reporters after the hearing.

Barin said Pryce Plans Inc. had stopped selling plans and was just servicing plan holders until 2005. To find out which of the pre-need firms had been stripped of the dealers’ license, Barin said the media could secure a list from the SEC office.

Asked if giving medicine and cooking gas rather than what was promised to plan holders was legal, Barin said: “Not really.”

Aquino explained that they called the attention of the firm “but then they told us that this is the most that they can do.”

Barin also said that the trust fund of Pryce Plans was no longer liquid, since the trust fund was built up with contributions of real assets.

“This company was allowed by SEC to contribute other assets to build up their trust funds but they’ve been stopped from issuing plans and instead are just servicing whatever are existing. There is still a trust fund, which may not be adequate. (It) consists mostly of real estate and therefore, this trust fund is no longer growing (and) unless you are able to sell, there’s no income,” she added.

Barin at first said Pryce Plans Inc. was only selling memorial plans but corrected herself to say it also sold education and pension.

“But the funding scheme for the trust fund is in the form of memorial lots,” Barin said.

Senators blame SEC, BSP for negligence

Senators blamed the SEC and BSP for being “criminally” negligent since they failed to protect plan holders from being defrauded as they allowed pre-need companies and banks to continue with their operations, sell policies or accept deposits even if they were already having problems.

Barin and BSP General Counsel Juan de Zuñiga said they also had to assess the companies and give them the chance to recover because immediate closure or even simple warnings to the public that certain pre-need firms and banks were in trouble could be more disastrous to the companies.

“Pre-need companies operate according to certain standards and regulations. So when they are in violation, we talk to them, partially because of our thinking that one way of protecting the plan holders is to try to give these companies a chance to recover or to make good what their deficiencies are because if they continue in the business, the chances of the plan holder are bigger,” Barin said.

Senators said these policies were obviously more favorable to the companies than the plan holders, when in fact regulators like the SEC and BSP were mandated to protect the public.

Piccio said the company identified by Barin as Pryce Plans Inc. was already having problems since 2005 but nothing was heard from the SEC to immediately warn or protect the people from the company that continued to sell policies.

Sen. Manuel Roxas II said the money they get from new plan holders was use to pay off previous plan holders whose policies matured or became payable.

Roxas, chairman of the Senate committee on trade and commerce that is leading the investigation, said this practice was called “kiting” or the act of misrepresenting the value of a financial instrument for the purpose of extending credit obligations or increasing financial leverage.

Kiting is also defined as a fraudulent act involving the alteration or issuance of a check or draft with insufficient funds. This is normally done to keep the funds flowing, Roxas said.

Roxas, Senate President Juan Ponce Enrile, Richard Gordon and Francis Escudero took turns asking SEC and BSP officials why they could not figure out early if certain pre-need firms and banks were already having financial difficulties, such as the case of the Legacy Group owned by Mayor Celso de los Angeles of Sto. Domingo, Albay.

The Legacy Group owns banks, a pre-need and other companies, which offered a “double-your-money scheme” to investors and creditors. Senators said this was clearly pyramiding and SEC and BSP officials considered it pyramiding and fraudulent for being a quasi-banking operation not approved either by SEC or the BSP.

Senators noted that once companies and banks were in trouble, the SEC and the BSP as regulators must be able to take the necessary steps, such as adjusting their trust funds or making sure that their assets were intact and could be used to pay off their plan holders or depositors.

“That is exactly the kind of system, the kind of thinking that brought about the debacle in America which now covers the whole world. The regulator, the SEC there, just like the SEC here, knew the problem but did not act because they were hoping that these guys, doing what they were doing, would repair the situation and didn’t care when it collapsed,” Enrile said.

“The SEC was installed by law, by government to regulate. It failed to regulate. What is the plan of the SEC to correct this failure of regulation? What legislation do you expect us to enact tomorrow, today if possible, to prevent the next victims that will come by? Tell us. At least we will know how to craft the legislation or submit to us the proposed legislations,” Enrile said.

“You are the guardians. The BSP is the guardian in the banking system. The SEC is the guardian for the security issuers. If you cannot do your regulation, how will you protect the public? Not Congress. We’ve invested you with powers. If those were not enough, why don’t you come to us and tell us? This is sickening information that we hear. I’m telling you I’m a little bit shocked with what’s happening. I’ve been in government for 44 years and this has never happened in my time in the Cabinet,” Enrile said.

While officials said they did suggest some reforms to the current laws, senators said the problem was more of inefficient implementation rather than the lack of measures to protect the public.

February 11, 2009 - Posted by | Philippine Newspapers/Web News | , , , , , , ,

2 Comments »

  1. October 23, 2010

    THIS IS NOT A COMMENT BUT AN APPEAL.

    Dear Sir/Madam:

    I would like to request for a speedy settlement of my claims with Pryce Plans, Inc.. Please feel our urgent need for the money we paid in your company as premiums in my two (2) policies. It is already very long time since I notified your office of my claims. Documents needed are already with your office.

    Ms. Girlie – Smart Ichat/Chikka #277004260658, I will appreciate very much your immediate action on this matter. My cell # 09213764530 is open and ready to receive calls and or texts.

    Sincerely yours,

    Emiliano C. Alday

    Comment by Emiliano C. Alday | October 23, 2010

  2. Does anyone here know number ng APIC?

    http://www.pesorepublic.com/db/banking-and-insurance/

    Comment by Lucio | December 26, 2010


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