Wednesday, July 25, 2007

Update on the PIPC scam

I first blogged about this last Friday because I'm interested in exploring the huge potential offered by foreign exchange trading to Filipinos. Scandals like these wouldn't help in the development of a mature trading community in the country. While I won't go as far as to call it an investment because of its highly speculative nature, I believe good, disciplined traders can earn enough to make forex trading a worthwhile undertaking.

I read the Performance Investment Products Corp. (PIPC) story last Friday and was curious enough to research its possible connection with the Performance Foreign Exchange Corporation (PFEC). I found out that the PIPC owner Michael Liew attended the inauguration of the PFEC Cebu branch as the Performance Chairman. The whole point of the initial post was that PIPC is somewhat related to PFEC. Given that relationship, I wrote that "I wouldn't "invest" in PFEC or any company in their group." I was surprised that a visitor to this blog took exception to the fact that I used the word "scam" in relation to PIPC. The Inquirer and the Daily Tribune calls it "$250-M scam" and "PIPC investment scam" respectively in their editions today so why shouldn't I call it what it is?

According to the lawyer of some clients, PIPC is "registered at the Securities and Exchange Commission as a research company and is not authorized to engage in foreign exchange trade. (Daily Tribune, 07/25/07 page 4).

This makes PIPC officially a SCAM. No ifs and buts about it.

Victor Agustin of Cocktales, Manila Standard (07/20/07) has a detailed insider look.

Forex scheme wallops Forbes crowd

"A NUMBER of Forbes, DasmariƱas, and Urdaneta crowd have suffered embarrassing foreign exchange losses after being suckered into placing a minimum of $40,000 in an Internet-based forex investment fund scheme...."

Emphasis mine.

"Performance Investment started in the late ’90s as Performance Foreign Exchange Corp., with Liew taking in on board an ex-Allied Bank officer in Singapore, Roberto Borromeo, to help the venture hurdle the thicket of local regulatory rules...."

I am right. There's a major connection after all.

"The forex venture did immediately run into opposition from the Securities and Exchange Commission, which sued all the way to the Supreme Court, only to suffer a loss after the Bangko Sentral sided with Performance."

They have good lawyers and lobbyists too.

"Borromeo, who admitted having already heard of the Performance implosion earlier this week, said he and Liew parted ways sometime in 2004, with Borromeo taking control of Performance Foreign Exchange..."

Sometime in 2004? Pretty vague... Performance Chairman Liew helped open the PFEC Cebu branch in 2004.

PFEC released an ad in the Philippine Star today denying any connection to PIPC and the Performance Group of companies.

"Borromeo sought to distance his company from the similarly named Liew venture, saying his Performance is limited to being an Internet-based financial intermediary, with clients themselves doing the foreign exchange trading using Performance’s software for a fee..."

Not entirely true. They do have that option but most clients don't trade and many that did usually lose money. They are discouraged to do so. PFEC account managers and executives usually do it for them. That's the best way to keep those commissions coming.

Some clients of PIPC are suing the local incorporators as well. Some of the local incorporators come from wealthy and known families. I would give them the benefit of the doubt because no amount of money can be worth dragging their family name into the scandal. However, I will never believe that Michael Liew acted alone. His accomplices have to be discovered and punished as well.


THE ANiTOKiD said...

I say, something definitely smells fishy! And when there's smoke, there's fire! Good insights, Jedi! Very good intuition too! The force is strong with you!

J. Bubwit said...

Scams really hover around all over the world, victimizing both the rich and the poor. What is interesting though is how people never really learned their lessons. Investing in such non-guaranteed instruments entail so much risk, and interested investors must only shell out their funds if and only if they are prepared to lose and are ready to face the worst scenario and swallow significant losses.

What I really dislike is the Philippine SEC's timing in coming into the picture, months after allowing "scams" to operate freely.

There have been a number of fly-by-night "scams" that really pay investors well and as promised. An example is G. Cosmos, which was permitted by the SEC to operate in the Philippines. It was initially "categorized" as an advertising firm. Well, all businesses have the logical right to accept willing investors. G.Cosmos had huge advertisements on print and on TV, asking investors to help them fund their advertising business, by sponsoring their choice products in Japan.

I put some money into the firm, believing that they have a great business model. That was around P1,500. Five months later, I received the fruits of my investment. P2,200 was credited to my account because of their good sales figures in Japan. That was a 40% profit in less than half a year!

I was prepared to reinvest the money, but was not really that serious about this amazing investment scheme. I know that one day, their business might not be that good, and I might entail losses.

My next investment was P3,300, and my expected yield is around 30% in half a year's wait.

For almost a year, G.Cosmos gave Filipinos a great new channel for their excess money. Some investors who sponsored the wrong products lost a minimal 5%, while those who had the right investment strategies earned up to 50%.

A month later, SEC declares that G.Cosmos is an illegal business entity, because it should have been categorized under "investments" instead of "advertising". As an "advertising" firm, it is not allowed to collect money from "investors". This vague structure caused by G.Cosmos' unique business model and SEC's negligence pulled the plug out of G.Cosmos and its investors. G.Cosmos closed down, and the SEC promised to liquidate all its assets and pay the "victimized" investors.

So, if you hear about new scams that abound in the country, don't worry too much; these are just small and negligible, and won't hurt the market. The biggest scam to worry about is the SEC itself. SEC is the biggest scam!!!

Anonymous said...

You're just reading the news. try to get some credible news from the company's perspective. When you find some info about then that's the time you can write a blog update.

I don't think a scam would last for ten years, and even expanding it abroad. Scams are mostly short-term fads like networking and pyramiding scams. Hence Francswiss, which doesn't even have an office--only laptops.

It wouldn't last this long if its client base weren't satisfied with the returns. And for 10 years running, i guess its clients are more than enthusiastic to invest. With clients from the country's richest, you can't buy good publicity like this.

Besides, from what i recall francswiss amassed nearly 5,000 clients; PIPC managed to get less than half of that. Given the timeframe of 10 years, PIPC, should it be branded a scam, would have gained so much more than any scam. Yes, it is harder to be an investor for PIPC, but again, being an investment firm, it suits to specific clients only, not to anyone who has internet connection.

Neither do i find a company owner, after building an empire from scratch, would disappear abruptly. The company, like i mentioned, is expanding in China. With a successful run in China (you can't go wrong when investing there), i don't think the owner just ran away because he felt like it, or one day he felt like quitting and left for the caribbean.

Having said all this, the company may have legal problems with the SEC, but it's simply not a scam.

jedianalyst said...

SEC improved during the time of Yasay. The organization was very efficient then. I don't what happened. Maybe the politicians took over.

jedianalyst said...

The loss of $100-$200 million is a big blow given the relatively small size of our financial market. I think it will affect the new IPOs the most. Investments will come from "hot money" flowing from outside the country.

Anonymous said...

the tragic pipc saga continues this blogpost

Anonymous said...

you may want to read this poor "literally" chaps story