POSTSCRIPT / February 5, 2009 / Thursday


Philippine STAR Columnist

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Here's a lesson Gloria can learn from Barack

SCREWED UP: Remember when Executive Secretary Eduardo Ermita said that then newly installed US President Barack Obama could learn from President Gloria Arroyo? Ermita was pelted with a hail of criticisms.

Look what Obama just did. Yesterday, he admitted having made a mistake in nominating Tom Daschle as his Health and Human Services secretary. Daschle’s tax problems, he said, sent a message that the politically powerful are treated differently from ordinary people.

Maybe it is time our Gloria learned from Barack. When it is abundantly clear that her Cabinet nominee is unfit, she should not insist on it.

“I think I screwed up,” Obama told CNN. “I take responsibility for it and we’re going to make sure we fix it so it doesn’t happen again.”

Can we ever hear our Gloria saying something like that?

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MONEY MATTERS: Daschle, the former Democratic leader in the US Senate, withdrew earlier as news on his failing to pay some taxes continued to stir opposition on Capitol Hill.

He had apologized for what he said were honest mistakes, referring to them as an embarrassment.

These “mistakes” included improperly reporting $15,000 in charitable donations, failing to list $80,000 in lobbying income, and not reporting as income a car and driver lent to him by a friend and business associate.

He has filed amended tax returns, and paid more than $140,000 in back taxes and interest for 2005-2007.

You think something close to that will ever happen with Filipino senators and congressmen?

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STINKING MESS: With the Legacy stink assailing us even when the stench of earlier financial scams still hangs in the air, we can never overstate the perils that small investors and bank depositors face.

A reader signing in as Leo Tecson points to one reason why Legacy rural banks remained open long after the Central Bank found out they were operating a Ponzi scheme using deposit insurance as surety for their scam.

He pointed out that “our courts, particularly the Supreme Court, have undermined the ability of the Central Bank to supervise banks.” It is not the only reason, but it bears looking into.

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CB SUED: Tecson said: “During the financial crises after Ninoy Aquino’s assassination in the ’80s, there was a rumor in the banking community that a scion of a family that controlled a big savings bank fled to the US with a big chunk of the bank assets.

“Months later the bank was in trouble and was closed by the Central Bank. The family that controlled the bank sued the CB, including its Governor, even though the Monetary Board approved the bank’s closure.

“The courts disregarded all evidence presented by the Central Bank. The scion’s family won all their cases in the Supreme Court and was able to regain control of the bank.

“The family even went after the personal assets of the former CB Governor. I understand the Central Bank will have to pay something like P18 billion to the owners of the savings bank.

“The Supreme Court rulings in favor of the family scared past and present CB officials, who became hesitant to close erring banks since they could be sued. Even their personal assets are at risk.

“The SC decisions also scared other government agencies, such as the Securities and Exchange Commission, especially when it comes to well-connected individuals like Celso de los Angeles of the Legacy Group.”

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PONZI SCHEMES: The US Securities and Exchange Commission has this backgrounder:

“Ponzi schemes are a type of illegal pyramid scheme named for Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s. Ponzi thought he could take advantage of differences between US and foreign currencies used to buy and sell international mail coupons.

“Ponzi told investors that he could provide a 40-percent return in just 90 days compared with 5 percent for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during one three-hour period — and this was 1921! Though a few early investors were paid off to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons.

“Decades later, the Ponzi scheme continues to work on the ‘rob-Peter-to-pay-Paul’ principle, as money from new investors is used to pay off earlier investors until the whole scheme collapses.”

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NEAR-VICTIM: Tecson recalled his brush with a Ponzi: “Five years ago, a friend and I went to a restaurant on Tomas Morato. We chanced upon an acquaintance having lunch with an agent of the Legacy Group. The agent persuaded us to accompany her to the Legacy office.

“A manager there explained that if we wanted to buy a car worth P1 million, all we had to do was deposit P1 million at the Rural Bank of Parañaque under different names so it would be covered by insurance under the Philippine Deposit Insurance Corp.

“We were told we could immediately get the car, but that the papers would be in the name of Legacy since they would have the car refinanced and use the money for five years. After five years, we were told, they would turn over the car papers to us and we would be able to withdraw the P1-million deposit.

“Since my friend and I used to work in a bank, we did not bite. We saw it was a Ponzi scheme. However, the deposit insurance turned out to be true and now the PDIC is left holding the bag for a rumored P14 billion.”

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(First published in the Philippine STAR of February 5, 2009)

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