“Financial Stock on

: Fire ”
Scandal
Quest for Bequest
 In December 2008, the Bangko Sentral ng
Pilipinas (BSP) shut down 13 rural banks under the
Legacy Group of Companies for being insolvent and
for engaging in unsound practices. The banks, which
had a combined P14.03 billion in insured deposits in
132,642 bank accounts, were placed under the
receivership of Philippine Deposit Insurance Corp.
(PDIC). The closure of the banks prompted the filing
of a string of charges against Legacy group founder
and owner Celso de los Angeles Jr. and other Legacy
bank officials.
■ On Jan. 5, 2009, the BSP filed 49 counts of
falsification of public documents against 16
officers, employees and agents of several
Legacy banks who allegedly forged documents
to support fictitious loans.
■ On Feb. 6, the BSP filed 116 counts of
falsification of public documents against 18
officers, employees and agents of four Legacy
banks. On Feb. 11, the Bureau of Immigration
barred De los Angeles from leaving the country.
■ SEC charges On Feb. 13, the Securities and
Exchange Commission (SEC) filed criminal
charges against De los Angeles and other
officials of Legacy Consolidated Plans for
offering and selling unregistered securities. On
Feb. 26, the BSP filed a P1-billion estafa case
against De los Angeles and other company
officials in the Department of Justice for
swindling the public and for siphoning off
deposits from the bank.
■ Behind bars On July 13, De los Angeles, who was
confined at St. Luke’s Medical Center for throat
cancer, was served a warrant of arrest for several
estafa cases filed against him at the Cagayan de
Oro Regional Trial Court.
■ On Aug. 3, 2010, De los Angeles was taken out of
the hospital and detained at the Quezon City
police station based on a warrant issued by the
Regional Trial Court in Ormoc City, Leyte province,
in relation to syndicated estafa charges filed
against him by the BSP.
■ On Aug. 19, he was transferred to a jail compound
in Ormoc City to face the charges against him.
■ In February 2011, state prosecutors of Danao
City, Cebu province, found probable cause
to charge Legacy officials—led by De los
Angeles —with syndicated estafa committed
by the Rural Bank of Carmen, the group’s
unit in the province. In September, De los
Angeles was excused from arraignment
proceedings by the Regional Trial Court in
Ormoc City after jail officials said he was
too ill to travel from Tacloban to Ormoc.
The officers at the Securities and Exchange
Commission (SEC) were preparing a
retirement party for their boss, Jose
Batobalane, with the usual “plague of
appreciation” describing him as “our sharp,
witty and charming chairman.”
The plague was signed by the SEC’s four other
commissioners, but only one planned to attend
the party, which is not surprising.

For a fortnight ago, all four issued a public

statement attacking Mr. Batobalane and calling
him a “liar”
 ■ Mr. Batobalane in turn, has accused
them of caving in to Ben Tumbaga,
the country’s King to tone down an
investigation into one of Mr.
Tumbaga’s close friend.’

Mr. Batobalane,’s retirement

is coming amid huge scandal
that has rocked the
country’s financial
institution, frightened
foreign investors and driven
the stock market down. ■ It even threatens to bring down Mr.
Tumbaga government.
At the center of the scandal is a company called Ample
Group; and Marko Ripot, an ethic-Chinese Filipino
businessman and the company’s main shareholder.

A year ago, AG was a little more than an unknown shell

company. Mr. Ripot was known mostly as a friend of
“Sunog” as Mr. Tumbaga is known to Filipinos, as a
generous contributor to his coffers.
 During 1998 and most of 1999, according to a report by investigators at
the Philippine Stock Exchange (PSE), Mr. Ripot has been snaffling up the
shares in AG without disclosing to the exchange (which is illegal) and
knowing full well that he was planning to merge AG with another company
under his control that owns a valuable online bingo license.

Besides of that, Mr. Rapot was in cahoots with atleast eight stockbroking
firms to fake transactions and thus inflate volumes in AG shares.
 1. For a while the scam worked spectacularly
AG shares surged from P2 in January 1999 to
P107 at their height last October.
2. In June, Mr. Rapot unloaded some
shares, ranking up a profit perhaps
P800 million.

But as the report makes clear, this

exposed Mr. Rapot to charges of
insider trading.
3. Last autumn, Mr. Rapot brought in a friend,
the Macau casino king Cornelius Kahn, to become
a chairman of AG. Mr. Kahn said he would invest
heavily in AG. But he did not and in October,
AG’s shares crashed.

4. Mr. Rapot now portrays himself as a “victim”

Stock on Fire

- consists of assets at heavily

discounted prices. Fire sale originally
referred to the discount sale.

Now it more commonly refers to any sale where the

seller is in financial distress. In the context
of the financial markets, a fire sale refers
to a situation where securities that are
trading well below their intrinsic value,
such as during prolonged bear markets.
Stock on Fire

- can be an opportunity for investors. Securities that are on fire sale may
offer compelling risk-reward payoffs for value investors, since further
declines in these securities may be limited and the upside potential could
be quite substantial.

The challenge for investors is making the decision to purchase securities

during a fire sale. When the market is having a fire on stocks, for example, it
means that the overall market sentiment is that it is a bad time to own
stocks. Buying when the market is selling requires investors to have a
contrarian streak in them. A broad fire on stocks is rare, however, and
usually only occurs during times of financial crisis.
Questions:
6. In the case of the Ample Group, what are the manipulation adopted by Mr. Marko Ripot to persuade the
investors to pit in money in the business?
Answer: Mr. Ripot had been snaffling up share in Ample Group without disclosing this to the Philippine Stock
Exchange, which is illegal, and he was planning to emerge AG to another company under his control that owns a
valuable online bingo license. And Mr. Ripot was in cahoots with at least eight stockbroking firms to fake
transactions and thus to inflate volumes in the AG shares.
7. Which schemes served as a platform for perpetrating both the Ample Group and the Bequest Bank fiascos.
Answer: Ponzi scheme is the platform for penetrating both the Ample Group and the Bequest Bank.
8. Dis the Board of both corporations acted in the interest of their shareholders and the public in general?
Answer:
9. In assessing the structure of both companies, are these companies on consonance with the corporate
governance principles as presented in the three models?
Answer:
10. The SEC plays an important role in policing the corporations. In what way is SEC remiss in these two cases?
Elaborate.
Answer: