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Financial

Scandals
Mini-Case
Group 5 and 6
Ponzi Scheme

Name: William Miller


Crime: Scamming/Fraud
Sentence: Jailed for 10
years
Ponzi Scheme

Name: Charles Ponzi


A.K.A: Charles Ponci,
Carlo and Charles P.
Bianchi
Crime: Scamming/Fraud
Sentence: Jailed for 12
years and deported back to
Italy
Madoff Swindle
Name: Bernard Madoff
A.K.A: T-Bill Bernie
Crime: Scamming/Fraud
Sentence: 150 years
imprisonment and forfeiture of
$17.179 billion
Criminal Status: Incarcerated
at Butner Federal Correctional
Institution; Federal Bureau of
Prisons Register #61727-054;
scheduled date of release:
November 14, 2139
Quest for Bequest

Name: Julian Damondong


Crime: Falsification of
Public Documents; Offering
and selling unregistered
securities; Estafa
Sentence: Detained in
Caloocan City Police
Station but currently
Hospital arrest at Our Lady
of Church Hospital
Stocks on Fire

Name: Jose Batobalane(SEC


boss)
Crime: Still on Process
but called liar by the three
officers of SEC
Sentence: Under Investigation
Stocks on Fire

Name: Marko Ripot


A.K.A: Sunog
Crime: Snaffling of
shares without disclosing
to the exchange; conspiring
secretly with at least 8
stock broking firms to fake
transactions
Sentence: Under
Investigation
Summary:
Ponzi Schemes
It all starter in the year 1899 where a New York
scammed artist name William Miller promised investors
returns as high as 520% in one year. The term “robbing
Peter to pay Paul” is the practice of providing the
investors above average returns on their investment funds
raised from other investors in the absence of any
business operations to generate profits and this is
illegal.
The practice was given a new Ponzi scheme in honor of
Charles Ponzi, an Italian immigrant, who began to promote
the spectacular returns to be made by buying
International Reply Coupons (IRC) coupons that could be
used to purchase stamps in order to reply to a letter
like an international self-addressed envelope in local
currencies and cashing them in at US currency rates.
Therefore if two countries’ postal charge differ from
each other, it will open a new profit-making possibility.
Summary:
Ponzi Schemes
Ponzi was able to keep the scheme rolling by
encouraging those older investors to keep rolling
over their investment. But then, many suspicious
rumors began to spread about the questionable nature
of Ponzi enterprise so fewer and fewer people
continue to invest instead the choose to take their
money out. At that point, the whole system collapsed
and Ponzi’s business enterprise was exposed as
fraudulent.
The Ponzi scheme was followed by many other
investment fraudulent activities like the Madoff
scheme, Quest Group of Companies, and etc. These
other similar fraud may differ in some aspect but
they are all rooted on the same purpose which is to
earn money by playing with the investor’s money.
Summary:
Madoff Swindle
The arrest of the 70-year-old Madoff, widely considered
to have the magic touch as an investor, is another serious
black eye for the hedge fund industry and all non-transparent
investment vehicles. Investors across the New York area have
clamored to be in Ascot because of the stability of double-
digit returns and the reports of serious wealth creation. The
scandal is bound to reveal the inner workings of the hedge fund
industry, whereby intermediary feeders bring in their clients
and take fees for putting clients with an investment manager.
Until Madoff came along, the Equity Funding scandal may have
been the largest fraud in dollar terms in U.S. history. A
publicly held company whose shares traded on the New York Stock
Exchange, the top executives falsified 64,000 insurance
policies that were used to report revenues of $2 billion. The
company also sold $25 million in counterfeit bonds and had
missing assets of $100 million. Three auditors and high ranking
executives served prison terms.
Summary:
Quest for Bequest
In December 2008, BSP shut down 13 rural banks under
Bequest Group of Companies for being insolvent and in
engaging unsound practices like falsification of
public documents. Th founder, Julian Damondong and
other officials forged documents to support
fictitious loans.
Damondong denied the wrongdoing. Instead, he blamed
unfair media reports and adverse economic conditions.
On August 19, 2010, he was jailed in Western Visayas
but on the next day, he was on hospital arrest.
Summary:
Quest for Bequest
The following are the cases filed:
1. On January 5, 2009 – BSP filed 49 counts of
falsification of public document of fictitious
loans.
2. On February 9, 2009 – BSP filed 116 counts of
falsification of document against officers and
employees of 4 banks.
3. On February 11, 2009 – BI barred Damondong from
leaving the country
4. On February 13, 2009 – SEC filed criminal charges
against Damondong and other officials for selling
unregistered bonds.
Summary:
Quest for Bequest
The following are the cases filed:
5. On February 26, 2009 – BSP filed P1 BILLION estafa
case against Damondong and other officials in DOJ for
siphoning off deposits.
6. On February 26, 2009 – SEC filed 2 more criminal
charges against Damondong for making people believe
that investment securities they have is registered
when in fact, it’s not.
7. On July 13, 2009 – Damondong served warrant of
arrest but he remained hospital arrest due to neck
cancer.
Summary:
Quest for Bequest
The following are the cases filed:
8. On August 3, 2010 – Damondong was taken out of the
hospital and detained in Caloocan City police
station.
9. On August 19, 2010 – Damondong transferred to jail
compound in Western Visayas.
10. On August 20, 2010 – The petition to hospital
arrest was granted so he was brought to Western
Visayas Medical Center.
Summary:
Stocks on Fire

Jose Batobalane, SEC boss is retiring and having a


party. Although all 4 commissions signed the plaque,
only 1 one of them will going to attend. This lead to
bitterly attacking Batobalane, accusing him a liar.
In turn, Batobalane accused the 3 other of caving in
to Mr. Tumbaga, the country’s king.
This scandal resulted to frightening of foreign
investors and the stock market goes down.
Summary:
Stocks on Fire
Ample Group and its main shareholder, Marko Ripot
snaffling up shares in AG without disclosing it to the
exchange and “knowing full well” that he’s planning to
merge AG with other company that owns a valuable online
bingo license.
He also involved in conspiring secretly with at least 8
other stockbroking firms in up roaring the value of
stocks of AG.
He also suffers in insider’s trading(illegal securities
practices due to having access in confidential
information.
On October 1999, AG’s shares crash because king Cornelius
Kahn did not invest heavily in AG as opposed on what he
promised. So, Ripot portrays himself now as a “victim”.
Questions:
1. Why was Madoff occasionally
referred to as “T-Bill Bernie”?

Answer:
Bernard Madoff occasionally called “T-Bill
Bernie” because his promised steady returns
of investment reflect the same security as
investing in government-backed treasury
bills. T-Bills is the safest securities
because it is guaranteed by the government.
Questions:
2. Charles Ponzi was working-class Italian immigrant
who was eager to find success in America. Bernard
Madoff was already a multi-millionaire before he
started his scheme. Does that make one more unethical
than the other? Why or why not?

Answer:
The source of where you came from or the root where you
started the crime is not a basis to consider if the act
is more unethical or not. As long as you took advantage
of someone and caused injury or loss to the other party
with the intent of doing so is already unethical.
Questions:
3. Explain how a Ponzi scheme works.

Answer:
Ponzi schemes are a kind of pyramid scheme
which operate on ``the `robbing Peter to pay
Paul' principle".

With the promise of large returns as bait, the


fraudster takes in money from new investors and
uses it to pay off the earlier investors until
no more new recruits can be found and the whole
scheme collapses, with the newest investors
losing everything.
Questions:
4. In the case of the Philippines, do
you consider the Bequest Bank and Ag Share
cases as the same as Ponzi Scheme? Why or why not?

Answer:
They are not the same but somehow there is some
similarities. In the Ponzi scheme they continue to
invite investors to pay out the older. While in
the Bequest bank and AG share cases they use
fictitious loans on different bank accounts and
they are snaffling up shares without disclosing to
the exchange. They both did fraudulent act for
personal gain.
Questions:
5. Is the strategy adopted by Mr. Julian Damondong
similar with that of Charles Ponzi and that of Bernard
Madoff? What similarities could you provide? What are
the strategies adopted which made it different from
that of the two schemes?

Answer:
Julian Damondong used the same strategy as Ponzi and
Madoff. They are all about financial scandal that used
someone's money that are being used for their business
and promise to return in a higher amount. They are
different in a way how to convinced someone to invest
in their business and how to return the invested money
like in ponzi's scheme they promise to return as high
as 520%.
Questions:
6. In the case of the Ample Group,what are the
manipulations adopted by Mr. Marko Ripot to persuade
investors to put in money to business?

Answer:
Mr. Marko Ripot adopted the following manipulations to
persuade investors to put money to the business:
1.Obtaining shares in Ample Group without disclosing it
to the exchange.
2. Conspiring at least eight stockbrocking firms to
fake transactions and thus inflate volumes in Ample
Group shares.
3. Insider trading or the illegal practice of trading
on the stock exchange to one's advantage through having
access to confidential information.
Questions:
7. Which schemes served as platform
for perpetrating both the Ample Group and
the Bequest Bank fiascos.

Answer:
Questions:
8. Did the Board of both corporations
acted in the interest of their shareholders
and the general public?

Answer:
Questions:
9. In assessing the structure of both companies,
are these companies in consonance with the corporate
governance principles as presented in the three models?

Answer:
No. Since both Ample Group and Bequest Bank suffered from
different form of financial Scandal, their structure will
never be in consonance with the corporate governance
principles presented in the three model because just in the
regulatory framework, theirs is already illegal, which in the
corporate governance structure of the three models must be
legal. And also the persons composing these corporations do
not give a sound, integrated and a quality information to the
public hence, they scammed people out of billions of money
for their personal gain which is a clear fact not a structure
or characteristic of a good corporate governance.
Questions:
10. The SEC plays and important role
in policing the corporations. In what way
is SEC remiss in these two cases?
Elaborate.

Answer:

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