Ponzi schemes feed on stupidity and greed
AS I WRECK THIS CHAIR By William M. Esposo
The Philippine Star 2012-11-22

That Ponzi scheme of Aman Futures Group that hit Pagadian residents and other areas of Mindanao is nothing new. Previous Ponzi schemes have been featured on national primetime television and yet despite all that media dissemination — there are still suckers who bite into the next Ponzi scheme.

Of recent vintage, in the US, former NASDAQ Chairman, Bernard Madoff pulled what could be considered the biggest Ponzi scheme in history. The US courts estimated that Madoff ripped off $18 billion and for that Madoff was sentenced to 150 years in prison. Madoff was able to pull off such a huge amount because he had the trust of the richest — and possibly greediest — folks in America. Madoff’s victims weren’t the neighborhood bread snacks peddler but the well heeled of America who should have known better.

Named after 20th century con man Charles Ponzi, the Ponzi scheme feeds on two facets of the human character — our stupidity and our greed. In some cases, people are aware of the risks when promised returns that are way too high compared to what the more reputable and stable financial institutions offer. Yet, their greed gets them to still take the risk and invest in a Ponzi scheme. All witting victims — people who sense that there’s something irregular with an investment offer but still placed their money in it — thought that it’s the next guy who’ll get the short end of the deal. Wrong, all of them, whether witting or unwitting, became victims.

People should understand that there’s a limit to what your money can earn for you. There’s a good reason why successful bankers like the Ayala family would only offer a 5 percent interest on your time deposit and that’s on condition that your money is locked in with them for five years. Unless the person or firm offering to pay big rewards for your investments has struck gold or oil, there’s no way their operation can offer something better than what the leading financial institutions offer.

Personally, my reaction to news about victims of the latest Ponzi scheme is that of: “Serves you right.” Although, we should make the distinction between victims who have had the benefit of a proper education and should have known better from victims who are under informed and under educated and really didn’t know any better. Many from the under informed and under educated group were lured by people they trusted. In the Aman scam, media had reported the involvement of politicians and cops — public officers who should be protecting the public interest. Knowing our political culture — patronage politics — those poor folks may have been convinced to invest because their political patrons had endorsed it.

Preventing Ponzi schemes should be a government top priority. As seen in Pagadian, street commerce was immediately affected by the Aman Ponzi scheme. A Pagadian fruit vendor said that it looked like money suddenly disappeared in Pagadian. When your fruit sellers are seeing their produce rot on the shelf, expect a major economic dislocation to happen that will cause economic instability, disorder and dangerous situations. Already the PNP (Philippine National Police) expressed fear of a crime wave happening in Pagadian as an effect of the Aman Ponzi scheme. Simply because of a Ponzi scheme, erstwhile peaceful Pagadian is now marked as a potential high crime area to watch.

If President Benigno S. Aquino III was enjoying a high trust rating in Pagadian, expect that to dip if government is unable to address the plight of the Aman Ponzi scheme victims. At the very least, the Aman operators must be brought before the bar of justice. It would be great if at least half of the money that was conned could be recovered and distributed among the victims.

Seeing the people who conned them jailed and recovering a part of their investment would bring a big relief to the victims. Many of them lost their nest eggs. The Aman Ponzi scheme didn’t just steal money from people but stole their futures as well. No issue could be more emotional and politically unsettling.

Clearly, Ponzi scheme promoters are economic saboteurs. If we were still under martial law, these people could have been meted death by musketry. It’s not a bad punishment if you ask me. The initial reports of victims of the Aman Ponzi scheme showed a wide profile, from politicians all the way to the salaried workers who lost their life savings. Media had reported that even some cops became victims of the Aman Ponzi scheme. Aman executives have good reason to fear that they’ll be salvaged.

Perhaps the government should form a multi-agency task force to ferret out Ponzi scheme operators and to prevent their future predation. The National Security Agency, NBI (National Bureau of Investigation), PNP and NICA (National Intelligence Coordinating Agency) should be engaged for spreading a wide dragnet to prevent Ponzi schemes from ever happening again. This is for operators like Aman Futures Group that are normally outside the radar of the Finance Department.

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Shakespeare: “Madness in great ones must not unwatched go.”

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