Syndicated estafa

Dear Atty. Maan,

My brother was persuaded to invest his savings in what appeared to be an investment company. They promised high monthly returns and even showed my brother certificates and receipts to make it look legitimate. After a few months, the promised returns stopped coming in, and when my brother went to the office, it was already closed. Other investors also complained that they lost their money. The group can no longer be contacted. Can this be considered syndicated estafa?

Sheila

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Dear Sheila,

Section 1 of PD 1689 qualifies the offense of Estafa if it is committed by a syndicate, viz:

Section 1. Any person or persons who shall commit estafa or other forms of swindling as defined in Articles 315 and 316 of the Revised Penal Code, as amended, shall be punished by life imprisonment to death if the swindling (estafa) is committed by a syndicate consisting of five or more persons formed with the intention of carrying out the unlawful or illegal act, transaction, enterprise or scheme, and the defraudation results in the misappropriation of moneys contributed by stockholders, or members of rural banks, cooperatives, “samahang nayon(s),” or farmers’ associations, or funds solicited by corporations/associations from the general public.

Synthesizing the two provisions of law, the elements of Syndicated Estafa, therefore, are as follows: (a) Estafa or other forms of swindling, as defined in Articles 315 and 316 of the RPC, is committed; (b) the Estafa or swindling is committed by a syndicate of five or more persons; and (c) the defraudation results in the misappropriation of moneys contributed by stockholders, or members of rural banks, cooperatives, “samahang nayon(s),” or farmers’ associations, or of funds solicited by corporations/associations from the general public.

The special law is typically invoked by those who fall prey to the too-good- to-be-true promises of a Ponzi scheme, wherein the purported investment program offers impossibly high returns and pays these returns to early investors out of the capital contributed by later investors. The history of such a stratagem has been discussed in the landmark ruling of People v. Balasa (Balasa): x x x x Named after Charles Ponzi who promoted the scheme in the 1920s, the original scheme involved the issuance of bonds which offered 50 percent interest in 45 days or a 100 percent profit if held for 90 days. Basically, Ponzi used the money he received from later investors to pay extravagant rates of return to early investors, thereby inducing more investors to place their money with him in the false hope of realizing this same extravagant rate of return themselves.

If fewer than five persons were involved, or if the fraud affected only one or a few individuals, it would still be ordinary estafa under the Revised Penal Code, not the syndicated type.

Hope this helps.

Atty. Mary Antonnette Baudi