Price Richardson boiler room scam bust in Philippines
11/01 - The SEC in the Philippines is readying criminal charges and a cease-and-desist order against Price Richardson Corp. which is accused of engaging in boiler room operations.
The company was registered as an administrative services company which handles clerical work, bookkeeping, mailing and billing and not as a stockbroker which employed 22 unlicensed salesmen, mostly British and Canadians.
Their Anti-Money-Laundering Council (AMLC) has ordered five banks to freeze deposits connected with Price Richardson Corp. after authorities raided six offices of theirs in three buildings. Documents found in the raid pointed to Consuelo Velarde-Albert aka Connie Albert as the company's head.
This is the sixth company found to have engaged in boil room operations their this year. The other five were Mendez Prior, Dukes and Co. Inc., Evergreen, Barclays and the Goldberg.
Twenty other suspect corporations named in an SEC report include Dukes & Co. Securities Inc., Muller & Sons Securities Mgt., Saxon & Swift Inc., Knowle & Sachs Inc., First Federal Capital, Morgan Lynch United Resources Marketing, Pryce Weston Inc., FFCI Marketing & Dev., Bradshaw Global Asset Management Inc., Wells Chadwick Inc., Comsat International, Worldwide Investors Management Inc., United Capital Management, Newport Pacific Securities & Management, Interloop Marketing Services Inc., Freelander & Kuhn Inc., United Resources Asset Mgt., Westwood Management, Sherman Bros. Mgt. Ltd., Bradford-Kempner Management Services Inc., and Barnes Marketing Concept Inc.
05/23/2003 Court of Appeals precedent setting decision on its
jurisdiction over freeze orders Republic of the Philippines
COURT OF APPEALS
SPECIAL TWELFTH DIVISION
THE REPUBLIC OF THE PHILIPPINES,
THROUGH THE ANTIMONEY
LAUNDERING COUNCIL (AMLC)
represented by AMLC EXECUTIVE
DIRECTOR PIO C. GUERRERO,
PRICE RICHARDSON CORP.,
MS. CONSUELO VELARDE ALBERT
and MR. GORDON RESNICK,
CA-G.R. SP No. 67974
ASUNCION, E. J., Acting Chairman
*DEL CASTILLO, M. and
SUNDIAM, E. JJ.:
Apr. 30, 2002
ASUNCION, EJ., J.:
Before Us is a petition filed pursuant to Republic Act 9160, otherwise
known as the Anti-Money Laundering Act of 2001. Petitioner prays
for the extension of the freeze orders issued against several bank
accounts in the names of the respondents, to wit:
Hong Kong and Shanghai Bank
China Banking Corp.,
(Paseo de Roxas)
Price Richardson Corp.
Citibank-Paseo de Roxas
Consuelo Velarde Albert
Respondent Price Richardson Corporation was organized for the purpose of providing administrative services including, but not limited to, furnishing all necessary and incidental clerical, bookkeeping, mailing and billing services.
Pursuant to three (3) search warrants issued by the Regional Trial Court of Makati City-Branch 43 after finding probable cause for violation of Section 28 of R.A. 8799 (The Securities Regulation Code), on November 16, 2001, agents from the National Bureau of Investigation (NBI) and the Securities and Exchange Commission (SEC) served the aforementioned three (3) search warrants on Price Richardson Corporation (501 and 502 of Pearlbank Center, 146 Valero St., Salcedo Village, Makati City); Connie Albert and/or personnel or occupants of Price Richardson Corporation (31st Flr. Citibank Tower, Makati Avenue, Makati City); and Ernest Hathaway, Anne Benwick and/or personnel or occupants of Capital International Consultants, Inc. (Rms. 407 and 809, Peninsula Court, Makati Avenue, Makati City).
On the occasion of searching the said premises, the raiding team seized several documents including false buy-sell confirmation slips, stock quotations, brokers’ scripts, lists of fictitious names used by brokers/salesmen with their corresponding real names, and other documents which would indicate that respondents are engaged in fraudulent buying and selling of securities in violation of Section 28 of R.A. No. 8799.
Furthermore, the raiding team seized documents pertaining to bank accounts of Price Richardson Corporation, Consuelo Velarde Albert and Gordon Resnick.
Thereafter, on November 19, 2001, Atty. Jose Tomas C. Syquia of the SEC Compliance and Enforcement Department requested the Anti-Money Laundering Council (AMLC) for the issuance of a freeze order on the subject bank accounts in the name of the respondents on the probability that such were being used to channel the proceeds of illegal activities.
Having found probable cause that these were related to an unlawful activity proscribed in Section 3 (i) (13) of R.A. 9160, the AMLC issued Resolution No. 011 directing the immediate issuance and service of freeze order on the said bank accounts in accordance with Section 10 of R.A. 9160. The freeze orders issued under freeze order case docketed as AMLC Case No. FO-001, were served on the concerned banks on November 20, 2001.
Respondent Consuelo Velarde Albert’s Explanation with Motion to Lift Freeze Order filed before the AMLC on November 23, 2001, was denied for lack of merit on November 26, 2001. However, inasmuch as the fifteen-day period of subject freeze orders was to end on December 4, 2001, the AMLC filed this petition praying that the freeze orders be extended.
The novel question confronting this Court is whether or not it
has the jurisdiction to resolve this petition and grant the extension
of such freeze orders as prayed for by the petitioner.
We are not called upon to decide the merits of a case for money laundering or whether there exists probable cause in this case. The law being relatively new, there is a need to interpret Section 10 of R.A. 9160, which provides:
"Sec. 10 Authority to Freeze –Upon determination that probable cause exists that any deposit or similar account is in any way related to an unlawful activity, the AMLC may issue a freeze order, which shall be effective immediately, on the account for a period not exceeding fifteen (15) days. xxx
The fifteen (15)-day freeze order of the AMLC may be extended
upon order of the court, provided that the fifteen (15)-day period
shall be tolled pending, the court’s decision to extend the
No court shall issue a temporary restraining order or writ of injunction against any freeze order issued by the AMLC except the Court of Appeals or the Supreme Court." (Underscoring supplied).
The question arises as to which court this provision refers to with regard to extensions of the fifteen (15)-day period for such freeze orders.
Respondent Consuelo Velarde Albert opposed the instant petition and filed a motion to dismiss on the ground that this Court has no jurisdiction to hear and decide the instant petition. Respondent claims that under Section 5 of R.A. 9160, it is the Regional Trial Court which has jurisdiction to try all cases on money laundering, to wit:
"Sec. 5 Jurisdiction of Money Laundering Cases –The regional trial courts shall have jurisdiction to try all cases on money laundering. Those committed by public officers and private persons who are in conspiracy with such public officers shall be under the jurisdiction of the Sandiganbayan.
Respondent would stress that freeze orders, and any extension thereof, issued pursuant to Section 10 of R.A. 9160 are mere adjuncts to money laundering cases and said freeze orders are precisely issued preparatory to money laundering cases. Thus, being a preparatory remedy, the jurisdiction to issue the same is and should allegedly be vested with the RTC.
We are not persuaded.
Respondent’s arguments must fail in view of the fact that Section 5 of R.A. 9160 contemplates a situation where a complaint for money laundering and/or unlawful activities as defined in Section 3 (i) has been filed and is pending before the RTC.
In the present situation, the AMLC is still at the investigation stage docketed as AMLC Case No. FO-001, with the purpose of issuing the necessary freeze orders while determining the propriety of instituting criminal or civil complaints against the respondents herein for violation of R.A. 9160 before the RTC.
There is, as yet, no actual complaint for money laundering against the respondents before the RTC. A close perusal of Section 5 of R.A. 9160 would show that if, after the proper investigation, a complaint for money laundering is to be filed against the respondents, then jurisdiction over such case is vested in the RTC. Section 5 of R.A. 9160 does not claim that proceedings prior to an actual complaint for money laundering shall also vest in the RTC.
We find merit in the petitioner’s contention that jurisdiction to extend a freeze order issued in accordance with Section 10 of R.A. 9160 is vested in this Court. it is but logical that this Court, having the power to enjoin or restrain a freeze order issued by the AMLC, corollarily exercises the power to either lift its own restraining order or the power to further extend such freeze order in the proper circumstances.
Viewed from another perspective, the RTC not having been given the power to restrain a freeze order issued by the AMLC, neither does it exercise any corollary power to life any restraining orders issued to enjoin a freeze order of the AMLC nor the power to act further on such freeze orders, such as to order its extension.
In this case, the RTC has not yet acquired jurisdiction over the case as there is yet no complaint filed before it. All that exists are the freeze orders under AMLC Case No. FO-001. And, since further proceedings thereon are to be undertaken in accordance with Section 10 of R.A. 9160, the court which may order an extension of the fifteen (15)-day freeze order period is rationally the same court which may issue an injunction against such freeze order, that is, either the Court of Appeals or the Supreme Court.
It would be violative of the well-settled principle of hierarchy
of courts if the Court of Appeals were to restrain a freeze order,
and the aggrieved party would be given recourse to the lower court
and allowed that a freeze order in its favor not only be affirmed
but further extended.
Based on the foregoing premises, We rule that this Court has jurisdiction to hear and resolve the instant petition praying for the extension of freeze orders issued by the AMLC on subject bank accounts.
After having heard both parties’ arguments and studying their respective positions, We find that the petition has merit. Indeed, there is a need to prevent any transfer or removal of subject deposits from the bank accounts which are allegedly being used to channel proceeds of illegal activities. The AMLC having found probable cause to order the freezing of the subject bank accounts, We find it proper to extend such freeze orders pending the AMLC’s further investigation on the propriety of filing complaints against the respondents for violation of R.A. 9160.
WHEREFORE, based on the foregoing premises, the petition is hereby
GRANTED. As prayed for, the freeze orders issued by the AMLC on
the following bank accounts:
Bank Account No. Account Holder
Hongkong and Shanghai Bank 001-0710910195 Gordon Resnick
China Banking Corp. 544-7-36833 Price Richardson Corp.
(Paseo de Roxas) 103-719221-0
Citibank-Paseo de Roxas 8-132051-292 Consuelo Velarde Albert
are hereby EXTENDED, until further orders.
ELVI JOHN S. ASUNCION
MARIANO C. DEL CASTILLO
EDGARDO F. SUNDIAM
I hereby attest that this Decision was reached after due consultation among the members of this Division in accordance with Section 13, Article VIII of the Constitution.
ELVI JOHN S. ASUNCION
Acting Chairman, 12th Division
(NOTE: Subsequently after the promulgation of this Decision, R.A. No. 9194, which took effect on March 23, 2003, amended R.A. No. 9160 otherwise known as "The Anti-Money Laundering Act of 2001."
The amendment provides that it is the Court of Appeals which has sole jurisdiction over a petition/motion for extension on effectivity of a freeze order. The Supreme Court, on April 21, 2003 adopted a resolution enforcing the amendment provided in R.A. 9194 applying the same to G.R. No. 154522 (Republic of the Philippines, etc. vs. Cabrini, Green and Ross, Inc., et al.), G.R. No. 154694 (Republic of the Philippines, etc. vs. R.A.B. Realty, Inc., et al..) G.R. No. 15554 (Republic of the Philippines, etc. vs. Mario N. Misa, et al..) G.R. No. 155711 (Republic of the Philippines, etc. vs. Alberto De los Reyes, et al.) and all other similar cases pending before all courts in the Philippines.)
A Major Victory for the AMLC
May 27, 200 issue of TODAY, Business Section
When the delegation head and members of the Anti-Money Laundering Council (AMLC) go to Australia early next month to meet with the Financial Action Task Force (FATF), they will have with them, in addition to President Arroyo’s firm commitment against international terrorism, a significant triumph in the Philipppine judiciary. In the case of Republic v. Price Richardson Corporation, et al, (CA-G.R. SP No. 67974, promulgated 30 April 2002), it was ruled that the 15-day freeze order issued by the AMLC may be extended upon order of the Court of Appeals and not by the regional trial court.
The case involved what appeared to be a "boiler room" operation being conducted by a company that, on paper, was organized to provide administrative services such as furnishing clerical, bookkeeping, mailing and billing services. The formal purpose, as stated in its articles of incorporation, provided the cover for the many telephone lines and several working desks manned by shifts of employees who were in fact illegally selling securities to the public.
To catch the perpetrators of the scam, the head of the Compliance and Enforcement Department of the Securities and Exchange Commission, Atty. Tomas Syquia, a worthy son of his worthy father, Ambassador Enrique Syquia, asked the Regional Court of Makati to issue three warrants to search on the company’s offices. In the course of the search, the raiding team - agents of the National Bureau of Investigation and the SEC - seized false buy-sell confirmation slips, stock quotations, brokers’ scripts, lists of fictitious names used by brokers with their corresponding real names, indicating that violation of Section 28 of Republic Act No. 8777, and some documents pertaining to the bank accounts of the company.
Convinced that the bank accounts were used to launder the proceeds of illegal activity, Tom Syquia applied for a freeze order with the Anti-Money Laundering Council on November 19, 2001. After reviewing the evidence presented, the AMLC found that there was probable cause and accordingly issued Resolution 011 directing the relevant banks to freeze the accounts. The company, through Consuelo Velarde Albert (of undetermined relation to the famous Jose Velarde) asked the council to lift the freeze order but her motion was denied for lack of merit. The 15-day life of the order was not long enough to complete the investigation. Hence, the AMLC had, under the law, to seek court extension of the freeze.
The question that confronted the AMLC was where to ask for the extension. The text of the law was not clear. It simply said "the fifteen (15)-day freeze order of the AMLC may be extended upon order of the court," without saying which court.
There were two possible answers. The first, which was espoused by Price Richardson, was that the proper court is the regional trial court because Section 5 of the anti-money laundering law says, in part that "the regional trial court shall have jurisdiction to try all cases on money laundering." The correct answer, however, is: Court of Appeals.
Section 5, the Court of Appeals observed, contemplates a situation when a person has been charged with an anti-money laundering offense. This is very clear from the second sentence of the section that appoints the Sandiganbayan as the trial court when the accused is a public official. Hence, Section 5 is not good authority for a proceeding where is yet no criminal information filed and where, as a matter of fact, the matter is still in the investigation stage. Indeed, the extension of the freeze order is sought in order to enable AMLC to complete the investigation preparatory to the filing of the case.
The proper authority is Section 10 itself which deals with the matter of freeze orders. The last sentence of Section 10 provides that "no court shall issue a temporary restraining order or writ of injunction against any freeze order issued by the AMLC except the Court of Appeals or the Supreme Court."
If the Court of Appeals and the Supreme Court are the only courts granted the power to restrain a freeze order, then it stands to reason that only they can extend it. Actually, had Price Richardson decided to contest the denial of its motion to lift the freeze order, it would have had to go the Court of Appeals or the Supreme Court, to restrain it. Price Richardson, however, instead decided to wait out the 15-day life span, hoping, perhaps, that the AMLC would not be quick enough to do the right thing.
But, Price Richardson was to be disappointed. The executive director of the AMLC is Judge Pio Guerrero, a veteran litigator and addressed as "judge" not because he presided over a court but because he spent almost all of his entire illustrious career with the Office of the Solicitor General. He was, when he left that office, the Assistant Solicitor General. Correctly, he sought the right writ from the proper court and in due time. And most of all, presented the right reasons.
The case of Price Richardson should convince the FATF that, despite the textual inadequacies of the anti-money laundering law (no thanks to Congress, for that), the Philippine legal system, has enough features and processes to achieve the major thrust of anti-money laundering legislation. It should further persuade the FATF of the country’s seriousness in fighting cross-border money laundering since the onus of manning the money gates is placed in the hands of senior justices.
This is not to say that the regional trial court, which is presided by a single judge, would not be able to do the same thing. But, there is always the comfort of a collective decision that both assuages hidden fears of a partial judge and assures the populace of mature and collective deliberation of a collegial court.
Friday, February 1, 2002
Banks queried on withdrawal of frozen accounts
By Zinnia Dela Pena - The Manila Times
THE Bangko Sentral ng Pilipinas has directed five major banks, including Hongkong and Shanghai Banking Corp. and Citibank NA, to explain why they allowed the withdrawal of accounts ordered frozen by the Anti-Money Laundering Council (AMLAC).
A ranking official of the Securities and Exchange Commission said BSP wanted to know why only P51,000 remained of the P18 million frozen bank account of Price Richardson Corp.
SEC is investigating Price Richardson Corp. for alleged illegal sale of securities through telemarketing. The other banks are China Banking Corp. and two other smaller banks.
Officials of the banks were not immediately available for comment.
"The BSP is looking into this and seeking explanations from these banks on how it (bank account) went down to just $1,000 on the date of withdrawal," the SEC official said.
If investigation would show that these banks conspired with Price Richardson, the responsible officials will face six months to 14 years imprisonment depending on the gravity of violations committed.
The freeze order was issued by the AMLAC following the raid conducted by a joint 35-member team composed of representatives from the SEC, National Bureau of Investigation, and International Police Commission of the six office building of Price Richardson in Makati on the basis of findings that the company had engaged in the fraudulent sale of securities.
This was the first time that the newly-created AMLAC has exercised its authority over companies suspected of engaging in illegal activities.
The SEC filed with the Department of Justice last December a criminal complaint against Price Richardson, its operations manager, Connie Albert and its salesman, Gordon Resnick, for having sold unregistered securities in violation of Sections 26.3 and 28 of the Securities Regulation Code.
Under the approved articles of incorporation of Price Richardson, the company’s primary purpose is merely to provide administrative services and not to engage in the buying or selling securities in the Philippines as a broker or dealer.
Without a license, Price Richardson engaged in numerous instances of soliciting clients on the pretext that it would buy and sell securities for and in behalf of their accounts.
In its complaint filed with the Justice Department, the SEC said: "This is a case of fraud on a grand scale. The number of victims in the thousands, the amount involved in millions of dollars. The modus operandi was for the respondents in conspiracy with one another, to set up a corporation in the Philippines and without the secondary license to deal in securities… engage in a systematic cold-calling of "leads" and offer their services as qualified brokers/dealers in securities."
According to the SEC, Price Richardson, its incorporators/directors and associated persons are liable under Article 315 of the Revised Penal Code which deals on swindling or estafa.