Government readies case vs ‘boiler room’ operator

A "boiler room" operation may serve as the government’s first test case in its campaign against money laundering. The Securities and Exchange Commission (SEC) is now preparing to lodge a court case against Price Richardson Corp.

Last Friday, Nov. 16, a composite team of SEC, National Bureau of Investigation (NBI) and Bureau of Immigration and Deportation (BID) officials simultaneously raided the three offices of Price Richardson in Makati City by virtue of a search warrant issued by the Makati Regional Trial Court. It was the sixth such raid in an ongoing crackdown on suspected boiler room operations this year.

The SEC and the NBI forged an agreement last April to intensify efforts to curb the boiler room activities of a growing number of companies. Since then, combined elements of the SEC and NBI have raided the corporate offices of Mendez Prior, Dukes and Co. Inc., Evergreen, the Barclays group and Goldberg.

Aside from court cases, the SEC has issued cease-and-desist orders (CDO) against 21 other firms engaged in the same practice. Some of these firms are related to the five abovementioned companies.

Tomas Syquia, director of the SEC’s Compliance and Enforcement Department, said they are preparing a CDO against Price Richardson. This will be followed by a court case in which officials and personnel will be charged with violating specific provisions of both the Securities and Regulation Code (SRC) as well as the newly-enacted Anti Money Laundering Act (AMLA).

The AMLA was passed by Congress and signed into law by President Arroyo last Sept. 30 in response to the inclusion of the Philippines in the list of non-cooperative countries and territories against money laundering issued by the Paris-based Financial Action Task Force (FATF).

The term "money laundering" covers all transactions designed to conceal the origin or to change the identity of money obtained from criminal activities, such as drug trafficking and smuggling, so that it would appear to have originated from a legitimate source.

Syquia said a boiler room operation can be considered a form of money laundering since its activities involve the illegal collection of money from clients.

The modus operandi of boiler room operations is to set up a corporation in the Philippines and without a secondary license, as required under the SRC, deals in securities. Using unlicensed brokers, dealers and telemarketers, they then engage in calling of "leads", usually names of CEOs, general managers, directors and other moneyed individuals abroad and offer their services alleging that they are qualified brokers/dealers in securities.

Once money has been collected from the unsuspecting clients or when there is knowledge that the government is closing in on their illegal practice, these companies simply close shop, then re-open later under a different name.

Syquia said Price Richardson, which was incorporated only in Dec. 2000, was registered as an administrative services company offering clerical, bookkeeping, mailing and billing services.

But upon investigation, it was found out that its personnel made up to 22 mostly Canadian and British nationals – deal in registered securities without the necessary licenses. One of the salesmen allegedly duped his clients more than $127,000 in only six months of operations.

Although most of the staff are foreigners, Price Richardson’s director for operations is a certain Connie Velarde-Albert.