SEC files charges vs Glasgow

The Securities and Exchange Commission (SEC) has filed with the Department of Justice a criminal complaint against the owner-directors of Glasgow Credit and Collection Services Inc. for unauthorized sale of investment contracts in violation of the Securities Regulation Code.

Glasgow offered investment contracts to 8,921 investors with the promise of a 15-percent interest a month for six-month placements. It was among the first batch of pseudo-investment companies that hogged the limelight following its failure to pay promised returns to investors.

Upon signing of the contract, investors were issued seven post-dated checks, covering the six monthly interest payments and the principal.

Among those that were recommended for criminal prosecution are Manuel Roldan (president), Radiacion Baldias, Jenilyn Condes, Roldan Estacio, and Jonathan Condes.

In its complaint, the SEC said the "illegal activity" of Glasgow which victimized massive individuals is a clear manifestation that directors of the firm caused and participated in said illegal scheme to the damage and prejudice of the investing public.

An examination of documents showed Baldias is the signatory to all loan contracts, promissory notes and post-dated checks being the treasurer of Glasgow while Roldan was co-signatory.

"All these illegal acts constituted bad faith and gross negligence on the part of the respective directors of Glasgow which give grounds for personal liability of said persons under Sec. 31 of the Corporation Code," the SEC said.

SEC said other respondents are charged in complicity with Roldan and Baldias for being members of the board of directors of said corporation since all business activities of a corporation are conducted and controlled by its board of directors.

These illegal acts, according to the SEC, constituted bad faith and gross negligence on the part of the respective directors of Glasgow which give rounds for personal liability of said persons

"The corporate fiction must be pierced and the incorporators/directors held to be a mere aggregate of individuals, each criminally liable, particularly in this case where the corporation fiction was used as a means of perpetrating a fraud, illegal acts, knavery and crimes," SEC said.

SEC said the investment contracts offered by Glasgow are within the context of securities as defined under the SRC.

Under Sec. 3.1 of the SRC, an investment contract means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others.

The SRC also prohibits the sale of securities to the public without prior registration with the SEC.

The primary purpose of Glasgow as listed in its articles of incorporation is "to make business of credit and collection services."

Pseudo investment firms offer ridiculously high interest rates ranging from from five to 15 percent a month to entice the public to put in their hard-earned money. The yields are significantly higher than the four to five percent annual rate on treasury bills.

A Ponzi scheme is closely related to a pyramid because it revolves around continuous recruiting, but in a Ponzi scheme the promoter generally has no product to sell and pays no commission to investors who recruit new "members." Instead, the promoter collects payments from a stream of people, promising them all the same high rate of return on a short-term investment.

In the typical Ponzi scheme, there is no real investment opportunity, and the promoter just uses the money from new recruits to pay obligations owed to longer-standing members of the program.