Dashed hopes, shattered dreams

The hopes and dreams of housewives, teachers, overseas contract workers and many ordinary Filipinos have been shattered once again with the sudden closing of three pre-need companies. According to sources, Legacy Consolidated Plans, Scholarship Plans Philippines and All Asia Plans abruptly ceased operations without even properly informing their plan holders and without obtaining approval from the Securities and Exchange Commission.

This unfortunate news will certainly do little to help the pre-need industry recover its tarnished image. It can be recalled that the whole industry was shaken when leading pre-need firms like CAP, Platinum and Pacific Plans teetered on the brink of collapse partly due to unregulated tuition fee increases plus a combination of financial problems, as well as bad investments and faulty management decisions that aggravated the problem. A lot of people put their trust – and their hard-earned money – on these pre-need companies believing this is the only way for them to secure the education of their children. Just imagine the disappointment and anguish of these parents upon finding out that the investment which they have painstaking saved up for over the years has vanished, leaving them hanging in the air.

While the SEC for its part is urging plan holders to file by March 31 this year their individual and sworn complaints before the non-traditional securities and instruments department of the Commission, we doubt if this will bring much comfort to the disillusioned plan holders, who will definitely find it difficult to break the bad news to their children that any plans for a college education will have to be shelved. Under SEC rules, pre-need companies are required to put up a trust fund to help guarantee that future benefits promised to plan holders will be given. The trust fund is also supposed to minimize the risk of insolvency since the money – which comes from a portion of the payment collected from plan holders – will remain untouched until such time as the pre-need insurance plan matures.

But what happens when these companies resort to “creative accounting” methods to cover up financial problems? According to reports, some 35 percent of pre-need firms registered between 1977 and 1999 have closed shop, so one can only surmise what the present “mortality rate” is now among pre-need companies. Even if the SEC says it “has taken all necessary actions... to ensure the preservation of the existing trust funds” of these companies so that proceeds can be used to pay the claims of legitimate plan holders, the fact still remains that some of these companies have managed, time and again, to prevent the Commission from detecting early on that something is amiss in the operations. And when shit hits the fan, so to speak, it’s the hapless plan holders who end up holding the empty bag.

Interestingly, the parent company of Legacy Consolidated Plans is reportedly the same group that owns several rural banks that suddenly and unilaterally went into bankruptcy last December, leaving a lot of fishermen, farmers and other poor working class Filipinos in the lurch. Despite knowing that they were already in financial trouble, these banks engaged in deceptive “double your money” gimmicks, offering cellphones and laptops and promising fantastic interest rates to lure depositors. The Senate promised it would begin investigations this January, so perhaps our Senators can also include this latest pre-need fiasco involving this Legacy Group and look into the corporate practices of this firm. According to their official website, Legacy Consolidated Plans Inc. was “organized in February 2003 out of a merger of Legacy Scholarship Pension Plans Inc. and Consolidated Plans Inc., with a paid-up capital of P198 million and a trust fund asset of P557 million servicing more than 100,000 clients.” Any which way you look at it, a hundred thousand represents a lot of disappointed and disillusioned Filipinos. 

Perhaps the House of Representatives should also make it their priority to enact the proposed pre-need industry code to offer a modicum of protection to plan holders. Under current conditions, plan holders have no protection once the pre-need company goes bankrupt. While bank deposits are covered by insurance under the PDIC, pre-need plans are not covered by any insurance at all – which is rather ironic since insurance firms are the very same ones that offer pre-need plans. Under the proposed code, providers are mandated to deposit up to 60 percent of the money collected from plan holders into the trust fund, which is a significant increase from the current 45 to 51 percent requirement.

I have always said that education is the only asset and capital that cannot be stolen from anyone, but these pre-need companies are stealing the very education of these poor, young people even before it gets to them. This is a crime worse than drug trafficking because it kills – murders – the very dreams of young Filipinos whose only weapon against poverty is a good education, and destroys the hope of poor parents who slaved hard to provide their children with good education.

The DOJ should file criminal charges against these companies engaged in shenanigans, misusing the money entrusted under their care. But like so many drug cases, charges against pre-need companies (and we’re not just talking here of education but also healthcare and retirement plans) have either been dismissed or are just languishing until they are buried into oblivion. Over the years, there have been so many scandals like the Maxicare fiasco and The Professional Group controversy. This is where the DOJ should concentrate on aside from drug trafficking cases to protect the interest of Filipinos whose hopes and dreams – and ultimately, their lives – have been shattered by parasitic pre-need companies who prey on poor people’s savings.

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