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The “C” in “PIPC”

(Article published in the Sept. 12, 2007 issue of Manila Standard Today)  

PIPC Corp. was probably just being clever about what “PIPC” in its name meant when, upon amending the Articles of Incorporation of Carvaggio Holdings, Inc., it represented to the Securities and Exchange Commission that “PIPC” in PIPC Corp. meant “Phil. International Planning Center.” 

 But the benefit of the doubt dissolved as soon as Sheer Luck Holmes pointed out last week that the marketing materials distributed by PIPC Corp. proudly proclaimed that it was a member of the so-called Performance Group, headed by Performance Investment Products Corporation, a corporation registered in the British Virgin Islands on 14 January 1999.

 This week, after analyzing the documents which PIPC Corp. gave its investors to sign, Sheer Lock insists that the “C” in the corporate name of the BVI flagship may just as well not have meant “corporation”. Instead, it stands for “condom”   because PIPC seems to have mastered the art of giving its investors a false sense of security while being s***(for fear of scandalizing the ears of the victimized buena familias, I refrain from using the standard French) or scammed. 

 Exhibit A, points out Sheer Lock, is a mother contract called “Portfolio Management Partnership Agreement.”  The two Whereas clauses set the tone of mutual admiration: in the first it is declared that the parties “have their own respective resources and capabilities in Funding, Marketing of Investment Products and Portfolio Management”; and in the second, the parties confess that they are “desirous of corporating with each mutual benefit.”

Then follow the Now Therefore stipulations which are couched in boiler plate language to assure the investors that everything is standard and above board. For example, the partnership is very liberal, it is non-exclusive, i.e. either party may pursue or carry on any other business or investment. The parties deal with each other as equals and agree to mutual indemnification, i.e. each party promises to obey the law and commits to render the other harmless for its own acts, promising “only be liable for its own liabilities and debts”.
 










     

There is also a clause on confidentiality to assure the parties that outsiders will not know their secrets. Thus, neither party will use or disclose “confidential information provided by one to the other” and both will protect all data, documents, records, etc given by one to the other.

 Promises of mutual respect are exchanged as the parties agree to recognize each party’s “proprietary rights”, and even commit to “abide by the terms and conditions of non-circumvention as defined and contained in the Rules of ICC, Paris…”

 Present also are the usual headings of “Assignability, sublicense or transfer prohibited”, “Application Laws” (a touch of the exotic since the standard heading is “Applicable law”); “Disputes”; “Dissolution”; “Notices”; “Entire Agreement” and “Severability”.

 But under the cover of these “business-as-usual” clauses, in the heading that is ostensively meant only to state the agreement on the sharing of profits, PIPC springs its trap: The parties are to divide 60% for investor and 40% for PIPC the “profits/financial benefits derived/received from the investment activities utilizing the funds provided by” the investor.  This is in direct contradiction to the assurance in the brochure that the investor’s funds “shall not be exposed for trading purposes.”

 Apparently to distract attention from this falsehood, the investor is also made to sign a “Security Agreement”.  Like the Human Security Act, the agreement is equivocal on who is being secured.  Under this document, the amount handed over to PIPC is considered a “Margin Deposit” which, the investor is assured, is only “by way of security in his favor.” Accordingly, PIPC issues a receipt and gives the investor a copy of Certificate of Time deposit into which the margin deposit is converted.

 However, the certificate is in the name of PIPC; the original remains with PIPC; the interest and income accrues to PIPC, which income PIPC “can withdraw at anytime for its own benefit”; and PIPC is not “liable for loss or depreciation in the value of the Certificates of Time Deposit occurring by reason of bank insolvency unless it failed to act in good faith or with reasonable care.” 

 The most unkindest cut in the Security Agreement, however, is Section 9.  It provides that “the provisions of the Partnership Agreement whenever applicable and not inconsistent with the terms of this Agreement shall also be observed.”  In order words, Sheer Luck declares, the funds, the so-called “margin deposit” or its subsequent conversion as a certificate of time deposit, may be utilized by PIPC in its investment activities.

 Perhaps to distract the attention of those less cynical than Sheer Luck from the Partnership Agreement and Security Agreement’s booby traps, PIPC issues the investor a “Declaration of Trust.”  In paragraph 1 of this document, PIPC declares that the funds of the investor “do not belong to us but to [name of investor]” who is called the Beneficial Owner.  In paragraph 2, PIPC, says “we hold the said amount of money UPON TRUST for the Beneficiary Owner.”  Surely, an investor is thus led to think, nothing can be more prophylactic than Trust!

 Maybe so, but PIPC cannot be faulted for not trying to pierce it.  In the second clause of paragraph 2, PIPC, in jagged English, commits “to transfer, pay, dispose of any of the said sum of money upon the satisfactory of the terms and conditions stated in the clauses in the Partnership Agreement and Security Agreement as the Beneficial Owner shall from time to time direct.”  Obviously, there is an attempt to tie up the trust with the terms of the partnership agreement which, as Sheer Luck pointed out earlier, authorized PIPC to put all of the investor’s money at risk. 

 Fortunately for the investors and unfortunately for PIPC, trust is made of sterner stuff.  Trust, which according to an English writer is the child of Fear and Fraud, has over the centuries been raised by its nurse and nanny, the Courts of Equity, into a fine knight whose arms are strong as Lancelot’s and heart as pure as Galahad’s.  The Declaration of Trust, which was resorted to by PIPC as the ultimate tool to fool its investors into a false sense of security, will in fact, if Sheer Lock Holmes knows his law, be the very instrument by which the investors will be able to retrieve their funds from PIPC, with a vengeance.  The how of that, next week.

             

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