DOJ upholds SEC findings of fraud vs religious group

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    The Securities and Exchange Commission (SEC) said the Department of Justice (DOJ) has affirmed its findings against a supposedly religious corporation of defrauding the investing public and will charge the religious group for the investment schemes if offered to the public in violation of the Securities Regulation Code (SRC).

    In a resolution issued on Sept. 25, 2019, state prosecutors found probable cause to charge
    Kapa-Community Ministry International (KAPA), its founder and president Joel Apolinario, trustee Margie Danao and corporate secretary Reyna Apolinario for violating Sections 8 (8.1), 26.1, and 28 of the SRC, also called Republic Act No. 8799.

    The DOJ also indicted Marisol Diaz, Adelfa Fernandico, Moises Mopia and Reniones Catubigan for “promoting and participating in the unlawful public offering and/or selling of securities by KAPA.”

    The SEC said KAPA’s scheme involved the sale and offer for sale or distribution to the public of securities in the form of investment contracts as defined under Section 3 of the SRC.

    It noted that under Section 8 (8.1) of the SRC, securities shall not be sold or offered for sale or distribution without a registration statement duly filed and approved by the SEC.
    Section 26.1 of the SRC provides it is unlawful for any person to be directly or indirectly be involved in the sale of any securities with the intent to defraud others.

    Section 28 provides that no person shall engage in the business of buying or selling securities in the Philippines as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered with the SEC.

    The SEC filed a criminal complaint against KAPA with the DOJ last June 18, 2019, after discovering the group’s unauthorized investment-taking activities.

    KAPA has enticed the public to invest at least P10,000 in exchange for a 30 percent monthly “blessing” or “love gift” for life, without having to do anything other than invest and wait for the payout.

    The SEC said KAPA employed a Ponzi scheme, an investment program that offers impossibly high returns and pays investors using the money contributed by other investors. This qualifies as a fraudulent transaction prohibited under Section 26 of the SRC.

    The SEC initially issued an advisory against KAPA in March 2017. It would later issue a cease and desist order on Feb. 14, 2019 and an order of revocation of the KAPA’s certificate of incorporation on April 3, 2019.

    In the interest of affected investors, the Commission, through the Anti-Money Laundering Council, likewise obtained a freeze order from the Court of Appeals on June 4, 2019 to preserve assets linked to KAPA.

    “The indictment of KAPA along with its founder, officers and promoters is an affirmation of our unwavering commitment to championing investors and tackling abuses in the corporate sector,” said Emilio Aquino, SEC chairman.

    “This should also serve as a stern warning against other groups engaging in unlawful investment-taking activities and other predatory practices to the detriment of the investing public,” Aquino said.

    A person found to have violated the SRC, or the relevant rules and regulations promulgated by the SEC, will face a maximum fine of P5 million or imprisonment of seven to 21 years, or both.

    The SEC has pushed for a penalty one degree higher, considering the use of Facebook and YouTube in the illegal investment scheme.