A sociology of scams

Scams tell us a lot about the nature of our society—more than about the gullibility, greed, or ignorance of our people. Sociologists try to understand how these criminal schemes work, not by figuring out the motives and interests of the individuals they victimize, but by determining the types of social relationships they are able to tap. Moral terms like gullibility and greed contain no analytic value. But, the degree to which communications in a society like ours remain undifferentiated may explain why scam victims are quick to entrust their money to swindlers with no economic credentials or record.

In the Aman Futures and Rasuman Group scam that victimized thousands of investors in Mindanao, the operators rode on the social capital supplied by kinship networks, faith communities, and the local political and business elites. Such connections rest on the strength of implicit trust. Individuals rely on them to simplify decision-making in an increasingly complex social environment.

I was listening the other night to a panel interview on ANC that featured a certain Pastor Hipolito Paner as one of the guests. I was struck by Pastor Paner’s admission that he and other members of his Pagadian City-based church, the Christ the Lord of Glory Family Church, were among the earliest investors of Aman Futures. He said that he first met Manuel Amalilio, the suspected brains of the Aman Futures Group, through one of their church leaders, Fernando Luna. Authorities have identified Luna as the right-hand man of Amalilio and is now being hunted down as one of the brains behind the Aman scam.29

According to Pastor Paner, Amalilio impressed him as a very generous man. The man gave him money for his religious work, and offered to make him and the leaders of their church rich by teaching them the intricacies of global stock trading. They held seminars where the glib Amalilio patiently interpreted for them the movement of stocks on Bloomberg television. They were amazed by the man’s seeming mastery of international investment. Amalilio told them that he would make their city a prosperous center of global finance. To all intents and purposes, he appeared before them as the messiah of economic boom.

That was in February this year. Not long after their first meeting, Pastor Paner and his religious flock became the first investors of Aman Futures, earning as much as 86-percent interest on 19-day money placements. The interest earnings came in the form of postdated checks, which Amalilio faithfully redeemed on time—until around September, when the checks began to bounce. While their initial placements were small, the continuous rollover of investments in a span of four to five months allowed the church members to accumulate hundreds of millions of pesos in capital. So dramatically did the promised prosperity come, said Pastor Paner, that at one point, the monthly tithing from members of this small church came up to more than P3 million.

The good news of this modern version of the miracle of the endlessly multiplying loaves spread so swiftly that soon every family with some savings was knocking at the door of the church asking to be included in the rapidly expanding investment pool. I wouldn’t be surprised if the religious leaders gave their uncommon luck a spiritual meaning. One can begin to imagine what a confluence of seemingly fortunate encounters can do to transform a house of God into a house of investments overnight. Pastor Paner wryly recounted how he had enticed his two children, both university graduates with IT skills, to work for the company in order to computerize and put some order to its thickening files of transactions.

To use a word that has acquired a new sense in the digital era, the whole affair became “viral.” From the confines of a small church, the investment pool spawned rivulets that fanned out to distant households, integrating kinship networks and other social systems to which the Filipino family is functionally linked in various ways. One such system is the political patronage network that especially comes to life during elections.

Here, the involvement of Mayor Samuel Co of Pagadian City is most instructive. Residents of Pagadian say he was a prime mover in Aman Futures, providing the startup capital that lured investors in. He claims he was an ordinary investor who, like many of his town mates, had lost some money.

Still, the mayor was far from being a naive investor. In an interview he gave to television the other day, he admitted putting in millions of his own money into Aman Futures, in full awareness that the bubble could burst anytime. He did so, he said, after he saw how much money his political rivals were making from the scheme.  He now claims that he lost money.

Shouldn’t a public official know better?  Mayor Co claims that when he first heard that small investors in his city were raking in large sums of money from Aman, he immediately suspected this was a pyramiding scam. He shows letters saying he officially alerted concerned government agencies to the group’s operations. But, since there were no complainants and no reports of investors being victimized, the investigation could not progress.

My sense is that everyone, except maybe the smallest investors, knew there was something irregular or illegal in this venture, and that it was bound to fail. But they didn’t seem to mind making a quick profit while the money lasted, probably thinking they would be able to get out before the collapse. They seemed confident that their inside connections would protect them. That’s the way a premodern society works.