CRIMINAL charges are being prepared against the officials of Kapa-Community Ministry International Inc., which government regulators said is running one of the biggest investment scams in the country.
Building a case against Kapa at the same time are securities regulator Securities and Exchange Commission (SEC) and law enforcers Philippine National Police (PNP) and National Bureau of Investigation (NBI).
"We have already a case build-up. We are going to file the necessary charges against the pastor, against his men , against his directors, and against the defenders or those who are abetting and propagating this scheme," SEC Chairperson Emilio Aquino said in a press conference Monday, June 10, 2019.
Based on the claim of Kapa founder Pastor Joel Apolinario that they have 5.0 million members as of June 8, 2019, Aquino said Kapa is even bigger than the Aman Futures scam that duped around 15,000 people in the Visayas and Mindanao of around P12 billion in 2012.
He challenged Apolinario to "show the numbers" and prove how he can sustain delivery of the promised 30-percent monthly return for life.
Aquino warned the public that Kapa, like other investment scams, will collapse. Like other Ponzi schemes, there will be payouts initially. But it will collapse when it runs out of new investors.
"Ultimately, it will collapse. It is inevitable. As sure as the sun will rise in the east tomorrow, they will never be able to sustain the 30-percent return per month for life," Aquino said.
PNP Chief Oscar Albayalde, for his part, said the Criminal Investigation and Detection Group (CIDG) and NBI have been building a case against Kapa since President Rodrigo Duterte gave the order on Saturday, June 8.
“The PNP and NBI (National Bureau of Investigation) are working on it, and we have already made case build-up. Within the week, merong resulta ‘yan,” he said.
For six years now, Kapa has been enticing its members to make a donation of P10,000 to P2 million, with a promise of 30-percent return monthly for life.
Aquino stressed that this is a scam that is mathematically unsustainable and the promised return is "unrealistic and ridiculously high".
Mutual funds provide returns of only 4,0 percent to 9.0 percent while government securities, like the 20-year Treasury bill, offers only 5.0 percent to 6.75 percent.
"Kapa is running a scam. Its financials do not show that it can deliver. It is only relying on the investors," he said.
If each of the 5 million members claimed by Apolinario made just the minimum "donation" of P10,000, Aquino said Kapa would have collected P50 billion.
To deliver the promise of 30-percent return monthly for life, Kapa would need P15 billion a month. For one year, the requirement for the monthly payouts would be P180 billion.
Aquino noted that Kapa does not have the funds to cover these payouts. Neither can it sustain these payouts.
Businesses registered under Kapa are mostly sole proprietorships under the name of Apolinario's wife, Reyna Lobitaña Apolinario. Most of these are fairly new, having been registered with the Department of Trade and Industry (DTI) only in 2018 or 2019.
"All these businesses are startups. These do not have the capability to generate the necessary funds for the payout, for the delivery of the promised returns," Aquino said.
Kapa has claimed to have acquired Aces Tagum College. But Aquino noted that in 2018, Aces made barely P1 million for the entire year.
Besides, Aces is a non-stock, non-profit educational institution, which means that there can be no dividends. Kapa cannot expect any ROI from this investment.
Kapa has also claimed to have taken control of Tagum Doctors Hospital. But Aquino said that based on the hospital's financial statement, it made only around P5 million in 2017.
"Again, it's way way short of the billions (of pesos) promised, assuming it was really acquired by Kapa," Aquino said.
Apolinario claimed to make P4 million a day from a fishing business. Granting this is true, Aquino said this will amount to only P1.5 billion a year.
Based on a financial statement filed by Kapa in October 2018, the religious group had total assets of only P465,000 as of end-2017 and an excess of revenue over expense of only P5,740.
Yet, Kapa has acquired eight luxurious vehicles under the name of Reyna Lobitaña Apolinario and one under the name of Joel Apolinario. Most were acquired in 2018 and 2019.
Millions of pesos have also been invested in insurance under Reyna Lobitaña Apolinario, Aquino said.
Kapa has not filed a statement for 2018 yet. The deadline for filing was last April.
Aquino said SEC is running after Kapa for offering or selling securities to the public without a permit or license from the commission in violation of Section 8.1 of the Securities Regulation Code.
Any person who, directly or indirectly, in connection with the purchase or sale of any securities, (1) employ any device, scheme, or artifice to defraud, (2) obtain money or property by means of any untrue statement made, in light of the circumstances under which they were made, not misleading; or (3) engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person shall likewise be prosecuted and held criminally liable under Section 26 of the Securities Regulation Code and penalized accordingly pursuant to Section 73 of the SRC.
As far as the SEC is concerned, what Kapa is offering its members takes the nature of an investment contract which falls under securities and as such, requires prior SEC registration.
Even before Duterte ordered to shut down Kapa, the SEC has issued advisories and a cease-and-desist order against Kapa.
The first advisory was issued as early as March 22, 2017. A second advisory was issued on October 4, 2018.
On February 14, 2019, SEC issued a cease-and-desist order against Kapa and on April 3, 2019, SEC revoked Kapa's Certificate of Registration.
SEC has also petitioned the Court of Appeals (CA) to freeze Kapa's assets. Kapa has managed to get a Regional Trial Court in General Santos City to issue a preliminary injunction against the CDO issued by the SEC.
But Aquino cited Section 179 of the Revised Corporation Code which provides that no court below the CA shall have jurisdiction over the SEC.
The law states that, "No court below the Court of Appeals shall have jurisdiction to issue a restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy that directly or indirectly interferes with the exercise of the powers, duties and responsibilities of the Commission that falls exclusively within its jurisdiction."
"An RTC has no jurisdiction over us. As far as the SEC is concerned, Kapa has been shut down. It is operating illegally," Aquino said. (Marites Villamor-Ilano with Third Anne Peralta-Malonzo/SunStar Philippines)