How To Analyze A Scam (Part 1)

Edited Image - Original Photo by: roujo via Compfight cc
Edited Image – Original Photo by: roujo via Compfight cc

As I scanned the internet about news of the closure of Jacama Sales and Marketing, which I wrote about last week, I noticed that there were a number of comments from those involved in it arguing the following:

  1. That they were perfectly happy with the system and that no one was complaining — and that all this was some sort of conspiracy by the government who didn’t want people to rise from their poverty.
  2. That they bought and sold products and were “partnered” with several establishments, such as some well-known retailers. That made them legitimate (or so they think).
  3. That they had the necessary government permits, and that the Securities and Exchange Commission (SEC) had no business meddling in their affairs because the company is registered as a sole proprietorship, and thus was under the jurisdiction of the Department of Trade and Industry (DTI).
  4. That they had a detailed analysis showing how the company is sustainable.

As I looked at these comments, I realized that a lot of people still don’t understand how these scams work. In fact, there are reportedly three other scams that are under investigation at the moment. Someone also asked what would the SEC do about this company since there are rumors that they just went under the radar for the moment but will reopen in a different location with a different name.

I do not know what the government will do about this, although I do laud them for nipping this in the bud before it blew out of proportion. For my part, I am doing my best to educate the public about this. Hopefully this article and similar ones I have written before will help you analyze “opportunities” that people offer to you, or will help you explain to your friends or relatives why or how their particular offering sounds dubious.

So let’s look at how to counter the objections I mentioned above:

  1. Every scam has happy people. There is always someone profiting from a scam, otherwise, what is the point? Just because there are happy people and no one is complaining doesn’t mean that it is a legitimate business. No one is complaining YET because the scam hasn’t reached the critical mass for it to break down. If you do a little research, the complaints come in after the scammers have already fleeced hundreds of millions and run off with the money.

    My accountant tells of a small group of investors who put in 70 million pesos in Aman Futures (which victimized around 15,000 people last 2012 with an estimated 12 BILLION pesos). They were given an iPhone each and the owner brought them on an all-expense paid trip to China where he supposedly showed off his businesses and investments. The scam broke wide open a short time later and these investors lost their hard-earned money and were left only with the most expensive iPhones in the world.

    So as much as I complain from time to time about the inefficiency of government and the stupidity of some of its policies and procedures, this is one time that I am reasonably satisfied with their actions. This is no conspiracy. This is government actually doing its job in preventing the general public from falling prey to another multi-million scam.
  2. Just because a company has products doesn’t automatically make them legitimate. You should also look at what the products are, if they are reasonably priced, and how they are sold. Since many investment scams have been reported in the news, scammers have also wised up and added “products” to their schemes in order to make their business look legitimate.

    So what products are being offered by Jacama? They are products which can be bought anywhere else for one-fourth of the market value. This is a fact they openly admit. When you fork over the minimum “investment” of P1,800, you get P450 worth of products. For example, you can “buy” gift cheques from a well-known supermarket chain worth P450.

    Now I will ask you, who in their right mind will pay P1,800 for P450 worth of gift cheques? I might as well go to the supermarket directly and buy P450 worth of gift cheques for, well, 450 pesos (though they might charge a small fee on top of that for services or something to that effect, which is perfectly acceptable).

    Clearly, I am not buying the product for the sake of the product. The product is merely an excuse for me to enroll in the scheme which will allow me to make money. In the words of the SEC Advisory against Jacama, “The sale of the product is merely a RUSE to make it appear that the said entity is engaged in the marketing and distribution of products.”

    A counter-point that can be made here is that people are willing to buy overpriced or high-priced products like designer bags or clothes, expensive supplements from networking companies, and so on. However, the difference is that people buy these products because of their unique benefits that the owners perceive they can enjoy, and they would be unable to get these products anywhere else. For example, a wealthy person may buy a designer bag from a boutique worth 1 million pesos because of the perceived quality and stature it may bring. That person buys the product for its own sake, and will be unable to buy the product anywhere else for 1/4 of the price — unless it were fake or had defects.

    I still buy some products from a legitimate networking company I joined more than a decade ago, like toothpaste, soap, and other toiletries even if they are high priced because I like the quality, and I cannot get these products anywhere else so I am willing to pay that price. The point is, I am buying the product for the sake of the product and not for the sake of recruiting others (I stopped actively networking around 15 years ago) or to double my money.

    Now, back to Jacama, why would someone pay 4 times the price of a product that he can get anywhere else for its true value? Clearly, there is another motive there and that makes it highly suspect.

Click here to read Part 2.

Originally published in Sunstar Davao.

Email me at View previous articles at

Is Jacama a Scam?

Photo Credit: igracek.efko via Compfight cc
Photo Credit: igracek.efko via Compfight cc

A few weeks back, one of my readers asked me if Jacama was for real. At that time, I was still unaware of what it was, so I asked her to elaborate a bit on what they offer. She answered that they offer 32% return in 15 days. All sorts of warning bells rang in my head at this statement because that is too fantastic a return. For comparison, legitimate businesses would be very happy to generate a 20% return in ONE YEAR.

After a little digging online, I found out more details about the company’s “cash back program” which operates like this:

  1. You buy product packages from them starting at P1,800 (up to P1.8M).
  2. Your product package is actually worth only around P450. One of the packages worth P1,800 is a gift cheque from a local store worth P450.
  3. You get a 6 vouchers from the company worth P450 each. The first one is dated 15 days after your original purchase and the subsequent ones are all dated 15 days after the previous one. In other words, you can claim P450 from the company every 15 days until you reach the 90th day after your purchase.
  4. That means after 90 days, you would have “earned” a total of P2,700. So in 3 months, you have effectively gained back what you originally paid for plus 50% of that (150% return in 3 months). And we are not even including the value of the product itself yet.

To appreciate how incredible this all seems, imagine that you’re strolling around SM and a saleslady approaches you to tell you of their special promo. You buy a stove for P10,000 and in 3 months, they will refund your P10,000 and give you an additional P5,000 on top of that. Plus, you get to keep your stove. Is this a realistic and believable scenario? I don’t think so.

The obvious question here is, how does Jacama make money by selling you a product and then paying you back more than the amount you paid them? How is this a sustainable business model? It is not sustainable at all. In fact, the way I see it, this operation is very much like a Ponzi scheme (quite similar to the Aman Futures scam which victimized many people just over 2 years ago).

The US Securities and Exchange Commission defines a Ponzi scheme as “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors…In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the false appearance that investors are profiting from a legitimate business.”

In other words, the operator of such a scheme uses the money put in by later investors to pay off earlier investors. So as long as more and more people join the program, or as long as people keep re-investing their earnings, the party goes on. But there will inevitably come a time when the number of new investors will no longer be able to sustain the existing ones. When that happens, the operator knows it’s time to pack up and run. Checks and vouchers start bouncing. People who invested their life savings into the program find themselves on the verge of bankruptcy. There will be ugly fights and broken relationships as people start blaming and pointing fingers at those who recruited them into the program.

This is not conjecture. This is historical fact. Just google Multitel scam, or Aman Futures, or Legacy scam, or Mateo Management. All of these companies operated “legitimately” for a while and their investors were all happy, until everything came crashing down in the end. It is also a historical fact that even after almost 100 years (Ponzi schemes started as early as 1920), many people still fall for them. The lure of easy money is just too difficult to resist, but regret always comes too late.

The Davao City Business Bureau recently shut down and padlocked Jacama for not having the necessary business permits for offering investments. It took its cue from an advisory by the Securities and Exchange Commission (SEC) dated January 11, 2016 which strongly advised the public to “stop investing and recruiting other people.” The SEC also warned those who recruit others into such schemes that they can be held “criminally liable, or accordingly sanctioned, or penalized.”

Amidst all these, there are rumors that the business plans to open again elsewhere. Its followers are of course decrying the closure as being motivated by envy and crab mentality. But I urge these people to listen to reason. The government is not trying to stop you from earning. Rather, it is trying to stop a fraudulent practice that has ZERO historical records of success and 100% worldwide rate of imminent failure. There is not a single record of a Ponzi scheme that ended on a happy note. They all ended with despair, bankruptcy, depression, and even suicide.

Save yourselves the grief. There is no such thing as easy money.

Originally published in Sunstar Davao.

Email me at View previous articles at

Systems Thinking and Why Federalism Will Work

Photo Credit: kenteegardin via Compfight cc
Photo Credit: kenteegardin via Compfight cc

I discovered Systems Thinking a few years ago thanks to some lectures based on a book by Peter Senge entitled The Fifth Discipline. It is the process of seeing things as part of a bigger picture, an overarching ecosystem of interdependence where a small change in one part can cause massive changes in another.

We live in a culture where self-help articles and books abound. There is always some new-fangled diet around the corner which promises to shed off x-pounds of fat in x-weeks. There are new ways of organizing your messy desk, or new techniques to manage your time, and so on and so forth. The focus is on YOU to change YOUR behavior by sheer force of willpower.

The number of overweight people, messy desks and messy schedules attest to how ineffective those methods really are.

Systems-thinking trains one to think about the STRUCTURES which affect behavior, and aims to change those structures in order to influence and change behavior.

Let me give an example. In the past, firecracker-related injuries during the holiday season have been a problem all over the Philippines. No matter matter how many infomercials and ad campaigns the government release showing mutilated and bloody hands or other body parts, January 1’s headlines would always tell you how many hundreds of people suffered from firecracker-related injuries yet again.

The campaigns were ineffective because they focused on people to change themselves, but no changes were made in the the bigger system or environment in which they lived to encourage that change. The thinking was, “Why should I not celebrate with firecrackers when all my friends and neighbors are doing so? I’m missing out on all the fun.” Since the system did not encourage change, nothing happened.

As far back as the year 2000, Duterte and the local government of Davao showed they understood systems thinking when they enacted a local ordinance banning firecrackers in the city. The result of that change is palpable as Davao just celebrated 15 years of ZERO firecracker-related injuries in the city. But aside from merely being an impressive statistic, it has also resulted in changing people’s opinions about firecrackers. When the law was first enacted, many thought that new year would be boring. After all, how could one celebrate new year without noisy explosions? But today, many are appreciative of the ordinance, and we have learned to celebrate new year in more meaningful ways, perhaps in family gatherings where there is more focus on conversation, or reflection and gratitude for the past year.

The same can be said for the No Smoking ordinance, the speed limits, the 1/3-2/3 sidewalk rule, and so on and so forth which makes Davao what it is.

At present, one of Duterte’s major platforms in his presidential bid is the shift to federalism. A lot of opponents have brought up objections about it, saying that local governments aren’t ready for it. Writers such as Michael Henry Yusingco say that “the overdependence of local government executives on the Internal Revenue Allotment and the continued existence of central-government largesse, or pork barrel funds, signify the stark reality that the development perspective of local leaders has not reached the level of sophistication necessary to sustain a federal government structure.” Moreover they cite the prevalence of political dynasties as proof that the country is not yet ready or mature enough for a federal structure.

What these people fail to understand is that it is the current over-centralized government system which bred all these problems in the first place. Why are local government executives over-dependent on revenue allotments or pork barrel funds? It is not because they “have not reached” a certain level of sophistication. It is because the current system REWARDS them for doing so.

Why are political dynasties prevalent? The same thing, the current system REWARDS them, not for developing their local economy, but for sucking up to Malacañang so they can get a slice of the “countrywide development fund” which is hardly used to develop the country but to fatten their own pockets.

Systems-thinking shows that if you want to develop lasting change, you must tweak the system in order to do so. How can our local executives ever be ready or mature enough for a federal system if you do not first CHANGE the system such that persisting in their old behavior will no longer bring the rewards they are used to receiving?

I am not saying that federalism is a cure-all as it brings its own problems and the leadership has to work hard to implement the system and educate the people about it.

It is, however, a step in the right direction and we must be willing to take that step. As the old Chinese saying by Lao Tzu goes, “the journey of a thousand miles begins with a single step.”

Originally published in Sunstar Davao.

Email me at View previous articles at

Duterte’s Math

Photo Credit: dullhunk via Compfight cc
Photo Credit: dullhunk via Compfight cc

Mayor Digong Duterte made another outrageous statement last December, declaring that should he become president, he would remove algebra, trigonometry and calculus from high school and replace these with business math and statistics. He noted that a lot of Filipinos (himself included) suffered from Math anxiety trying to learn “unnecessary numbers and signs” that did not serve any practical purpose. He thinks business math would be more useful as people do not get asked about sines and cosines when they go job hunting.

Do I agree or disagree? Well, both.

First, let me give a bit of a background so you understand where I’m coming from. I did not always find Math easy. I struggled with word problems in elementary and had only passable grades in my freshman year of high school. I had similar struggles entering my second year of high school and I was so desperate that I called a friend of mine from another school to help me out with my algebra homework because I could make neither head nor tails of it. My friend, Arthur Brian Yap (who later became my co-teacher at Davao Christian High School and is now the school president), graciously walked me through the solutions and explained them over the telephone. The clarity of his explanations seemed to unlock something in my mind and ever since that time, math problems transformed from burdensome tasks I detested into captivating puzzles I willingly took on. I went from a nobody to someone who represented the school in math contests.

In junior year, one of my best friends from elementary, Anthony Montecillo, came back to my high school (he had gone to Manila for a couple of years) and I had a great coach and tag-team partner for geometry which became a walk in the park. By our senior year, we were solving math and physics problems at the end of chapters that the teacher had just begun discussing. We were the ultimate nerds who always had a set of ballpens and a scientific calculator in our pockets — and our calculators were programmable, mind you. We could give you the hypotenuse of a right triangle, or the roots of a quadratic equation, at the push of a button.

We both majored in physics in college, although we went to different schools, but he stuck with it while I later shifted to computer science when I couldn’t handle the daily dose of equations I faced. When I graduated, I became a high school teacher for several years. I taught mainly English Literature, Math and Physics.

So let’s go back to Duterte and his math “solution.” I agree with his assessment that many Filipinos suffer from math anxiety. I was one of those, and as an algebra teacher, I’ve seen many of my students break into cold sweat when they start seeing x’s and y’s on the board. I also agree that calculus and probably most of trigonometry are probably too complex for high school students and their absence from the curriculum wouldn’t really matter for most of them anyway.

But I would have to disagree with removing algebra.

At its very core, algebra trains us to see and describe patterns, a much-needed trait in problem solving (and I’m not just talking about math problems). The signs and symbols we learn are not “useless” but train our brains in the process of abstraction and generalization — a very useful skill in designing systems (traffic systems, sewage systems, electrical systems, computer systems), and so on. I agree that business math and statistics are useful and practical but algebra makes both these subjects easier to comprehend, and provides many useful tools needed to solve their problems. For example, you can see that a bunch problems are very much similar even though they are worded differently and describe different situations but the underlying mathematical principle between them is the same. Therefore, if you can solve one, you can also easily solve the others.

If I had my way, I would begin teaching algebra in elementary because word problems become so much easier to understand and solve when you learn how to transform long blocks of text into a short equation.

So while I do not agree with the specifics of his solution, I agree with its spirit, that Math should be made more relevant and practical for the students. I recently reviewed the K to 12 program of DepEd and found that most of it already conforms to Digong’s wishes. Calculus and trigonometry are NOT compulsory — you only take these in senior high IF you decide to take the Science, Technology, Engineering and Mathematics (STEM) academic track. Otherwise, all you need to graduate from Junior High is arithmetic, algebra, geometry and probability and statistics. Business math is also compulsory in senior high.

So there you are, Mr. Mayor, it seems you need not do much about our math curriculum after all. And if you need someone to make algebra less fearsome for you, I’ll gladly do that for free.

Originally published in Sunstar Davao.

Email me at View previous articles at

And Just Like That


Just a couple of days ago, my high school batch hosted our grand alumni homecoming. That means it has been 25 years since I donned my white polo and khaki pants, put on my backpack and trekked the streets of Juna on the way to school. I still had pimples and a head full of hair back then.

We were the last of the 80’s and the first of the 90’s. We grew up with BMX bikes and breakdancing, Madonna and Michael Jackson, Larry Bird and Magic Johnson, Hardy Boys and Sweet Valley High, the A-Team and Knight Rider.

I was a computer geek even as a kid and my father indulged my hobby by subscribing to U.S. magazines like Personal Computing and PC Magazine. I saw the debut of the first Macintosh, the IBM PC (XT and AT), and the slow demise of the Apple II, where I had so much fun with pixelated games on a screen that showed no other color but green.

16 kilobytes (kb) was standard memory. You were a power-user if you had 64kb, and if you had 128kb, you were at the top of the food chain. For today’s users who are so used to Gigabytes (GB) of memory, a kilobyte is what you get when you divide a gigabyte by one million.

But enough of the geekiness. We were witnesses to Ninoy’s assassination and the original EDSA revolution. Marcos vs. Cory was a hotly debated topic in English classes. Unfortunately that’s about all I remember of politics in that era as I was more interested in computers. Seems like I can’t escape from the geekiness.

I have my elementary math teacher, Mrs. Salinas, to thank for introducing me to the world of computers when I was just in Grade 4. The school had just acquired a number of low-end Zenith computers and she offered to teach programming in BASIC for those who were interested. So that’s how I spent a number of Saturdays learning about variables and loops, on a machine that only had 1 kilobyte of memory (yep, that’s not a typo) and didn’t save any of my work. I had to retype any programs that I had made before if I wanted to run them again.

Speaking of teachers, I met a few at the reunion. There was my Montessori (pre-school) teacher, Ms. Vikki Ravarra, who had to put up with my constant fear of not seeing my mother at the back of the classroom. Ms. Nelia Sanchez, the ever patient and kind grade 1 teacher, who made the transition from kinder to elementary less scary experience. Ms. Edna Royo, my grade 5 teacher who tied my rubber shoes to the teacher’s table for defying the school rules of wearing black leather shoes (which I detested) once too often. She was strict and firm, but always fair in class. She taught me to love softball, actively coaching our team to be the softball champions for that year.

There was, of course, fellow columnist and toastmaster, Mr. Rene Lizada — who was my inspiration for becoming a teacher, speaker, writer, and heckler. I even saw my college physics professor and department head, Fr. Dan Mcnamara, who has transferred here from the Ateneo de Manila. He had a deep booming voice and his lectures on the third floor could be heard on the ground. I frequently hung out in his office trying to figure out the quantum physics chart that hung on a wall, and I ran to him for advice when I considered shifting out of physics and into computer science.

It’s hard to believe all those happened more than 2 decades ago. Some of them seem just like yesterday.

And just like that, it’s 2016.

Happy New Year!

Originally published in Sunstar Davao.

Email me at View previous articles at

Related Posts with Thumbnails