Section 1. Any person or persons who shall commit estafa or other forms of swindling as defined in Articles 315 and 316 of the Revised Penal Code, as amended, shall be punished by life imprisonment to death if the swindling (estafa) is committed by a syndicate consisting of five or more persons formed with the intention of carrying out the unlawful or illegal act, transaction, enterprise or scheme, and the defraudation results in the misappropriation of money contributed by stockholders, or members of rural banks, cooperative, "samahang nayon(s)" or farmers' association, or funds solicited by corporations/associations from the general public.
In essence, syndicated estafa is but the commission of any kind of estafa under Article 315 of the RPC (or other forms of swindling under Article 316) with two (2) additional conditions: one, the estafa or swindling was perpetrated by a "syndicate" and two, the estafa or swindling resulted in the "misappropriation of money contributed by stockholders, or members of rural banks, cooperative, samahang nayon(s), or farmers association, or of funds solicited by corporations/associations from the general public." (Remo v. Devanadera, G.R. No. 192925, December 09, 2016)
What are the elements of syndicated estafa?
1. Estafa or Other Forms of Swindling, as defined in Articles 315 and 316 of the RPC, is committed;
2. The Estafa or Swindling is committed by a syndicate of five (5) or more persons; and
3. The defraudation results in the misappropriation of moneys contributed by stockholders, or members of rural banks, cooperative, "samahang nayon(s)" or farmers' association, or of funds solicited by corporations/associations from the general public. (People v. Aquino, G.R. No. 234818, November 05, 2018)
What is meant by syndicate?
A syndicate is defined by P.D. No. 1689 as consisting of five or more persons formed with the intention of carrying out the unlawful or illegal act, transaction, enterprise or scheme. The Court has clarified in Remo v. Devanadera that in order for any group to be considered a syndicate under P.D. No. 1689, the following standards must be present:
1. They must be at least five (5) in number;
2. They must have formed or managed a rural bank, cooperative, "samahang nayon," farmer's association or any other corporation or association that solicits funds from the general public.
3. They formed or managed such association with the intention of carrying out an unlawful or illegal act, transaction, enterprise or scheme i.e., they used the very association that they formed or managed as the means to defraud its own stockholders, members and depositors. (Remo v. Devanadera, G.R. No. 192925, December 09, 2016; Home Development Mutual Fund vs. Sagun, G.R. No. 205698, July 31, 2018)
Syndicated estafa
In syndicated estafa, there must be five or more persons who formed or managed a corporation or association and said persons used the very corporation or association that they formed or managed as a means to misappropriate the moneys contributed by its stockholders or members or solicited from the general public.
What is the penalty for syndicated estafa?
The penalty for syndicated estafa under PD No. 1689 is significantly heavier than that of simple estafa under Article 315 of the RPC. The penalty imposable for simple estafa follows the schedule under Article 315 (as amended by Republic Act No. 10951) and is basically dependent on the value of the damage or prejudice caused by the perpetrator. Syndicated estafa, however, is punishable by life imprisonment to death regardless of the value of the damage or prejudiced caused. (Remo v. Devanadera, G.R. No. 192925, December 09, 2016)
Cases:
1. Committed by 5 or more persons
Facts: Only 3 officers of the corporation were charged in the Information for syndicated estafa. However, private complainant alleged in his supplemental complaint-affidavit, that the alleged fraud perpetrated against him was committed, not only by said three officers, but also by the other officers and directors of the corporation.
Held: The number of the accused who allegedly participated in defrauding the private complainant exceeded five, thus satisfying the requirement for the existence of a syndicate. (Hao v. People, G.R. No. 183345, September 17, 2014)
2. The funds fraudulently solicited must come from the general public.
Facts: A and B induced V to invest in their corporation, State Resources, promising higher returns. But unknown to V, what occurred was merely a ruse to secure his money to be used in A’s construction and realty business. When V learned that the petitioners used his money for A’s construction and realty business, V demanded the return of his money. A and B, however, never returned V’s invested money and its supposed earnings.
Held: The circumstances all serve as indicators of the A and B’s deceit. "Deceit is the false representation of a matter of fact, whether by words or conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives or is intended to deceive another, so that he shall act upon it to his legal injury." Thus, had it not been for the A and B’s false representations and promises, V would not have placed his money, to his damage.
The third element of [syndicated estafa, however,] is patently lacking. The funds fraudulently solicited by the corporation must come from the general public. In the present case, no evidence was presented to show that aside from V, A and B, through State Resources, also sought investments from other people. V had no co-complainants alleging that they were also deceived to entrust their money to State Resources. The general public element was not complied with. Thus, no syndicated estafa allegedly took place, only simple estafa by means of deceit. (Hao v. People, G.R. No. 183345, September 17, 2014).
3. Ponzi or Pyramiding Scheme
The special law is typically invoked by those who fall prey to the too-good- to-be-true promises of a Ponzi scheme, wherein the purported investment program offers impossibly high returns and pays these returns to early investors out of the capital contributed by later investors. The history of such a stratagem has been discussed in the landmark ruling of People v. Balasa (Balasa):
x x x x Named after Charles Ponzi who promoted the scheme in the 1920s, the original scheme involved the issuance of bonds which offered 50% interest in 45 days or a 100% profit if held for 90 days. Basically, Ponzi used the money he received from later investors to pay extravagant rates of return to early investors, thereby inducing more investors to place their money with him in the false hope of realizing this same extravagant rate of return themselves.
However, the Ponzi scheme works only as long as there is an ever-increasing number of new investors joining the scheme. To pay off the 50% bonds Ponzi had to come up with a one-and-a-half times increase with each round. To pay 100% profit he had to double the number of investors at each stage, and this is the reason why a Ponzi scheme is a scheme and not an investment strategy. The progression it depends upon is unsustainable. The pattern of increase in the number of participants in the system explains how it is able to succeed in the short run and, at the same time, why it must fail in the long run. This game is difficult to sustain over a long period of time because to continue paying the promised profits to early investors, the operator needs an ever larger pool of later investors. The idea behind this type of swindle is that the "con-man" collects his money from his second or third round of investors and then absconds before anyone else shows up to collect. Necessarily, these schemes only last weeks, or months at most. (People v. Baladjay, G.R. No. 220458, July 26, 2017)
ESTAFA INVOLVING 100,000
SEC. 1. xxx
When not committed by a syndicate as above defined, the penalty imposable shall be reclusion temporal to reclusion perpetua if the amount of the fraud exceeds 100,000 pesos.
● For the second paragraph of Section 1 to apply, when not committed by a syndicate as above defined," the definition of swindling in the first paragraph must be satisfied: the offenders should have used the association they formed, own or manage to misappropriate the funds solicited from the public. (Galvez v. CA, G.R. No. 187919, February 20, 2013).
[1. The amount of fraud exceeds 100,000.
2. Estafa was not committed by a syndicate;
3. The offenders should have used the association they formed, own or manage to misappropriate the funds solicited from the public.]
● In sum and substance and by precedential guidelines, we hold that, first, Presidential Decree No. 1689 also covers commercial banks; second, to be within the ambit of the Decree, the swindling must be committed through the association, the bank in this case, which operate on funds solicited from the general public; third, when the number of the accused are five or more, the crime is syndicated estafa under paragraph 1 of the Decree; fourth, if the number of accused is less than five but the defininf element of the crime under the Decree is present, the second paragraph of the Decree applies (People v. Romero, People v. Balasa); fifth, the Decree does not apply regardless of the number of the accused, when (a) the entity soliciting funds from the general public is the victim and not the means through which the estafa is committed, or (b) the offenders are not owners or employees who used the association to perpetrate the crime, in which case, Article 315 (2)(a) of the Revised Penal Code applies. (Galvez v. CA, G.R. No. 187919, February 20, 2013).
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