INVESTORS SCALDED IN SECURITIES FRAUD

[upena]

A long read but well worth it - how smart people (albeit a bit greedy) can be burned big time).

 

A sweet-talking stock broker allegedly is responsible for relieving several dozen investors of their hard-won savings, writes SIRIPORN SACHAMUNEEWONGSE

 

Have you ever heard of the movie Boiler Room? In a typical boiler room, telemarketers call potential customers to offer attractive schemes and close sales contracts. But too often, as in the movie, the deal revolves around fraudulent stock investments pushed off on innocent clients. One common lure to promote such investments is the Initial Public Offering (IPO), a chance to get in on the ground floor of a company going public before its stocks are actually offered on the market. Purchasing such stocks is commonly a guarantee of easy money, but only, of course, if the deal is legitimate.

 

Not many would think that the type of sharks seen in the Boiler Room might operate freely on the periphery of Thailand's highly promoted stock market, but it seems there are indeed successful, and intelligent, cheaters looking to make an easy buck from ordinary citizens. Michael Berbae's story is a testimonial to this. He reached out to Perspective to report an allegedly fraudulent stock deal after Thailand 's complicated and ineffective mechanisms for lodging a complaint left him feeling hopeless.

 

Originally from Los Angeles, four years ago Michael and his wife relocated to Chiang Mai, where they voluntarily teach English to locals. Last year, after they had become more sure that their stay in Thailand would be a long one, the couple started to look for an appropriate way to transfer a large sum of money from their American bank accounts into Thailand, to eliminate the need to transfer money every six months.

 

Stock investments seemed a good way to go, as it would not only mean that the money was in Thailand, but also that there was a possibility of earning some extra money with a minimum of effort. Little did they know the decision to invest in securities in their new homeland would be devastating to their life savings.

 

It was in May last year when Michael's friends in Chiang Mai, the Meyers, introduced him to a securities firm in Bangkok , the Siam Commercial Bank Securities (SCBS). The Meyers had initially found out about SCBS and its services from a marketing executive/broker of the company, Mrs Wanavadee Sripurd, who had flown to Chiang Mai to present them an investment proposal that she said allowed prosperous returns on initial investments. The Meyers had invested with Wanavadee, a friendly 33-year-old Thai woman, three months previous and had already made some quick returns.

 

In Chiang Mai, Wanavadee made investment proposals that regarded an IPO offering to these clients. She prompted them by promising that it was a sure thing, as the shares bought under the IPO were surely going to increase in value.

 

Upon hearing of the "favourable" scheme, Mr Meyer confidently urged Michael to invest. Michael, a former decorator for corporate parties in LA, had for many years invested in stocks in the US and didn't think there was much risk involved in what he saw as a great opportunity to transfer funds to Thailand.

 

Immediately, without meeting with the SCBS broker himself, Michael invested via the Meyers' account an initial sum of 4 million baht. The Meyers' investments were worth 7 million baht. All the money was transferred into the broker's personal bank account. It was believed that she would transfer the money into their trading ports once it was created on her return to Bangkok

 

Both the Meyers and Michael were assured by the broker that they would see returns within 2-3 weeks. However, June rolled around and there was no sight of any money from the investments. Wanavadee kept saying they must wait for prices to rise and then sell the stocks at the right time. She had also put them off by telling them they were new clients, and therefore had to wait.

 

At that point, the expatriates were not much concerned, and resolved to wait out the profits they felt sure were coming. But when Michael returned to Thailand after a trip home to see his mother and there was still no word, he began to feel anxious and very curious about what was going on with his money, and why profits weren't coming in as initially promised. He rang the Meyers and found that Mr Meyer was away in Germany on business.

 

STATE OF SHOCK

 

Michael tried to convince Mrs Meyer that they should contact SCBS. When he became insistent, she tried to calm him down, explaining that Wanavadee had already apologised for not being able to sell the stocks, and that they would have to wait a bit longer.

 

But by October, it was starting to become clear even to the Meyers that something suspicious was going on, and they finally lost all patience with the stock broker. They emailed and rang up the SCBS manager at the Sathorn branch where Wanavadee was employed. Their worst fears were confirmed when they learned that the marketing executive no longer worked at the office branch.

 

Still believing the company would be responsible for the large investment, Michael and the Meyers approached the SCBS headquarters with all the paperwork related to the transaction. They were reduced to a state of shock when officers at the securities company quickly identified that it was all forged.

 

An investigation by the firm also opened the Meyers' trading port. Only one transaction was recorded, made without their consent, the outcome of which was a significant loss. There was no record of any money being transferred to the broker for the IPO. It was looking like she had simply disappeared with all their money.

 

According to Michael, at this point SCBS made it clear to them that the firm was not responsible for any of their losses, as the clients had transferred the money into the broker's personal bank account, which is contrary to procedures required by the Stock Exchange of Thailand (SET).

 

They were told their only recourse was to sue the former SCBS employee.

 

While investigating into the matter, Perspective attempted to interview the manager of the Sathorn branch of SCBS, as well as the senior authorities in charge of compliance and audit at the SCBS headquarters, to get their views on the matter. They all signified that they had no authority to discuss it - therefore we had to manage with a press release on the topic provided by the SCBS Public Relations Division.

 

In the release, titled "SCBS Vouches Internal Transparency, Loss due to transactions between individuals", SCBS managing director Mr Kris Kasemsarn attempted to explain the situation. He said it was clear that the investors had transferred funds to the broker's personal bank account, bypassing regular channels and the SET's trading protocol, and that no funds were transferred into the company's account. The MD took the opportunity to warn investors to study their broker's advice regarding the trading process and procedures carefully.

 

Although these investors didn't have any expectations left from the SCBS, they wanted to see where their money was. They asked the firm to at least check into personal bank accounts of the former marketing executive. The manager of the Sathorn branch gave them a firm reply: Looking into bank accounts of employees who no longer worked for them was not possible.

 

The three victims were totally devastated. None of them were wealthy; they had worked hard all their lives. The savings they had accumulated over the years had suddenly vanished because they had trusted an executive of a registered securities company in Thailand who guaranteed them attractive returns on their investments.

 

A TRIP TO BANGKOK

 

Despite their huge disappointment, neither the Meyers nor Michael were ready to give up. This was, after all, about the money they had allotted for their futures.

 

They found there were a number of other acquaintances of Wanavadee who were in the same situation. Along with 12 others from Chiang Mai, the three flew to Bangkok on October 27, 2006 to exercise what amounted to their last hope.

 

The 15 wisened investors marched right into the office of the Securities Exchange Commission (SEC), the entity largely responsible for granting the operating licence to registered securities firms like SCBS. There they quite coincidentally met with three other groups that were also allegedly cheated by the marketing executive. One of these groups was being represented by a manager of the United Overseas Bank (Klong Toey branch) and another one was led by a senior doctor from the Bangkok Christian Hospital (BCH). Incidentally, the allegedly forged documents, faxed trading receipts and the entire process must have really been well done to have convinced bank manager Wanpen Taramaneerat and the other bank employees who claim to have been defrauded. Dr Karoon, a senior doctor at BCH, also was in contact with Wanavadee for a long time, but had not seen any hint of fraud coming his way.

 

Meanwhile, staffers at the SEC office were more than surprised to see this large group of restless people demanding their attention. A meeting room was arranged immediately to hear their complaints and to get an understanding of their claims against the broker and SCBS.

 

Since the complaint regarded a huge sum of money and a lot of investors, both foreigners and Thais, the SEC assured that it would conduct an investigation to look into the matter further. The group of alleged victims, which had swelled to 40, left the office with some new-borne hope of regaining their lost financial assets.

 

It was clear to them that any actions against SCBS or the former marketing executive would likely not bear fruit until they had an official ruling in their favour from the SEC, yet they also reported the matter to the Economic Crime Investigation Division in Sathorn district in October.

 

Michael said it was somehow clear that progress was going to be extremely slow. The policeman initially assigned to take charge of the case left his job at the end of last year. The process quickened when Lt.Col. Torsak Sawasdeemongkol, a specialist in economic crimes, took charge of the case earlier this year. But as luck would have it he was reassigned to the Kulaab Kaew nominee issue, related to the Shin Corp sale.

 

The days and months passed. Michael put up 400,000 baht to hire a personal investigator, who was able to provide him with some exclusive information.

 

"I was told that my money was lying in a bank account in Hong Kong, and that there were many others involved in this fraud case," said Michael, although he admitted that there was no guarantee of the accuracy of the investigator's information.

 

Nevertheless, Mrs Meyer said she was aware that Wanavadee had travelled to Hong Kong last year. She also said that after talking with other employees at the SCBS Sathorn branch, she was convinced that the alleged fraud scheme was hatched just a month after Wanavadee had received her broker's licence. Mrs Meyer didn't think this would be possible without another expert's assistance.

 

SEC RULING

 

In February this year, the SEC finally put it in writing that SCBS was quite negligible in the manner that it had addressed the issue. However, the SEC itself has no authority to require the firm to make restitution for any losses that may have occurred because of the misdeeds of a former employee.

 

On February 21, the SEC also accused Wanavadee Sripurd of fraud - in the amount of 130 million baht. She is nowhere to be found.

 

She has been called by the police to come in for questioning, but has thus far failed to show up. As of now there are no arrest warrants out for her.

 

It is now almost a year since the alleged fraud of Wanavadee's clients. Not only have they lost their investment money, they are out a considerable amount in lawyers' fees, plus a lot of time and effort.

 

"These investors are not interested in taking the matter to court. They only want their money back," said the Meyers' lawyer, Mr Damrongphon. Michael himself worries that the case against SCBS will go nowhere, because the firm is able to hire the finest of legal counsel.

 

Whether or not any or all of the 130 million baht is ever recovered, it is clear that all investors have lost their hope and faith in the Thai stock market.

 

Michael Berbae confesses that he should never have trusted the executive of the well-known firm so easily. Without safeguards employed by securities firms in Thailand, clients are totally vulnerable to being cheated by unscrupulous employees, he added. He doesn't think something like this could happen in the US.

 

This was his first investment in Thailand and, surely, it is going to be his last. He advises investors to be very careful and thorough when they consider investing in stocks in any foreign country. He says that one must examine the local laws and regulations and see whether they provide customers with protection in fraud cases. He also said it is a must to understand legal documents in the foreign language.

 

Mrs Meyer, like the others, said she was extremely let down by SCBS's response to their situation. She added that she could never have imagined that she might be cheated by a polite, friendly, female Thai executive. She blames a lack of coordination at the SCBS's Sathorn branch for the losses in her bank account. As a side note, the Sathorn branch of SCBS is scheduled to shut down soon. The firm plans to halt operations at 6-7 branches by May 1, 2007 to improve the corporation's efficiency.

 

The promises of high return for little risk did not hold true for Michael, the Meyers and many others.

 

The story serves as a clear warning for the rest of us. In point of fact, this type of alleged fraud is not all that isolated among brokers and investment managers in Thailand. The SEC website clearly displays a long list of individuals to watch out for.

 

http://www.bangkokpost.com/Perspective/22Apr2007_pers01.php

[BorisBroomhead]

That’s why I keep all my money in banks. The thing that pisses me off is when governments sometimes bail out investors in dodgy companies.

[lostinpattaya]

He doesn't think something like this could happen in the US.

As they were naive and gullible enough to transfer money into a brokers personal account then i am afraid the same could very easily happen to them in any country.

[LaaMok]

Great thread!

[MadStockBroker]

This was just a very ordinary and simple fraud by one individual.

 

Nothing really to do with thailand or SCBS (who are legitimate).

 

What the fuck they were thinking about transfering money into her personal account I have no idea.

 

Just cos she was thai, female and a nice smile is no reason to be so trusting.

 

 

I dont have much sympathy for them.........

[Short]

1. The broker was an employee of SCBS?

 

2. Did the broker tell the customer that the investment account to be transferred into was the brokers personal account or an official account of the bank.

 

3. If the customer was not informed that the account was private, then the broker as an employee has misappriated the money into the private account. In that scenario, the bank should be responsible to the customer for the misbehavior of the employee. Call the authorities and Sue.

 

4. If the customer new beforhand that the account was private, then it wasn't the banks responsibility.

 

Language barrier probably paid a part in this. A lawyer should have been brought in beforehand.

[galt67]

Unfortunately, I have 'heard' of several boiler rooms, operating now, in BKK soliciting Brits, Aussies. BE VERY CAREFUL if you receive an unsolicited phone call pitching ANY investments.

[The Deported One]

That’s why I keep all my money in banks. The thing that pisses me off is when governments sometimes bail out investors in dodgy companies.

 

 

same here! Great thread

[jharrison]

It's quite common to put money in broker's accounts.

 

I think the big problem is that this is a foreign country and not knowing the "lay of the land" makes it more difficult.

 

The basic rule of investment is to only risk a small portion of your funds, not a major portion.

 

A bank may not be the WORST place to keep money, but it's close.

 

All investments involve risk, so that's why you only risk a small amount.

 

That's my 2 cents.

 

All the best,

 

jH

[RedRackam]

Rule 1 - NEVER INVEST WITH A COMPANY THAT COLD CALLS YOU

 

Rule 2 - NEVER INVEST IN ANYTHING YOU DON'T FULLY UNDERSTAND (like futures, options, small tech companies listed on tiny stock exchanges etc).

 

Rule 3 - NEVER PAY MONEY TO A FOREIGN BANK ACCOUNT (this will also stop you buying shitty foreign shares because if the shares are legit then you'll be ale to buy them through your UK broker, assuming of course you're English).

 

Rule 4 - NEVER INVEST WITH A BROKER THAT A) IS NOT LOCATED IN YOUR HOME COUNTRY AND B) REGULATED BY YOUR COUNTRY'S FINANCIAL REGULATOR

 

If you follow those 4 rules it's impossible to be scammed. But if you don't and let your greed triumph over your commen sense you only have yourself to blame when/if your money is stolen from you.