Hunt on for the king of stock market scams
Jul 11, 2002
Meet the man who rose from the slums of Manila to run what authorities say is the biggest boiler room operation in the world
By Asian Pacific News Service
Living on the streets of a Manila slum, Amador Apungan Pastrana, vowed he would never go hungry again. That was about a decade ago before he started working at a fast food outlet while struggling as a college student.
Over the next 10 years Pastrana moved from the streets of Manila to the world of high finance amassing a fortune in billions and leaving behind a trail of victims around the globe.
Today Canadian, Australian, U.S. and Asian authorities are hunting the 30-something Pastrana, saying the Filipino is running the world’s biggest scam syndicate. Dubbed ‘king of the boiler rooms’, Pastrana, they say is the brains of a global network of boiler room operations that has duped tens of thousands of investors with little knowledge of the financial market, but with lots of money to spare.
The Philippine Center for Investigative Journalism (PCIJ) estimated that Pastrana has already amassed some US$6 billion in the last decade from running at least 150 boiler rooms in nine countries. Securities and Exchange Commission regulators in the Philippines, Hong Kong, Singapore, Australia, New Zealand, South Africa, Canada and Europe are all tracking the ‘slippery Filipino.’
Pastrana’s alleged victims include a batch of 4,000 people who lost US$35 million they invested in one of his shell companies, thousands of retirees in Australia and New Zealand, and nearly 700 South Africans who lost a total of US$28 million.
One of the South African victims was businessman Lino Leoni, of the renowned DeBeers diamond company, who invested about US$5 million. Pastrana, who maintains posh homes in Manila and Los Angeles, is now on the watchlist of authorities in many countries, including the Philippines.
The US Federal Bureau of Investigation (FBI) has also begun to investigate his activities, according to Filipino press reports.
In Austria police are reportedly looking at Pastrana’s connection with Regis Possino, a disbarred U.S. lawyer convicted of fraud and drug dealing and shady Saudi Arabian businessman Adnan Khashoggi.
Media reports say the three men were members of a consortium that bought a small Viennese bank without a brokering license, and then turned it into a boiler room. The PCIJ quoting Tomas Syquia, acting director of the Compliance and Enforcement Division of the Philippine Securities Exchange Commission, says building a case against the international syndicate is difficult because of the complexity of the modus operandi. Most of the victims are all overseas, making it hard and costly to gather information and court evidence.
James Martin, director of Sydney-based Stock Investigation Research described Pastrana as the ‘Henry Ford of boiler rooms.’“He has taken boiler rooms into mass production scale like no one else,” he said.
The operations are called “boiler rooms” because Pastrana’s employees usually work out of cramped office spaces with desks and telephones and apply high-pressure sales pitches on their victims. Each office has an army of telemarketers that call up retirees, pensioners, lottery winners anybody who’s neither a banker nor a broker who are thousands of miles away, and more than likely in another country.
The glorified telemarketers then pitch stocks of “pinksheet” companies, or those whose shares sell for a fraction of a penny, listed on the unregulated Over-the-Counter Bulletin Board (OTCBB) of the US NASDAQ.
Pastrana’s boiler rooms hire expatriates with Western accents, including Canadians, who present themselves as hotshot brokers of securities firms that have impressive-sounding names such as Morgan Lynch (a cross of US investment banks J.P. Morgan and Merrill Lynch), Griffin Securities, Muller & Sons, Dukes & Company, and Knowle & Sachs.
They send out glossy newsletters, put up Internet sites and pester the potential victim with follow-up calls until he agrees to part with his savings and buy the stocks.
Clients, who plunk down amounts that range from $1,000 to $5 million each, then receive instructions on how to send the payment by telegraphic transfer to a bank overseas.
The boiler room companies collapse their operations after six months to a year or when too many clients itching to see returns start burning their phone lines.
But like zombies, the firms come alive again in another office address or in another part of the world, using a different name and another set of incorporation papers. More often than not, the boiler rooms do not really buy the shares and merely pocket the money.
When the clients run to their respective Securities Exchange Commissions for help, they find out they have put their trust in obscure companies that do not even hold a license to trade stocks or a legitimate office address.
Their phone calls go to business centres paid to render secretarial work and receive calls that are automatically re-routed to the boiler room’s landlines.
While Pastrana is the present king of boiler rooms, he was not the inventor of this elaborate scam. Experts say boiler rooms began more than a decade ago in the United States, particularly in Florida, where they reportedly flourished due to lax investment rules there as well as the large population of retirees.
After the FBI conducted a major sweep in the early 1990s, the boiler rooms simply moved their operations outside of the United States, eventually choosing countries that had no extradition arrangements with US law enforcement agencies, or with weak rules of law.
Many of the boiler rooms set up offices in Canada, Hong Kong, the Bahamas, Panama, Costa Rica, Liberia and South Africa. Some wound up in the Philippines, with one of them eventually employing Pastrana.
A Computer Science graduate of Trinity College in Quezon City, Pastrana had first worked as a crewmember in a McDonald’s outlet before he chanced upon a newspaper ad for telemarketers in a Makati-based firm called Griffin Securities.
It turned out to be a boiler room operation, but Pastrana lasted long enough in the company to master the “business.” Some of his former employees were told that Pastrana took some vital diskettes with him when he resigned from Griffin.
They believe he used these to help set up his first company, which became First Federal Capital. According to the Philippine SEC records of AAP Management, Inc., his
flagship company, Pastrana managed to have more than 10 companies in just a span
of five years.
Today, Pastrana is said to own more than 100 boiler rooms and shell companies around the world. Some of them are incorporated in small tax-haven territories such as the Bahamas, Belize, British Virgin Islands, Mauritius, Cayman Islands, Western Samoa, Turks and Caicos, St. Vincent and the Grenadines, Island of Nevis, and the republics of Liberia and Seychelles.
Those in the United States were incorporated in Nevada, Florida, Delaware and South Carolina. A former resident of a squatter community in Guadalupe Viejo in Makati, Pastrana is now said to own a $2.8-million apartment penthouse on Wilshire Boulevard in Los Angeles, California.
“He also bought his mother a lovely gift: a $14-million house in Rancho Santa Margarita in Mission Viejo, California,” says Martin.
In the Philippines, his properties reportedly include two luxury condominium units in the high-end Essensa East in Taguig, a villa with a view of the sea in Caylabne Bay, the Winners restaurant on Arnaiz Avenue in Makati, and units at The Peak, also in Makati.
Authorities hot on Pastrana’s trail say some of the properties have been placed under the name of his front companies such as Euro Pacific Trade Inc., or those of members of his immediate family.
Pastrana’s megabucks have also found their way into listed conglomerates such as Hong Kong’s Hutchison Whampoa Ltd., as well as Singapore Telecoms, US metal producer Alcoa Inc., Pacific Cyberworks of Hong Kong, and US semiconductor firm Intel.
Some of his associates told PCIJ that despite his supposed riches, Pastrana still has some simple joys, among them buying brand-name shoes at bargain prices in either Bangkok or Hong Kong.
But he is also known for e-mailing his personal secretary to keep replenishing his stock of blue and black Mont Blanc pens, as well as showing off the results of his latest liposuction or the wonders cosmetic surgery has done on his face.
And of course, Pastrana is reportedly making good a promise his former associates say he made to himself several years back when he swore “I shall never go hungry again.”
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