Stepping into the plush Toa Payoh Central office
of multi-level marketing firm Sunshine Empire, few investors would
have thought that they would be duped by its charismatic founder,
who saw himself as Asiaâs answer to Warren Buffett, lived in a
luxurious three-storey landed property in Jurong West and drove a
shiny black Mercedes.
For 15 months between August 2006 and November
2007, thousands of unwitting Singaporeans bought almost 26,000
âlifestyle packagesâ ranging from $240 to $12,000 from the company,
which had an office featuring gold trimmings and lush
carpeting.
In November 2007, the policeâs Commercial Affairs
Department raided the fraudulent firm, owned by entrepreneur James
Phang Wah, in what was to be the unravelling of Singaporeâs biggest
Ponzi scheme.
Most investors would get back little or nothing, with
the authorities recovering only $21 million out of more than the
nearly $190 million swindled from ordinary Singaporeans, including
retirees and students, lured by the promise of high returns.
Only a few who invested in the early months of the
scheme made any money.
In July 2010, the court which sentenced Phang to nine
yearsâ jail and a $60,000 fine for criminal breach of trust
described his scheme as a âpremeditated, sustained, sophisticated
fraud on a large scaleâ which no âunsuspecting mind could have
easily seen throughâ.
Phang, the mastermind, came from humble beginnings.
He grew up on a Lim Chu Kang vegetable farm, and left
school after his O levels.
To pay for his A-level classes which he attended at
night, he worked in a shipyard and as a construction worker.
At 19, he went door-to-door selling stainless steel
cooking utensils, health items and other products.
After graduating from the National University of
Singapore with a degree in arts in 1983, he joined Shin Min Daily
News as a feature writer from 1984 to 1990.
In 1990, he started multi-level marketing firm Number
One Product, which sold magnetic mattresses.
He set up the Empire Group Alliance â an intricate
network of different businesses from property to
telecommunications, of which Sunshine is a part â in 2003.
He was its founder, director and international
president, and boasted that its assets exceeded $300 million. He
claimed that it took him five years to come up with a
ârevolutionaryâ business model for Sunshine.
First, people pay to become a Sunshine merchant,
allowing them to buy thousands of items, from health supplements to
lingerie, from its online platform.
They were then supposed to sell on these items. But
that was not the lure. The bait were the so-called Consumer Rebate
Privileges, which translated into monthly cash payouts.
Someone who bought a Gold package for $12,000 for
instance could end up with total payouts of $19,200 after 15
months â an impressive return of 160 per cent.
Since the company was not earning real profit, the
payouts for older investors came from the fees paid by new
investors â the very definition of a Ponzi scheme.
Still that did not stop people from being fooled,
pouring in tens of thousands to buy multiple packages, and then
convincing friends and family members to join. Youth were a
particular target for Sunshine.
After training sessions, Empire âmanagersâ will take
trainees out for supper. They would be dressed in black suits,
carry expensive Montblanc pens and wallets, with some driving
luxury cars such as BMWs.
This was the âlifestyleâ the company was trying to
sell.
But the only real winners were Phang and his
accomplices.
Phang was paid over $7 million in âconsultancy feesâ,
Sunshineâs director Jackie Hoo Choon Cheat and Phangâs wife Neo
Kuon Huay, who claimed that she was Sunshineâs sales director,
collected about $950,000 each.
Right till the end, the bespectacled Phang, who was
called Lao Da or Big Brother by his supporters, kept up his air of
confidence.
In a interview in 2008, after news broke that Sunshine
was under investigation and as reports emerged that the projects
boasted by his company never even existed, he compared himself to
the United States investment guru, saying: âIâm a legend. Iâm
very good â better than Warren Buffett.â
He also told The Straits Times: âWe acquire companies
like you go to the market buying beancurd.â
source:
http://www.straitstimes.com/singapore/courts-crime/guilty-as-charged-sunshine-empire-duped-investors-james-phang-wah-2006
It is a scam in which investors are
promised high rates of return, but with little risk. The returns
come from the funds put in by new investors. Earlier investors may
see some returns, but the scheme collapses when the supply of new
investors runs thin.
Up for awareness
