SEC Adm. Case No. 06-08-97 Wealth and Income Network Inc.

Department of Trade and Industry Republic of the Philippines

Securities and Exchange Commission SEC Bldg., EDSA, Greenhills, Mandaluyong City

In the Matter of

WEALTH AND INCOME NETWORK INC. SEC Admin Case No. 06-08-97

(CED Case No. 07-2858) Compliance and Enforcement Department, Petitioner. For: Revocation of Corporate Registration XS -)

DECISIOn

For consideration is the Petition for Revocation of Corporate Registration of Wealth and Income Network Inc. ('WIN"/respondent) for violation of the Securities Regulation Code' (`SRC") and Presidential Decree 902-A, as amended, filed by then Compliance and Enforcement Department ("'CED"), now the Enforcement and Prosecution Department (`EPD"/petitioner), on 26 June 2008.

FACTS OF THE CASE

under SEC Reg. No. A200201954. Its principal place of business is at Suite 1001 Tektite West Tower, PSE Centre, Exchange Road, Ortigas Center, Pasig City. WIN is a domestic stock corporation duly incorporated on 7 February 2002

Its primary purpose is:

"To engage in, conduct, and carry on the business of selling, distributing, marketing at wholesale and retail insofar as maybe permitted by law, all kinds of goods, commodities, wires and merchandise of every kind and description; to enter into all kinds of contracts for the export, import, purchase, acquisition, sale at wholesale or retail and other disposition for its

products whether natural or artificial." own account as principal or in representative capacity as manufacturer's representative, merchandise brokers, indentor, commission merchant, factors or agent, upon consignment of all kinds of goods, wares, merchandise or

which started on 14 August 2006,2 for allegedly deceiving complainants into applying with the said corporation when in fact WIN had no legitimate job vacancies. Rather, This case stemmed from numerous complaints received by EPD against WIN

1 Republic Act No. 8799 (2000). 2 Petition dated 25 June 2008, par. 5.

In the Matter of Weatth and Incorme Network, Inc. Compliance and Enforcement Department, Petitioner. Page 2 of 8 SEC Admin Case No. 66-08-97

were hired on a purely commission basis, and were made to recruit applicants in the same way that they were recruited (through flyers aiong EDSA and via advertisements in newspapers), to seil respondent's product cailed Health Advantage P{an C`HAP'}.3

To verify the allegations of the complainants, EPD formed an investigating team who, on August 18, 2006, went to the office of WIN, and posed as applicants, assuming different names. A summary of the contents of their Affidavit dated i September 2006 is as fotlows: There were about eighty (80) people in the room) inciuding the employees of WIN. The initial evaluators asked how they tearned of the job openings so they showed the flyers given by the complainants with the name, address, and contact person at WIN. They were given a ten-minute examination after which they were called and told that they passed the I.Q. test. Each applicant was again interviewed which lasted for about ten minutes.

It was during this interview that the interviewer mentioned the necessity of paying a licensing fee in the amount of Php400.005 for every successful applicant. The interviewer further explained that at the end of the day all the Php400.00 payments are collated and delivered to the Commission for the processing of the /icense. The license would serve as authentic identification of the employees of WIN in order for them to properly selt the products of WIN, among other reasons. They were instructed to return a few days after for the orientation seminar and prepare the Php400.00 for the license.

During the orientation seminar, 59 applicants from alt over the country were present, aged twenty-one years old and above. They were welcomed by a certain Hector Ferriols who instructed them to write an application letter. The first speaker was Joseph Uy who categorically stated that WIN was established on 7 February 2002, and registered with the Commission and the Bureau of Intermal Revenue. He informed them that WIN has 132 branches, 128 in the Philippines, and four (4) in Asia.

Uy further said that their providers are Med Asia, Prudential Guarantee, and

in one program, which allegedly provides the following benefits depending on the Paramount Life Insurance Company and the main product of WIN is the HAP, a four

Accident Insurance, and Burial Cash Assistance amount of premium paid: Hospitalization, Emergency Health Care Service, Personal

From Zamboanga City, Cagayan Valley, Dipolog City,Tarlac, Pampanga, and Metro Manila. 3 Id., par. 9. 5 In the narration dated 23 August 2006, of Reshiel T. Rosales, Sales Counselor per WIN Identification pars. 6,8,11,15,16,20,23,30,32,34,36,39,41-43,44,50,51,and 52, Annex "F." Card, this amount was broken down as follows: P150.00 for SEC license and P250. 00 for the Cormpany kit, Petition 25 June 2008, Annex "D-1"; see also Investor Complaint/Inquiry, Annex "D."

In the Matter of Wealth and Income Network, Inc. Compllance and Enforcement Department, Petitloner. Page 3 of 8 SEC Admin Cas se No. 66-08-97

The second speaker, Senior Area Manager of WIN, was Leo Isaga who enumerated the available positions in the company.7 He said that once an applicant is accepted, he must avail of the HAP either through loyalty system, wherein employees avail of the same, or referral system, wherein employees sell the HAP to others. Isaga aiso emphasized that WIN is not a networking company, or an insurance company, among others.

Isaga said that WIN needs only 10 out of the 59 applicants, but the investigating team later found out that all of the 59 applicants were accepted. Later, a final evatuator asked each of the applicants for their preferred position in the company and explained that in order to get the position of Area Manager. the applicant had to avail of HAP Plan A by paying the amount of Php6,600.00. If paid on that day, they would progress to the last step which was a two-day Basic Sales Training Program (`BSPT'). After training and paying for the HAP Plan A, they can start work immediately. Again, the license f A : payment of Php400.00 were brought up. Allegedly, since WIN is registered with the Commission, all agents are required to obtain a license from the Co missior 1 to deal with the clients. They were told that the final interview was with the Pre resident of wIN, and they were asked to pay the amount of Php400.00 on the spot. When told that they did not have the money for the license fee, the evaluator exclaimed that they had to pay within the day otherwise, their right to assume positions as employees of the company will be forfeited.

further surveillance and investigation. One hundred sixteen (116)8 applicants EPD referred the matter to the National Bureau of Investigation ('NBI") for

executed a Sinumpaang Salaysay (Sworn Affidavit) regarding the operations of WIN. On 26 October 2006, a search warrant against WIN was granted by Branch 268, Regional Trial Court, Pasig City, which was imptemented also on the same day by the NBI operatives assisted by the EPD investigation team.1 On 13 November 2006, the NBI endorsed the case to the Department of Justice for prosecution of the responsible officers of WIN, for alleged vioiation of Article 315 (Estafa) of the Revised Penat Code.11

WIN for a clarificatory conference. Messrs. Ernesto Salas, WIN's Chief Operating On 22 November 2006. EPD's investigating team summoned the officers of

7 Namely: 1) Sales Consultant who can eam as much as Php500.00 per day plus weekly performance 9 Here, they alleged that they went to the office of WIN to apply for a job; in the process, they were 11 Id., par. 14. a Petition dated 25 June 2008, par. 15. 1 Id., par. 13. bonus (wPB"7; 2) Area Manager who can earn as much as Php640.00 per day plus monthly performance (MP" bonus plus overriding incentives; and 3) Regionat Managers who can earn as much as Php720.00 per day plus Php10,000.00 back allowanoe every month plus WPB plus MBP required to pay an amount ranging from Php500 - Php4000, to be used as processing fee in securing a license from the Commission which was required for the approval of their application. Id., paragraph 16. plus overriding incentives.

In the Matter of Wealth and Income Network, Inc. Compliance and Enforcerment Department, Petitioner. SEC Admin Case No. 66-08-97 Page 4 of 8

Officer, Victory N. Lee, General Manager, and Atty. Juanito Antonio, Counset attended the conference, and they alleged that WIN was engaged in selling and marketing insurance products of other insurance companies, which they packaged into one product called HAP. 1

In view of its findings that WIN's modus operandi is in violation of the SRC and P.D. No. 902-A, as amended, EPD filed the instant petition.

In its Comment (To Petition for Revocation of Corporate Registration) dated 21 August 2008, WIN denied the charges and alleged that their corporation is essentially a sales outfit with sales heads who are commissioned and not employees of the company; the training of the new sales associates are based on their own strategies within the parameters of the general direction of the company: the sales agents are required to buy a sales kit as a necessary tool for the job, which was initially pegged at Php250.00 but was reduced to Php150.00 as of October 2006; the sales groups are prohibited from collecting any other fee other than those imposed

recruitment advertising without prior approval of management.13 by the company and also from using the company's name for sales literature and

the public and to their sales agents that the registration fees WIN is collecting is WIN, through its General Manager, Victory Lee, denied having represented to

sanctioned by the Commission. Lee surmised that since most of their sales heads

"SEC imposed charges."14 Lee reasoned that because of the size of the company's were former pre-need associates, they misconstrued the sales registration fees as sales organization, incidents of misrepresentations are most tikely to occur specially on the part of overzealous sales associates, but he claimed that WIN is on its toes in imposing disciplinary sanctions on erring agents.

Regional Trial Court Branch 268 of Pasig City (`Pasig City RTC Branch 268').15 A perusal of the same shows that the search warrant was indeed quashed due to the Moreover, Lee pointed out that the search warrant was quashed by the

apparent failure of the applicant to pursue the criminal charges filed against WIN for the crime of estafa.

ISSUE

Income Network, Inc. should be granted. Whether the Petition for Revocation of Corporate Registration of Wealth and

13 Comment dated 21 August 2008 par. 2 (a), (b), (e), and (f). 12 Dental Access card of Health Partners Dental Access Co., Prudential Guarantee-Med Asia Integrated 15 Id, Annex "A." 14 Id., par. 3 Medical Access System Card of Prudential Guarantee and Assurance, Inc. and Group Policy Insurance of Paramount Life and General Insurance Corporation, Id., pars. 17-18.

Page 5 of 8 In the Matter of Wealth and Income Network, Inc. SEC Admin Case No. 66-08-97 Compance and Enforcement Department, Petitioner.

RULNG

We rule in the affirmative.

P.D. No. 902-A, as amended, reads in part as follows:

"SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx

(1) To suspend, or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the fol!owing: xxx

2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public, xxx" (Emphasis supplied)

First, we tackle the issue of the search warrant. The fact that the search warrant was quashed by the Pasig City RTC Branch 268 is of no moment. That refers to a criminal case while the present case is administrative in nature. The two cases

criteria are whether there is substantial evidence1 against the respondent WIN that are independent of each other. Since this is an administrative case, the important could justify the revocation of its certificate of registration and whether WIN was accorded administrative due process.17

Substantial evidence to support the petition consists of the Affidavit of the

complaints18 of those who responded to the flyers and advertisements of respondent. that she paid Php2,300.00 to a Regional Manager of WIN and started working EPD investigating team mentioned above, corroborated by one hundred sixteen (116) complainants who signed a Sworn Affidavit, and the complaint forms and handwritten For instance, in a handwritten narration of facts of one of the complainants, she said Php400.00 licensing fee, she was given Pph25.00 as commission. Another thereafter by observing a fellow sales consultant. When an applicant paid the

complainant from Ifoilo City wrote that on 7 August 2006 she qave Php2,700.00 and Php400.00 to a representative of WIN who issued a receipt for the amount of

Is wIt means such relevant evidence as a reasonabie mind might accept as adequate to support a 17 The essence of due process is an opportunity to be heard. One may be heard, not solely by verba! 1 Petition dated 26 'June 2008, Annexes "D", "D1"- "D5." presentation but also, and perhaps even many times more creditably and practicable than oral argument, through pleadings. In administrative proceedings, moreover, technical rules of procedure and evidence are not strictly applied; administrative due prooess cannot be fully equated to due process in its strict judicial sense. Ocampo vs. Office of the Ombudsman (G.R. No. conclusion." (Appalachian Electric Power v. Nationai Labor Relations Board, 4 Cir., 93 F. 2d 985, 989; National Labor Relations Board v. Thompson Products, 6 Cir., 97 F. 2d 13, 15; Ballston- Stillwater Knitting Co. v. National Labor Relations 8oard, 2 Cir., 98 F. 2d 758, 760.) Cited in Ang 114683. January 18, 2000) Tibay vs. Court of Industrial Relations(G.R. No. L-46496 February 27, 1940; 69 Phil. 642).

In the Matter of Weafth and Income Network, Inc. Compliance and Enforcement Departrnent, Petitioner SEC Admin Case No.66-08-9

Page 6 of 8

Php2,700.00 but not for the amount of Php400.00. On 11 August 2006, the complainant assisted her Regional Manager to whom Php3,700.00 was paid by an applicant and she got Php360.00.

There is no question that WIN was given notice and an opportunity to be heard. As mentioned earlier, WIN's officers met with EPD's investigating team on 22 November 2006 wherein they explained that WIN was engaged in selling and marketing insurance products. WIN, through its General Manager, Victor Lee, responded to the Commission's Summons dated 15 July 2008, in the form of a Comment dated 21 August 2008 where Lee alleged that the company never represented to the public that they are collecting payment for license fees from the Commission. In its Rejoinder to Petitioner's Reply dated 22 September 2008, WIN.

and assistance program.20 its only product, it. is "acting as an agent, broker, or insurance company. Lee stressed that WIN was not and is not an agent or broker of an insurance company, and that its business is centered on the sale of HAP, a medical guarantee again through Lee, defended itself against the altegation of EPD that by selling HAP,

taking out insurance, on behalf of an insured other than himself (Italics supplied)."22 broker," which is: "any person who acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance contract or in placing risk or insurance, that is, a contract of insurance, The medical guarantee and assistance program that it sells is a contract of medical However, WIN's activities appear to fall under the definition of "insurance which is defined as "an agreement

damage or liability arising from an unknown or contingent 'event."23 Consequently, whereby one undertakes for a consideration to indemnify another against loss WIN necessarily has to have a license operate from the Insurance Commission Unfortunately. the Insurance Commissior sued a Certification dated 23 January 2007 that WIN "has not been issued a license to act as agent, broker, or insurance company. "n24

Moreover, the system25 of WIN is akin to the chain distribution plans or Pyramid saies schemes26 which victimize the gullible public.27

zz 'Section"4, 'Rules "and" Regulations Implementing the "Anti-Money Laundering Act of 2001 (R.A. 26 means sales devices whereby a person, upon condition that he makes an investment, is granted by 23 Section 2(1), Presidential Decree No. 612 (also known as the Insurance Code of the Philippines, 24 Repiy to Respondent's Comment dated 1 September 2008, Annex "A." zs wherein the so-called "positions" in the company such as the Sales Consultant, Area Manager, and 19 Reply (To Respondent's Comment) dated 1 September 2008, par. 8. 20 Petitioner's Reply dated 22 September 2008, pars. 3 and 4. the manufacturer of his representative a right to recruit for profit one or more additional persons who will also be granted such right to recruit upon condition.of making similar investments: December 18, 1974). are mandated to pay for the HAP to get a higher position and in turn are obligated to get more Regional Managers get a graduated scale of bonuses plus overiding incentives, and the recruits 9160). recruits from whom they will take their commissions

SEC Admin Case No. 66-08-97 In the Matter of Weatth and Income Network, Inc. Page 7 of 8 Compllang ce and Enforcerment Dep ent, Petitioner.

On April 28, 2010, WIN filed a General Information Sheet (`GIS'? with the Commission together with an Affidavit of Non-Operation for the years 2008 and 2009. A verification on the Internet as of 14 October 2010 revealed, however, that WIN is listed in JobOpenings.ph,28 and is looking for ten marketing managers. Although the job openings listed expired as of 12 April 2010, here, it is listed under the name of Benne Ssere International Incorporated, and indicates "(formerly known as Wealth and Income Network), "The Commission's records show that Benne Ssere International Incorporated ("'BSII'3, was registered on 9 January 2006, with SEC Registration No. CS200600210. Its principal office address is the same as that of

that'of WIN.30 In addition, Ernesto R. Salas, Victory Lee,31 and Gregorio Rivera, Jr. WIN,29 and the description of its business as written in the Internet is the same as are officers of the two corporations.

Before WIN resumes its operations, it is incumbent upon the Commission to exercise its power under Section 5.1. (m) of the SRC. Indeed, WIN has engaged in Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public xxx", a ground for revocation of the certificate of registration of a corporation provided under P.D. 9o2- A, Section 6 (I) 2.

GRANTED. The Certificate of Registration of WEALTH AND INCOME NETWORK WHEREFORE, premises considered, the instant petition is hereby

INC. is hereby REVOKED, on the ground that it has violated Section 6 (I) 2 of Presidential Decree 902-A, as amended, in relation to Section 5.1 (m) of the Securities Regulation Code.

Provided, That the profits of the person employing such a plan are derived primarily from the recruitment of other persons into the plan rather than from the sale of consumer products, services and credit: Provided, further, That the limitation on the number of participants does not change the nature of the p!an.{ Article 4 (k). Republic Act No. 7394 The Consumer Act of the

investors are paid off with funds raised from tater ones." It is sometimes called a pyramid scheme z7 This is "an investment swindle in which high profits are promised from fictitious sources and early Philippines April 13, 1992.]

because a broader base of gullible investors must support the structure as time passes. People vs.

32 BSII GIS filed 29 September 2008 and WIN GIS filed 30 April 2007. 30 DESCRIPTION: Benne Ssere International Incorporated started its operation in January i0, 2010 31 BSII GIS filed 29'September 2008 and WIN GIS filed 28 April 2010. 28 http://www.jobopenings.ph/page_job details.php?jobid=5634&companyid=1067accessed 14 Z Suite 1001, 10th Floor, West Tower, (Tektite) Philippine Stock Exchange Center, Exchange Road, Romero and Rodriguez G.R. No. 112985 April 21, 1999. Ortigas Center, Pasig City 1600 (at the back of SM Megamall, near San Miguel Corporation) with SEC Registration number CS2006-00210. We are a marketing company which provides provide healthcare access card as personalized services for dentai, emergency, hospitalization and build financially independent, and professional employees by our trainings and above minimum compensations. <http://www.jobscity.net/pls/jobs/companyprofile?comid=Y1LBQ> accessed on October 2010 excellent, flexible and dynamic products to discerning dients and corporations. Likewise, we annual physical exam. We aim to expand our operation nationwide to promote employment. We 14 October 2010.

In the Matter of Wealth and Income Network, Inc. SEC Admin Case No. 66-08-97 Compliance and Enforcement Department, Petitioner Page 8 of 8

Further, let the following individuals be put in the watch list of the CommiSSion: ERNESTO R. SALAS, JR., VICTORY N. LEE, AND GREGORIO RIVERA JR., all officers of WEALTH AND INCOME NETWORK, INC.

Finally, the Enforcement and Prosecution Department is hereby directed to conduct an investigation on the business operation of Benne Ssere International, Incorporated and to file the necessary action as warranted by its findings.

Let the Company Registration and Monitoring Department be also furmished with a copy of this Decision for its appropriate action.

SO oRdERED.

Mandaluyong City, 28 October 2010.

PE B. BARIN 1s.4

Chairperson

MA. JuANItae. Cueto Commissioner RAUL J. PALABRICA* Commissior

MANUEL HUBERTO B. GAItE * ELADIQ JALA

Commissioner Commissibner

* on official travel