RIYADH, 15 February 2004 — Amid a rush among overseas Filipinos to jump into the First Quadrant bandwagon, some expatriates in the Kingdom urged caution, warning that uncertainties over the legality of the new multi-level marketing scheme have yet to be clarified.

“I urge caution among fellow OFWs. They should take into consideration similar multi-level marketing (MLM) firms in the past which stopped operations,” community leader Dr. Mohd. Ali Carlito L. Astillero said.

Astillero, laboratory services director at the Al-Mishari Hospital and a leader of the civic group Order of the Knights of Rizal (OKOR), noted that tens of thousands of OFWs in the Kingdom have not recovered their hard-earned money they have put into similar money-making schemes in the past.

Filipino banker James G. Oliver, an assistant vice president at the Rizal Commercial Banking Corp. and manager for Saudi Arabia, said that he would only trust financial matters transacted through a bank.

In a letter published in Arab News on Feb. 9, Ian K. Siaotong from Dammam also cautioned fellow OFWs not to be easily swayed by something that has the appearance of another pyramid scam.

But First Quadrant promoters say FQPI is a legitimate MLM scheme, which has already turned thousands of Filipinos at home into millionaires in just two years.

How to Join and Earn

Promoters of the popular scheme said that for a joining fee of SR650 or the equivalent of P8,880, a member could enjoy at least five benefits.

These include a 3,000-peso shopping money for products sold by establishments accredited with FPQI; 50 percent lifetime discounts on the products sold by the same establishments; free accident insurance with a face value of P50,000 (amount is doubled if the accident happens abroad) from Prudential Life; and brochures or literature kit about FQPI.

Members also have four ways to earn: direct selling, direct referral, referral pairing, or rebate.

“If you’re a First Quadrant member, since you’re entitled to a discount, you could buy leather shoes for, say, P1,500 a pair and sell it for P2,000,” said one promoter.

One may also opt to get a sub-agent, splitting the profit between themselves.

In direct referral, the FQ promoter explained: “If I referred two who bought products, I have P2,000 automatically.”

In referral pairing, “since I have left and right, it means a pair. I have additional P1,500 for that,” he said.

“If I refer buyers of products from the member-establishments, I would be entitled to a cash amount equivalent to 5 percent of the purchase price. The money comes from FQPI,” he added.

Entrepreneur Dan Paredes, who manages a restaurant in Dammam, is among those who have joined the FQ bandwagon early and he says he has no regrets.

“I and my family have been here in the Kingdom for many, many years and the severance money I received from my previous employer was invested in the restaurant that earns us a living,” he told Arab News. “But aside from the restaurant and little else beside, the severance pay is gone. But in my two months with FQPI, I and members of my family have made about P100,000,” he said.

Doubts Linger

Not all members are happy, however.

Eduardo T. Salon, a system technician at the Qassim branch of a local bank, has shown his capability of recruiting new members, which could enable him to earn big bucks.

But questions over the legality of First Quadrant’s recruitment scheme has led him to doubt what he is doing.

“I have solicited and convinced 15 OFWs to join. Fifteen other OFWs have been convinced by colleagues to join FQPI,” Salon told Arab News. “I want to send now the amount and the corresponding documents to Manila but I am not sure about the legality of First Quadrant.”

“While I need to earn extra money for my family, I won’t do it at the expense of thousands upon thousands of compatriots who might lose their money if and when the operations of FQPI is proven to be illegal,” he said.

Not Just About Profit

But First Quadrant is not all about profit, but also about patriotism, say its promoters. They argue that since FQPI sells only Philippine-made products, those who join it help shore up the national economy not only by buying their own products but also promoting them abroad.

FQPI is registered with the Securities and Exchange Commission (SEC) of the Philippines and members’ earnings are subject to 10 percent withholding tax as mandated by Revenue Regulation No. 14-2002.

Organized on Jan. 8, 2002, it has its main offices in Manila, Cebu and Davao, plus over 17 authorized business centers all over the Philippines.

Its officers include a close relative of Housing Secretary Mike Defensor, President Arroyo’s favorite Cabinet member.

During its second anniversary celebration last month, FQPI paraded a long list of prominent people, including Secretary Defensor and Senator Noli de Castro, President Arroyo’s running mate in the May 10 presidential race.

On its first year of operations, according to the First Quadrant’s website, the company earned the 2002 National Consumers Choice award for Top Multi-Level Marketing Company of the Year.

The backbone of FQPI’s manufacturing arm, D. Tactacan Shoe Manufacturing, was named among the Who’s Who in the Philippines/National Consumer Affairs Foundation in 2002 as the Best Shoe Manufacturer.

Who to Believe

A check with the SEC shows a long list of companies blacklisted or penalized for engaging in pyramiding or similar illegal practices, but FQPI is not one of these.

Among those that have been declared illegal by the SEC was Power Homes Unlimited, which had been a hit among OFWs three years ago. The case is still being contested in the courts at home.

The Philippine Department of Trade and Industry (DTI), however, has included the First Quadrant in its watchlist, along with Power Homes and 20 other companies for alleged pyramiding activities.

In an article posted early last year in the Philippine government website www.gov.ph, then Trade and Industry Secretary Mar Roxas was quoted as urging the public “to steer clear of business entities that employ Chain Distribution Plans or Pyramid Sales Schemes.”

“If it’s too good to be true, don’t buy into it,” Roxas was quoted as saying.

He warned that promoters of such scams prey on people’s innate greed by promising extraordinarily high profits within a short period of time.

Officials have warned that being registered with the SEC is no guarantee that a company is operating legally.

They noted that many companies have been blacklisted precisely because while they violated the law against pyramiding.

As defined under Article 53 of the Consumer Act of the Philippines (R.A. 7394), pyramiding happens when a person is persuaded to join a scheme by paying a fee for which the person is given the “right” to recruit others into the scheme and derive commission or profit primarily from their recruitment.