The founder of the Legacy group of companies thinks he knows who is to blame for the virtual collapse of his business empire: virtually everyone but himself. Evidence is mounting, however, that his business was built on a fatally flawed business model. His attempts to explain exactly why his companies should have remained viable have backfired; in fact, they tend to show why his business was not sustainable at all.

?I have a story to tell. I have the records to show,? Celso de los Angeles told the Inquirer early this week. Later, at the Senate, he blamed the financial woes of his rural banks (13 of which closed down last December) and his pre-need firms (now inadequately capitalized) on ?regulatory harassment, adverse and irresponsible media reports, extortion, and the general economic situation.?

De los Angeles blamed the central bank, Bangko Sentral ng Pilipinas (BSP), for his troubles. He said the brother of a former BSP deputy governor had contracted two loans from his banks in 2003, and that every time payment was due, the BSP would suddenly demand a ?special audit of all [his] banks.?

He blamed the media for undermining public confidence in his banks, with a little help from the BSP. Last August, he told the Inquirer, newspapers started publishing stories ?with propositions like ?anticipating massive withdrawals? ... ?should the banks close.?? These stories cited the BSP as source, he said, ?but the BSP did not deny. They have a duty to come out and say ?No, we are not the source of the false information,?? De los Angeles said. As a result, ?people believed the newspapers and panicked.?

De los Angeles also said unscrupulous businessmen were making ?a career [of] extorting money from me.? He said: ?I was made an ATM [an automated teller machine]. Borrow one million, then special audit. That was what they did every time they needed money. Then finally, they made a proposal: Hire us as consultants and we would make all your problems go away.?

Of course, he also blamed the global financial crisis for Legacy?s present straits.

But listen to how he explains his business model or, rather, how he differentiates himself from the notorious Charles Ponzi. ?Those who are bankers will know that a depositor will go to one teller and after 30 minutes, that money will be given to teller No. 2 and will be used to pay the withdrawal of another depositor,? he said.

?The difference between a Ponzi [scam] and a bank is, a bank has an authority to solicit deposit, while Ponzi did not,? he said.

It is true that money taken in at one bank window may be used to fund a withdrawal in another window, but De los Angeles dishonestly suggests that that?s all a bank does: switch money around. He suggests that Ponzi, the man who gave his name to the ancient rob-Peter-to-pay-Paul, switch-money-around scheme, merely lacked a banking license.

That?s precisely where the trouble lies. Even banks with official licenses can defraud their clients, if all they do is to wait for new deposits to pay for old clients? withdrawals.

De los Angeles says he did no such thing. He had business plans. ?Why do we have credit cards? Legacy Motors? Real estate companies? Because these are the outlets. That in itself, the entire corporation of the Legacy Group, is proof of the business plans that we have.?

Could those business plans have sustained the double-your-money schemes (which in some cases included car giveaways) that made Legacy banks famous? ?Many big banks have double-your-money schemes,? he said. ?The question is: What is the outlet?? The real question, he said, was: ?Can your outlet pay for double-your-money??

Our question exactly. And apparently, in Legacy?s case, the answer is no.

In itself, this already has grave financial consequences. But industry observers warn that the real scheme may lie with the insured deposits in the shuttered Legacy banks: from P4 billion in 2006, the total has ballooned to P14 billion in 132,642 accounts, each one safely at or under the Philippine Deposit Insurance Corp.?s limit of P250,000 per account. Sounds like a neat outlet.