SIPC’s Brokerage Account ‘Insurance’ Scam: Take It from a Comptroller of the Currency
I’ve invited James Smith, former Comptroller of the Currency and former Deputy Under-Secretary of the U.S. Treasury to discuss the Insurance Scam being run by SIPC. As I’ve discussed in prior columns posted at www.kotlikoff.net, this scam puts all brokerage account holders at extreme risk. Indeed, I strongly recommend every brokerage account holder close her account immediately pending passage of H.R. 3482 and S. 1725. I also strongly recommend that all SIPC-insured brokerage firms immediately disclose the huge risk to their clients of SIPC “insurance,” specifically that if they withdraw and spend enough of their account balances, they can a) lose any claim to SIPC insurance coverage on their remaining balance and b) also be sued for every penny they legitimately withdrew over the six years proceeding the discovery of fraud in their brokerage account. To avoid its insurance obligation and sue legitimate brokerage account investors, SIPC need only declare the fraud a Ponzi Scheme, which is easily done and which, as the NY Times, recently reported, are a dime a dozen.
Take It From a Comptroller of the Currency:
Congress Needs to Act Now to Protect Investors from SIPC “Insurance”
by James E. Smith
On September 25, 2000, eight years before the scams of Bernard Madoff and R. Allen Stanford were uncovered, Gretchen Morgenson (financial journalist for the New York Times) wrote a perceptive column of exacting detail describing the Securities Investor Protection Corporation’s pinched and adversarial practices aimed at favoring the SIPC Fund over protecting innocent customers of failed broker dealers. That column was “dead on” concerning SIPC’s regrettable culture, in which litigation rather than protection is too often the order of the day.
Four months after five former Bernard Madoff aides were convicted of helping conceal his massive Ponzi scheme, their lawyers and U.S. prosecutors are still fighting over the trial’s key question: What did they know, and when did they know it? Prosecutors are seeking more than $150 billion in criminal forfeiture from the longtime employees of Bernard L. Madoff Investment Securities: back-office director Daniel Bonventre, portfolio managers Annette Bongiorno and Joann Crupi and computer programmers Jerome O’Hara and George Perez. At a court hearing on Tuesday in New York federal court, the government argued the defendants are responsible for every dollar of investor money that came to the firm after they started working there, because they should have known the money could be lost as a result of the scheme. More on Reuters [...]
Lawyers will have access to training on identifying elderly clients who have fallen prey to financial scams under a continuing education program introduced Tuesday by the American Bar Association and two investor protection groups. The program will teach lawyers how to spot signs of cognitive impairment, identify possible cases of investment exploitation and report these suspected instances to the appropriate authorities. Sponsored by the ABA along with the Investor Protection Trust and the Investor Protection Institute, two nonprofit organizations devoted to investor education and protection, the new program is called the Elder Investment Fraud and Financial Exploitation Prevention Program Legal. More on Reuters [...]
Investors who managed to withdraw funds in recent years from the Ross Asset Management group of companies, found to be a Ponzi scheme, have been put on notice that the liquidators may try to claw back the cash. PwC’s John Fisk and David Bridgman said they have a valid claim on any funds withdrawn from the investment scheme since December 2010 under the Companies Act on the basis investors would receive more than their entitlement under a liquidation. The liquidators also believe they can make a claim on anyone who drew funds within the past six years under the Property Law Act on the basis they were part of David Ross’s fraud. The managers weren’t able to cut deals with three investors who withdrew some $3.8 million in the lead-up to Ross Asset Management’s collapse in 2012, and expect to “imminently” file proceedings in the High Court, they said in their latest report. More in the New Zealand Herald [...]
A convicted con artist formerly of Pittsburgh with a propensity for writing frivolous civil suits is believed to have filed an apparently fake motion in Manhattan federal court to dismiss charges against Bernie Madoff, the jailed and infamous Ponzi scheme mastermind. The bizarre, rambling legal document purportedly filed by “Frederick Banks, The Litigator Legal Assistant,” includes numerous misspellings and handwritten scrawl that alleges the “CIA Office of Science and Technology used bio-electric sensors and subcranial voice to skull technology to influence the court.” U.S. Circuit Judge Denny Chin, who as a U.S. District judge sentenced Madoff to 150 years in prison in 2009, ruled the “defendant’s argument is meritless” in an order made public Wednesday alongside the motion mailed to the court. More on Bloomberg [...]
Economist Laurence Kotlikoff is calling on all Americans to close their brokerage accounts immediately because of the risk of a total wipeout — a risk he says stems from a massive Wall Street insurance scam perpetrated by the Securities Investor Protection Corp. (SIPC). “SIPC, a brokerage ‘insurance’ arm of Wall Street, has been and remains today engaged in insurance fraud,” Kotlikoff told ThinkAdvisor in a telephone interview. “SIPC claims to insure brokerage accounts. Nothing could be farther from the truth. What it’s really doing is placing all brokerage account holders at extreme risk.” More on ThinkAdvisor [...]
The federal judge who oversaw the trial of five associates of imprisoned swindler Bernard Madoff on Thursday refused to overturn their convictions for helping their former boss run one of the world’s biggest Ponzi schemes. U.S. District Judge Laura Taylor Swain found sufficient evidence for jurors on March 24 to have convicted back-office director Daniel Bonventre, portfolio managers Annette Bongiorno and Joann Crupi and computer programmers Jerome O’Hara and George Perez after the five-month trial. More on Reuters [...]
Bernard Madoff’s massive Ponzi scheme relied on reams of fake trading documents to fool regulators for decades. Now he may be the victim of a forgery himself, after a U.S. judge on Wednesday denied a bizarre motion supposedly filed by Madoff that claimed the U.S. intelligence agencies used “bio-electric sensors” to influence the case against him. The letter, which was made public alongside the judge’s order, appeared to be a fake. Madoff’s signature did not match his typical one, and the letter contained numerous typing mistakes and a handwritten rant. More on Reuters [...]
Victims of Allen Stanford’s $7 billion Ponzi scheme cannot seek compensation from the federally-mandated Securities Investor Protection Corporation, the D.C. Circuit ruled. In an unprecedented move, the Securities & Exchange Commission sued the SIPC in December 2011 in D.C. federal court after it refused to force liquidation proceedings in Dallas federal court that would result in victims being compensated. The SIPC is a self-regulating organization comprised of US-registered broker dealers that was mandated by Congress. It administers a fund that compensates investors in case a member fails. More on Courthouse News Service [...]
Economist Laurence Kotlikoff is calling on all Americans to close their brokerage accounts immediately because of the risk of a total wipeout — a risk he says stems from a massive Wall Street insurance scam perpetrated by the Securities Investor Protection Corp. (SIPC). “SIPC, a brokerage ‘insurance’ arm of Wall Street, has been and remains today engaged in insurance fraud,” Kotlikoff told ThinkAdvisor in a telephone interview. “SIPC claims to insure brokerage accounts. Nothing could be farther from the truth. What it’s really doing is placing all brokerage account holders at extreme risk.” More on Think Advisor [...]