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NIAP Update - January 3rd, 2011

As we begin the New Year, I wanted to bring people up to date on the legislative and related Madoff universe, as we see it. Some really positive events are happening that you should know about…

LEGISLATIVE:
SIPC: With the new Congress just sworn in yesterday, we are awaiting the seating and committee assignments in the House and Senate. The changeover in the House from Dem to Rep leadership is seen to be potentially very helpful on the SIPC side, particularly given the credibility of Congressman Scott Garrett who will be taking over the chairmanship of the Subcommittee on Capital Markets. As we’ve communicated before, Garrett presented HR6531 as a “marker” piece of legislation, which means it will be resubmitted early in this new session. The lobbyists at Smith Free Group feel the bill will move out of the Committee, most likely pending an additional hearing to hopefully be held within the next six weeks. It is expected that, unlike the prior September hearing, NIAP will play a stronger role in the selection of panelists best able to represent our perspectives. The new legislation will likely contain very similar language to the marker bill, which addresses net equity, claw back, and the Trustee appointment process, and NIAP will be working up modest language modifications for the legislation to be reintroduced by Garrett. Garrett had previously indicated that discussions about relief for indirects might be taken up later on with other modernization issues. (It remains important for indirect investors to continue to lobby Perlmutter and Garrett).

The grassroots campaign for passing this legislation will be essential to its passage, and NIAP is currently preparing for this even before the bill is submitted. We are drafting the sample letters and will let you know when our next letter writing campaign will begin. We will need to call upon your energy and letter writing within the next few weeks and hope you will let us know if you can help champion some of these efforts. At NIAP’s urging, Cong. Garrett has also forwarded a follow-up letter to SIPC demanding additional data and information, we have not been notified of any response as of this writing, but will keep you posted.

Tax: We were disappointed that the tax bill did not reach a vote last year as we’d been assured it would. It is expected, however, that the Senate will seek to take up discussion regarding the Schumer S3166 in short order, and it may be incorporated into an omnibus tax package in the first quarter. Again, we await further committee assignments and seatings to get a better sense of where things stand. Andy Lerman continues to be extensively engaged with Schumer and Pascrell’s office, as well as the Joint Committee on Taxation.

NIAP’s Letters to SIPC:
NIAP meanwhile, forwarded two letters to SIPC, seeking to take advantage of SIPC commitment to transparency, made by SIPC Chairman Orlan Johnson at the 9/23 hearings. Our November letter sought an explanation as to why investors in BLMIS were not credited with interest in the Chase 703 account into which deposits were made and withdrawn by Madoff investors, and which received interest over the years, were never credited with their percentage to their net equity. The SIPC response was one paragraph in length which simply stated that it had no application to this matter.

An additional letter seeking explanation of 1) why innocent investors were being pursued when assets sufficient to cover allowable claims had been received, and 2) how recovery of customer property was to be distributed, was met with a longer, but similarly inadequate explanation. Both of these letters and responses – clearly contrary to SIPC’s pronouncement of transparency — are in the hands of Congressman Garrett.

PUBLIC RELATIONS:
Given the enormous amount of press received regarding the claw backs and settlements announced by the Trustee, it may have seemed to many that relatively little from our point of view got across. The good news is that numerous mentions were made of NIAP and investors, and relationships with press members continue to grow and numerous interviews allowed Madoff victims to get key points across. Several stories were placed, notably Newsweek, NPR, Palm Beach Post, Fox 5 New York, CBS4 (Miami) and CBS West Palm Beach began to look at our side of the discussion. As passage of SIPC and tax-related legislation are NIAP’s short term goals, the primary PR focus will continue to be DC-focused, emphasizing the need for SIPC and tax legislation and supportive statements regarding the Garrett legislation. This will be critical in pressing support for the new Garrett bill and associated hearings. Our PR firm is closely engaged with the organization to continue to ramp up these efforts now that the elections are over and Congress has returned to work

A general media campaign, seeking to leverage the recent flurry of Trustee actions is now underway. It has always been enormously difficult and expensive to get our message across to the general media. We feel, however, that the media tide is turning, and we’re hoping to make greater inroads here. That said, even though it may be frustrating from the victims’ perspective, the biggest bang for the PR buck if legislation is to be passed should remain DC-oriented.

Additionally, one issue that has been discussed over the last year and a half is the taking of a full page ad in a major publication, i.e. Washington Post, NY Times, Wall Street Journal, with a letter explaining the shortcomings of SIPC and urging support for change. According to the PR firms involved, this might be a useful approach (although is considered as the approach of last resort), but would need to be coordinated with an integrated media campaign to maximize its effectiveness. Preliminary estimates are being worked up by the PR firms. It will be expensive.

NET EQUITY APPEAL:
The schedule for oral arguments has not yet been finalized although attorneys have advised us they will likely take place late February or March. We will have a better sense within the next couple of weeks regarding the solidifying of the schedule

While all claw back actions were filed with the courts, investor victims are now awaiting service by mail – physical letters that are received. We also recognize the need for transparency regarding the terms of settlements particularly in light of the confidentiality of those settlements, which remains a troubling issue.

SEC/IRS ACTIONS:
NIAP processed over 600 tort claims, and we now await the 6 months’ statutory response time by the agencies in June 2011. Other suits are already in play. We are also continuing to search for law firms to take the lead on the lawsuits. We are also pursuing actions against other entities

WHAT’S NEXT:
All told, much will be happening over the next few months. We continue to wage our fight on behalf of not just Madoff victims, but all investors who would suffer the tremendous weakening of our investor protection system through the arbitrary, dangerous and precedent-setting actions of SIPC and the SIPC-selected Trustee. We need your help:

  • we need you to engage in an aggressive letter-writing campaign for both the upcoming SIPC and tax legislation,
  • we need victims, particularly those going through the further violation of claw back to step forward, contact us, and be willing to tell their stories to the media, and
  • we need folks to take greater leadership roles in reaching out to victims to ask them to step forward to help.
  • In the coming weeks, we’ll keep everyone abreast of both the legislative and PR efforts.

    I wish everyone a happy, healthy, and prosperous 2011. Let it be far less onerous than the last.

    Ron Stein
    Network for Investor Action and Protection

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