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NIAP Update - December 21st, 2011

Third Anniversary Update

Part One: Washington DC

Year End Washington DC Headlines:

Congressmen Garrett prepares for upcoming hearings on HR757, now tentatively expected in January

GAO, in response to requests from Garrett and other Congressional members, prepares to issue preliminary info on actions of SEC, SIPC, and Trustee

SEC continues to weather massive pressure from Congress on multiple fronts, and recent NY District Court judge overturns SEC settlement with Citigroup

Message from the NIAP President:

We recently passed yet another anniversary, the third, and this is a good time to take stock of where Madoff investors stand. There’s simply too much to include in a single year-end update, so this will be sent in three parts. Thanks in advance for your patience.

It has been another difficult year for many Madoff victims, in both Congress and the Courts. Despite that, the evidence tells us that the pendulum, particularly in Washington, is swinging in our direction. We – and the experts behind us – remain hopeful that Madoff victims will see significant milestones reached in the coming months, as important positive developments continue in DC, and in the press. Given the difficulties encountered in the courts for many victims regarding Net Equity and “Customer” definitions, not to mention the painfully slow pace of a legal system as legal bills mount, many consider Congress to be the Madoff victims’ best hope. We strongly agree.

Washington DC
Let’s face it – after three years, aside from some early Dodd-Frank measures, Congress has not retooled investor protections in a meaningful way, let alone provide relief for Madoff investors. Victims are understandably frustrated. The general dysfunction in Washington, combined with major domestic and European financial issues, has made this a more difficult road than we all had hoped.

There is Good News. The fact remains that an effective battle is being waged on a number of fronts, spearheaded largely by Congressman Garrett, but backed by Carolyn McCarthy, Peter King, and Gary Ackerman, among others. We believe, and the numerous experts working with us believe, that we have a good chance of achieving a resolution that benefits victims. The upshot: while the attorneys continue to wage their battles in court, this legislative effort has a decent chance of providing great relief to victims, and one which we can be, should be, and must be fighting for.

The Sharks Are Circling. As 2011 ends, one can’t help but notice the financial headlines focused on MF Global and Stanford, a tandem of broker-dealer disasters that combined with Madoff rips open the wounds of the regulatory failures of SIPC, FINRA, SEC and other entities. With the SEC now suing SIPC over Stanford, with over $1.2 billion still allegedly missing from the customer accounts at MF Global and former CEO Jon Corzine twice paraded in front of Congress, our elected representatives are becoming increasingly fed up. Blood is in the water, and the upcoming Garrett hearings stand to bring renewed energy for change.

2011 has moved us closer to success in DC. As you probably know, Congressman Garrett, the powerful Chairman of the House Subcommittee on Capital Markets, has vigorously embraced our efforts, and the list of undertakings [link] spearheaded by Garrett and the Subcommittee on behalf of Madoff victims and investors is impressive. Here are but a few of the key positive efforts begun this year that stand to benefit Madoff victims:

HR757 (“The Equitable Treatment of Investors Act”), introduced by Garrett and Carolyn McCarthy (D-NY) is moving closer to hearings, expected now in January. This legislation demands that SIPC pay claimants based on the reasonable expectations of final account statements and eliminates the clawback of innocent investors. (It does nothing to impede the Trustee’s pursuit of those deemed complicit or investment professionals who helped escalate the fraud.) Those hearings will represent a critical milestone in our efforts, as it will mark the first time that a fiercely supportive Congressional committee chairman will be commandeering a hearing targeted to improving the plight of Madoff victims. In the meantime, we can expect Congressman Garrett to step up his advocacy of the legislation around the time of the hearings, as this is when we will kick off our best grassroots and media efforts.

Congressmen Garrett, Peter King and others have asked the Congressional watchdog – the GAO (the General Accountability Office) – to investigate the SEC, SIPC, and the Trustee, regarding a host of important issues. Preliminary findings are due in the coming weeks which should provide substantial ammunition for additional action, and may provide information central to the planned hearings on the HR757 legislation.

Over the year our efforts have also been acutely focused on the failures of the SEC, and the screws have continued to be turned on that agency from by multiple key congressional members. Importantly, as evidenced by Chairman Garrett’s powerful letter to SEC Chairman Shapiro and the recent disclosure of lack of any firings by the SEC over the Madoff fiasco, the pressures continue to mount. Adding insult to injury, District Court Judge Jed Rakoff has chastised the SEC and overturned its settlement with Citigroup regarding its involvement with subprime mortgages. As a byproduct of the SEC Inspector General’s investigation and report [link] of former Chief Counsel David Becker, the SEC will be going through a re-vote on its position regarding Madoff and SIPC payments. The perspectives of Garrett’s Subcommittee are likely to be strongly taken into consideration given its oversight of the agency.

General Timeline. In addition, we are all still waiting for the SIPC Modernization Task Force Report. It was due months ago, and is supposedly completed and awaiting SIPC’s approval. We are looking to pick up action on the tax remedy legislation as well (HR1635), and it is our hope that the sponsors – Pascrell & Boustany in the House– will refocus on these efforts early in 2012, once Congress can move past the tax gridlock. Ackerman’s legislation – HR1987 – which also seeks SIPC relief but includes relief for classes of indirects, is not expected to be moved (although Ackerman could be given some role in the final markup of HR757). Meanwhile, NIAP sees the passage of HR757 as a stepping stone to more comprehensive SIPC overhauls, including protections for pension fund and other indirect investors, increasing SIPC coverage, and other needed improvements to our protection system. It is our hope that once hearings are held in the next two months, HR757 will go quickly through a mark-up where necessary modifications can be made, then move to passage in the House.

We Need You. The coming few months will be crucial. We are working with the Subcommittee to make sure the hearings on HR757 and the GAO findings not only take place, but are effective and ultimately force the SEC and SIPC to put the needs of investors and fraud victims first. NIAP’s connections with Garrett and other key Congressional members are extensive and productive. Even with scant resources, we have – with your help — made tremendous inroads. We have been incredibly fortunate to have several incredibly talented legislative and media relations consultants, some working on a pro-bono or low-cost basis on our – your — behalf in DC. We believe prospects of success are very real if we can obtain the necessary resources to sustain this effort.

That said, NIAP and all of those who share in these goals are being looked to by Congressman Garrett, McCarthy, Peter King, and Bill Pascrell and others to help move these efforts forward. Simply put – a major aspect of the success of this effort will come not from NIAP staff and consultants… but from all of us — all of you.

What you can do. We have heard from many of you over the months that you are anxious to get to work on this, and we are as well. The grassroots effort required around the HR757 hearings will be sizeable. I’m excited that our grassroots Investor Action site is now ready, but we will need your using it to make it effective. We are looking to add to our pool of volunteers and others comfortable with reaching out to fellow victims, family members and friends to assist with the implementation of the grassroots plan. Letters, phone calls, media appearances will be necessary tools for success. A similar plan is under consideration as the SEC as the SEC evaluates a re-vote.

Ready, Set…. With Congress now the victims’ best hope for SIPC relief for all BLMIS investors and for prevention of clawback of innocent investor, your vigorous grassroots support when these hearings get underway will be critical. I feel compelled to finish this update with the following appeal to those who have been so active in this effort from the get-go those who have participated since. This next push will be our best, and last hope. The effort will only benefit from victims’ united and focused effort. NIAP’s small staff can’t do this alone. But if all victims and non-victim investors who share in these goals can see their way clear to work together with us and those working for us in DC, we stand our greatest chances of success. Let’s make this an army for change.

Let me also be clear on this: our attorneys reiterated that there is no danger whatsoever of victims assisting NIAP or participating in a grassroots effort. Earlier concerns voiced by some attorneys before lawsuits were commenced by the Trustee no longer apply. If you know of any attorney who has recently expressed concern in this regard, please have them contact us immediately.

Sustaining NIAP. We all want to see this effort through, but NIAP’s scant funds are weakening our chances of success. It’s not easy to ask for money. Personally, I find it very disagreeable. The fact is that NIAP and its supporters have invested tens of thousands of hours on our collective behalf generally without compensation. While we’ve moved so far, we need the economic resources to continue to fight, even as we’re keenly sensitive to the economic circumstances of many Madoff victims. Accordingly, we ask those with the means to do so, particularly at this season, to assist us financially as they can. For those without the resources, we ask you to instead step up and help with volunteer efforts. We will be reaching out to all our members for financial help via a separate letter.

Click here for more information, and once again, please check out our new Investor Action Center which will be central to our upcoming grassroots letter writing campaign. Working together, we stand to make 2012 a successful one for thousands of Madoff victims.

On behalf of NIAP Staff, Advisors and Volunteers, here’s wishing you and yours the best for the Holidays and New Year.

Sincerely and in Peace,

Ron Stein, CFP
President

Stay tuned for Part Two of this Anniversary Update: the Courts and Media!

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