SPOTLIGHT ON LEGISLATION:
Congressman Garrett Driving New SIPC Effort in House; NIAP, Stanford Victims Coalition Working Closely In Support
Dear NIAP Member –
The new year brings with it a new Congress – the 113th. We can only hope that the paralysis that marked the prior Congress will ease and permit bipartisan SIPC legislation to move forward in both the House and Senate. Despite the justifiable and extreme frustration experienced by so many Madoff victims, my feeling is that at no time has SIPC legislation had a better chance to move forward. Let me be clear – it won’t be easy: Madoff victims will need to work coherently – something we’ve thus far struggled to do, work effectively with the Stanford victims as part of the new Investor Protection Alliance, find the economic and staffing needs to manage an effective campaign, and generate national grassroots support at the appropriate time. The existing team of lobby and media professionals will need to remain in place. All this is doable, but we’ll be looking to all of you – both existing members, non-members and their friends to help move this boulder up the hill.
Ron
ALSO IN THIS ISSUE – THE COURTS:
• Madoff and Stanford Victims Anticipate Garrett Timeline to Initiate Major Grassroots Effort
• Judge Rakoff Rules District Court – Not Bankruptcy — Has Final Say on Clawback; Victims Still Await Other Rakoff Decisions
• US Court of Appeals to Hear SIPC Lawsuit Against SEC in Stanford Case
SIPC Legislation – A New Bill for 2013. Chairman Garrett, following the guidelines laid out in his letter to both NIAP and Stanford Victims last October, and having introduced marker legislation at the end of 2012, has begun his efforts to introduce legislation for the new Congress. He has convened meetings with the other key initial sponsors of the new legislation — Peter King, Carolyn McCarthy, Carolyn Maloney, and Jim Himes. Over the last month, the lobby team, Angie Kogutt (SVC), Ron Stein (NIAP), and NIAP’s attorney David Bernfeld participated in planning sessions and discussions with several important Congressional members. Having established an initial core group, Chairman Garrett will now meet with the overarching House Financial Services Committee to work out timelines for outreach to other congressional members, hearings, and legislation guidepoints. He will also begin to reach out to the Senate seeking to create similar legislation there. The Stanford victims are assembling a list of key members representing the interest of their coalition members to support the legislation.
The newly-minted Investor Protection Alliance has been urged to encourage victims of both frauds to work in a positive and coherent fashion, taking guidance from Congressman Garrett’s office and the lobby team. We were emphatically informed when in DC that efforts to criticize or shame Congressional members are highly counterproductive, and that care and tact in our grassroots efforts maximizes our chances of success. Accordingly, we are asking all Madoff and Stanford customers to coordinate their efforts with this group as best they can. (If you haven’t done so, we encourage all readers to go to the website of the Investor Protection Alliance — www.fixsipcnow.com – for more information.)
While we wait for details and timeframes to be laid out by Chairman Garrett, the Capital Markets Subcommittee staff and the House Financial Services Committee, we can anticipate the following to occur in the coming months roughly in this order:
Grassroots. Once again we will endeavor to develop a well-planned grassroots effort over the coming months. Working with the Stanford Victims Coalition side of the Investor Protection Alliance, we hope to identify and engage state and/or regional captains to help organize the effort. We will also be seeking to identify victims with strong personal or business connections to specific Congressmen not yet signed on as sponsors. Further, we will ask those who have strong contacts with the media or a willingness to speak with the media to engage. However, moving forward with grassroots at this moment is premature. Should we need added grassroots support to move this up as a priority in the broader Financial Services Committee in the coming weeks, we will quickly alert membership and reach out to you for your help. For now, however, let’s keep our powder dry. I suspect that there will be plenty to do in the coming months.
Other Legislation. As indicated in the last Update, tax legislation remains a very distant reach at this stage. Still, we will continue to test the waters to see if and when this might be seen as a viable undertaking and pursue it at that time.
We are disappointed that protection at this time for Indirect Investors damaged by these two frauds still has not enjoyed strong support in the Subcommittee or full Committee, and is seen there instead as something likely to weaken, rather than strengthen the next introduction of legislation by Congressman Garrett. We will continue to try to build support, however, and take advantage of opportunities as they may arise.
H.R. 827. Congressmen Cassidy and Deutch recently reintroduced a bill intended to offer Stanford Victims relief. This bill, previously introduced in the 112th Congress as H.R. 4002, is not expected to move, nor did the original legislation gain much Stanford victims’ support. The introduction does, however, make both Congressmen natural allies in this effort to provide SIPC protection for victims of both frauds. We see this as a positive for down the road.
The Courts: Rakoff, Lifland, the SEC
Madoff victims continue to wait anxiously for further information from both the Rakoff and Lifland courts. Since our last legal update, however, Judge Rakoff has rendered a decision on the various Stern vs. Marshall issues which relate to the limitations on the ability of the Bankruptcy Court to finally decide the claw back cases brought by the Trustee against Madoff victims. Specifically, does the Bankruptcy Court (Lifland, in this case) have the power to make final decisions on the Trustee’s clawback actions and can the Bankruptcy Court even make recommendations to the District Court? Judge Rakoff has decided, in fact, that the District Court, not the Bankruptcy Court has the final say. However, he has also determined that the Bankruptcy Court can hold hearings, propose findings, and make recommendations to the District Court, which the District Court may, or may not choose to follow. Hopefully this will amount to a win for clawback victims, but only time will tell.
As previously reported, Judge Rakoff still has a number of crucial motions pending before him awaiting decisions. These motions seek dismissal in whole or in part of the remaining claims not yet dismissed by the Court. There is no fixed or even projected time table for the decisions. We will keep you informed as decisions are rendered.
The Trustee’s appeal to the Second Circuit Court of Appeals from Judge Rakoff’s decision dismissing all six year claims against innocent Madoff claw back defendants is proceeding but at a relatively slow pace. No briefs have as yet been served or filed. Once briefs are filed, the Court will have to schedule and hear arguments and ultimately render a decision. If history is a guide, no decision is likely for many months following oral argument and accordingly, it is unlikely that a decision will actually be issued before year end.
Regarding the appeal of the lawsuits by the Madoff victims against the SEC, we still await the US Appellate Court’s next steps. Meanwhile, the US Supreme Court has agreed to take on the Stanford-related case involving the rights of Stanford victims to file a class action suit against “aiders and abettors” of those connected to the Stanford fraud (securities investors are usually precluded from filing class action suits). In addition, the US Court of Appeals of the Sixth Circuit is taking up the appeal by SIPC of the District Court’s previous ruling that the SEC does have the authority to demand SIPC undertake an insolvency as a SIPC proceeding. SIPC is challenging that authority in this appeal where, in this case, the SEC has demanded that SIPC make the Stanford insolvency a SIPC action, affording Stanford victims SIPC protection. We’ll keep you posted on this important case once we know more.
Next Steps for Madoff Investor Advocates
What you can do now. In the coming weeks we expect a clearer timeframe and strategic details to emerge, and we will forward these as they do. In the interim, in preparation for that effort, Madoff and Stanford victims can identify non-victim family members and friends who may be able to write letters to their not-as-yet sponsoring Congressman at the appropriate time, while thanking those who have signed on. In addition, those with strong connections to a Congressional member – “grasstops” – should contact us so an approach to these members can be well coordinated. For the time being, we discourage direct meetings with Congressional members or staff by victims until the appropriate time, and preferably only after conversation and proper preparation by NIAP and the Investor Protection Alliance, which we will be happy to provide. The same holds true for contacts with the media — please let us know if you have strong contacts with any major newspapers or other media.
Frankly, we remain confident that this legislation has a legitimate chance of passage — neither the lobby team nor NIAP would be willing to invest this enormous amount of energy if we did not think we had a reasonable prospect of extending relief to thousands of Madoff victims currently stripped of such protection. So, we ask you to stay positive, be prepared to help with the grassroots effort, and please help support the organization in any way you can so that we can continue our critical mission.
Once again, then, we ask that you consider how you might be able to assist NIAP (and the Investor Protection Alliance) financially – through you and your connections to other possible funders, and your volunteer energy. In addition, we are also encouraging victims to bring their attorneys up to speed regarding the current status of the legislative effort and ask them, in turn, to support this effort as well by urging their clients to do the same. The prospect of success is real and could dramatically help their clients. We are also available to discuss the situation directly with them.
Finally, on behalf of the Investor Protection Alliance, NIAP, our extraordinary lobby team of Jim Smith, Andy Barbour, and Mitch Delk, our media professionals, and outstanding legal support, we extend our best wishes to all those who have suffered this debacle, and our thanks to all those who have contributed to righting this wrong and those willing to partner with us in this fight going forward.
Thanks so much,
Ron Stein, CFP
President
CONTACT INFORMATION:
Please commit to assist us in whatever way you can!:
Email: djmionis@investoraction.org
rstein@investoraction.org
Call us at: 631-425-0770
www.investoraction.org
www.fixsipcnow.com
