Headlines:
• Garrett/Maloney’s HR3482 – Restoring Main Street Investor Protection & Confidence Act – clears 40 co-sponsors in House but well short of goal of 50% sponsorship on Financial Services Committee
• Stanford victims “celebrate” 5th Anniversary with strong round of Congressional DC meetings in support of HR3482 and S1725
• Trustee moving forward on clawback actions while arguments held on Trustee’s appeal of 2 year clawback limitation in Appeals Court
• Special Master Richard Breeden extends claim filing deadline until April 30th for “Madoff Victim Fund” claimaints
Dear NIAP Member & Madoff Investor,
The work behind the scenes in support of legislation continues vigorously despite intense resistance from SIPC and several Wall Street firms as the focus turns to the House Financial Committee for the grassroots effort. Meanwhile, the Trustee is now pressing forward with clawback actions, which is making the need for legislative relief all the more urgent, and in many cases desperate for many Madoff victims.
On a positive note, the Stanford Victims Coalition, led by Director Angie Kogutt and a group of Stanford victims had a successful round of meetings in DC at their 5th anniversary gathering. Coming off a successful Supreme Court ruling that gives them the ability to file class action suits, their focus in DC was on keeping the focus on the plight of the investor victim and the passage of H.R.3482 and S.1725. The meetings were successful, furthering support for the legislation in both the House and Senate. The Stanford victims are pulling their weight.
Financial Services Committee – Meeting the Threshold.
The good news, remarkably, we have now gained sponsorship of 43 House members – nearly 10% of the entire House. The bad news: we are well short of a critical threshold of 50% of the Financial Services Committee support. Subcommittee Chairman Scott Garrett and Ranking Member Carolyn Maloney are seeking to gain support of approximately half of the Financial Services Committee before bringing the legislation to a vote and markup. As of now, we only have 17 of the over 60 FSC members on board – the majority of them gained by the Stanford victims, but we need to gain support of another 15. The bill will likely pass the Senate but only if it first clears the House, and Congressman Garrett feels that strong passage out of FSC maximizes prospects for passage in the House and Senate.
Madoff victims falling short. Let me be brutally honest: this legislation can pass, but Madoff victims must step up far more than they’re currently doing. WE NEED MADOFF VICTIMS TO PULL THEIR WEIGHT IN GETTING SPONSORSHIP. Several very hard working victim volunteers are working their tails off to get support while the vast majority of Madoff victims stand by. We can’t expect the Stanford Victims Coalition to get all the needed sponsorships. (They’ve already gotten the majority of them thus far.) Without your support, NIAP lacks the financial resources and capacity to pick up the rest of the slack.
If you’re not helping, you are effectively part of the problem!
Inaction is only helping SIPC and the Trustee. If you’re reading this update, and have neither written a letter nor made a call in the last couple of months, you’re unwittingly hurting yourself and other victims. Not only are you effectively insuring your continuing legal expenses far down the road, a weak grassroots effort emboldens SIPC and their supporters to battle us in DC, and gives the Trustee an unimpeded path. The passage of this legislation, which is truly within reach, puts that to a stop.
Please get started now. If you’re a clawback victim, the Trustee is moving forward, and as one volunteer graphically put it, the “carnage is about to begin.” It’s the wrong time to throw your hands up, particularly when passage is so within reach.
So what can you do now? The first step is to be willing to write and call your Congressional member if they have not signed on, and/or find friends or family members, whether victims or not, who are represented by Financial Services Committee members not yet signed on by using this list. Contact us with your zipcode and we will get you the information you need to both write and call your representative. (Following up with a phone call is very helpful and important and will be indicated on the Congressional member’s website). We’ve also made it easy to send in a letter online. Just visit www.fixsipcnow.org, enter your zip code, and in just a few simple steps you can submit your letter on line. (But don’t forget to plan a follow up phone call.)
If you can do more by volunteering to help others as well, so much the better.
If you’d feel comfortable talking to some other volunteers who are engaged, we’re happy to put you in touch with them. And we’ll be holding conference call meetings to share thoughts and experiences.
The bottom line: We need leaders and doers. Only 15 more co-sponsors on the Financial Services Committee almost assures us of a strong vote on the House Floor.
In the courts, meanwhile, the Stanford Victims’ claimed success with the Supreme Court regarding their ability to file a class action lawsuit against firms which referred them to or were associated with Stanford Financial Group, as the ruling provides possible recourse for some Stanford victims. We have been asked if this could provide any benefit for Madoff victims in a similar fashion, but it is generally felt that this is unlikely, although we and others will continue to review the prospects.
In New York, in the 2nd Circuit Appellate Court, arguments were heard in the Trustee’s appeal of Judge Rakoff’s earlier ruling on the limiting of clawback to 2 years. The Trustee continues to seek the 6 year period under NY State law. Our reading of the testimony left us with a sense that there is a good chance that the 2 year period will be upheld. That said, even the limitation to 2 years puts many investors in a truly difficult and precarious position. The Trustee meanwhile, is likely seeing victims who withdrew funds from this 2 year period of December of 2006 to December of 2008 as low-hanging fruit, and attorneys have become very active in defense of those clients who are being denied additional time. The legal costs will be increasing rapidly.
Special Master of the Madoff Victims Fund, Richard Breeden, has extended the deadline for victims (direct and indirect net losers) to file claims to gain part of the $2.3 billion in recovered assets. We expect the recent settlement with JP Morgan Chase to place those funds into the Madoff Victims Fund as well, which should be great news for many indirect investors who have been denied SIPC benefits. We have received many calls from “net winners” asking if they should file claims as well. We have been advised that while Mr. Breeden’s position has been to deny payments to those with a negative net equity — “net winners” – using the Trustee’s net investment method approach, that no harm can come from filing a claim. Should Mr. Breeden change his method of determination going forward, not a likely event, those filing claims could benefit. By the same token, we have been advised that should the Special Master change his approach, people would be notified, and appropriate time would be given for people to file their claims under the different criteria. In any case, nothing is harmed by filing a claim – only the time it takes to do so. Let me be clear, however, that NIAP is not making a recommendation one way or the other on this. More information can be obtained at the website: www.madoffvictimfund.com.
To Do now. Circling back to the proposed SIPC legislation, passage would insure SIPC protection for all direct Madoff investors and prevent the Trustee from pursuing clawback against innocent investors. Passage of the legislation should have no effect on the vast majority of “net losers” who have already received SIPC benefits, as those benefits should be forthcoming from both the Trustee and the Madoff Victim Fund.
Inasmuch as most “net losers” are opposed to the clawback of their fellow innocent Madoff victims and in support of their receiving some SIPC benefit, this is an opportunity for everyone to support legislation that recognizes that all investors are victims in this debacle.
Passage of this legislation is a critical first step to investor protection reform. Some modifications will invariably be made during the markup session. During that time we are hoping that congressional members who have indirect investor constituents will consider introducing amendments to the legislation, and encourage indirect investors, despite many already having access to the Madoff Victims Fund, to support this legislation.
Fundraising Drive coming up. Tooting one’s own horn is a hard thing to do. Moreover, aggressively fundraising from people who have been already been financially victimized is even more of a challenge. NIAP and its Team have been working tirelessly from the beginning to help get legislation created, moved through committee, and hopefully passed. Moreover, NIAP, volunteers like you and key team members (most particularly, the lobbyists, legal experts and others) have been working almost entirely on a pro-bono basis on your – and our — behalf. We will continue to seek to raise funds to cover our immediate out of pocket costs, which are significant. Recognizing the cash flow difficulties of so many victims, however, we are about to undertake an ambitious contingency-fee fundraising effort as a complement, which would have the effect of minimizing out-of-pocket costs to victims until after legislation is passed and SIPC payments have been received. We will let our members and others know more about this in the coming weeks. Feel free to call us in the interim, however.
Beginning now, over these next six months we need to radically intensify our grassroots effort. We are well-positioned to succeed if Madoff victims step up and pull their weight. We must put past frustration, disappointment and cynicism aside. We must not expect others to do all the work. We must each commit to doing what little we can. If this effort fails, it will be due to one thing: we each did not do enough to contribute our efforts to this. NIAP, its team of lobbyists and others have taken us to the precipice of success – we need each of you to step up and help in whatever way, small or big, that you can. Remember, you are NIAP. Working together, we will succeed.
Happy Spring to all.
In peace,
Ron Stein, CFP
President
