Greetings. As many of you know, this has been a busy time on both the legal and legislative fronts. There has been much attention on the legal side as attorneys have filed their briefs on net equity with the US Federal Court of Appeals (NAIP has filed an amicus brief as well). The focus of this update, however, will be on the legislative front, particularly HR 5032 – the Ponzi Victims Investor Protection Act of 2010.
NIAP, its staff, board, and many devoted volunteers have been working diligently to advance our cause. We have nearly 850 individuals – mostly direct BLMIS investors (but with numerous indirects, victims from other frauds, and non-victims as well) — associated with the organization. We are very fortunate to be working with a variety of top-tier professionals to assist with our legislative lobbying, DC-based public relations, general PR, and grassroots consulting — thanks to the generosity of so many of you.
We understand the pain and frustration of many victims of this fraud, and the additional pressures of the Trustee’s behavior and perceived inactions in Congress. I would like to respectfully suggest and remind all that the more we are perceived as speaking with one voice, and certainly the less we are seen as speaking with contradictory voices, the better.
Expression of different perspectives and debate on the various sites is healthy. We have to be very cautious, however, when we are calling on others to take specific actions, for some of those actions, however well intentioned, may have the unintended consequence of working against our best interests. I suspect that much of this is due to an unfamiliarity with the sometimes frustrating legislative process, which has its own procedures. I’m not ashamed to admit that this legislative world has been an eye-opener for me as well.
Smith Free Group
The registered lobby firm — the Smith Free Group — has been actively working on our behalf since early this year. They are a well-respected and very credible firm with strong relationships on both sides of the political aisle, and have been working tremendously hard on our behalf. As of last week, they have held well over 50 face-to-face meetings with members of Congress, Senators, and staff, in addition to other communications. NIAP members and others should be pleased to know that NIAP is now well known in many Congressional offices, and as a legitimate not-for-profit organization and advocate for victims of ponzi fraud.
The SFG has helped move forward support for our shared goals in Congress, building on the momentum and work put in over the past year and a half by so many people, and are responsible in no small measure for the upcoming Kanjorski committee hearings, and certainly for the clear support that came through the Kanjorski press announcement (Click here for press release).
HR5032
This bill now has 27 sponsors – thanks in good measure to the great grassroots support many of you helped generate. To be clear, we recognize that this bill is highly flawed: it has problematic language regarding clawbacks of innocent investors (i.e. the term “negligent”), provides limited support for indirect investors, and does not at all address the final account statement determination of Net Equity (FAS-NE) for direct investors, among others.
In terms of getting the appropriate definition (FAS-NE) of net equity included, our plan as discussed and advised by NIAP’s highly experienced lobby firm and others, is to gain co-sponsorship of the existing legislation, using those meetings and relationships to educate as many legislators as possible about the key issues in the process (clawback, net equity, relief for indirects), and then build the recommended changes into the mark-up session.
The Process.
The same process occurs on the Senate side and both sides have a “reconciliation” hearing where the two bills are merged into one, and then forwarded to the President’s desk for signature. Often bills are attached to other pieces of legislation, which may happen here.
The bill has already been introduced so the changes will take place in the mark-up process which will begin shortly after the Kanjorski hearings. The bottom line is that bills are not amended before the mark-up, meaning neither Perlmutter or Ackerman can change the language at this time. This is not our opinion; this is how the process works. Pressing that issue, however well-intentioned, may well have the unintended effect of unwittingly antagonizing those who are trying to help us.
The language issues and other cracks in the legislation (including those cracks relating to indirect investors), can be fixed in the mark-up, and shouldn’t consume the bulk of our energy. Bills are seldom far from perfect when introduced – should they make it to committee, they invariably get changed in the mark up sessions and then in the reconciliation with the Senate afterwards.
Nor can we just “start over.” To ask either of the key sponsoring Congressmen to create a new “clean bill” would be counterproductive: none of the current sponsors would write a new bill, a new bill would have no chance of being enacted in this session of Congress, and the request would likely be met with skepticism and frustration from those who are key to passage. Feeling stymied, Congress would likely do nothing.
To that end we request that victims refrain from requesting that current co-sponsors rescind support of HR5032 at this time. Actions of this nature, whether in a well-intentioned effort to gain support for net equity or other language issues (which would certainly be resolved anyway) will only place our entire effort at congressional support in jeopardy, a blow matched only by SIPC’s inhumanity. We fervently hope that the rational best intentions of the victims will win out, and not unwittingly serve to undermine us all. As I’ve said in a prior communication, if this bill after the mark-up appears to work against investors’ interests, we can take the appropriate course of action at that time.
Net Equity
NIAP has been aggressively leading the effort to include FAS-NE in the legislation — in all meetings we (and/or the lobbyists) have had with legislators regarding sponsorship of HR5032, the net equity issue is driven home along with selling the other key goals of the bill. This is hard work and is a difficult lift — as you all know, the terms “fictitious profits” and “clawback” kill us in a soundbite, but the persuasive counterarguments take paragraphs. Our ground game consists of going from Congressman to Congressman, staffperson to staffperson. And we are making good progress in gaining support for these concepts.
Scoring
As mentioned in one of my earlier communications, scoring, ie., the analysis of what a project would “cost” the American taxpayer, is a primary reason for the omission of net equity for direct investors. It is required for most legislation that might result in a cost to the taxpayer. Unfortunately, it is needed for final account statement net equity.
But we all know “the taxpayer isn’t responsible for this. SIPC members are,” Yes, that is correct, but the potential tapping into the line of credit for funds beyond the existing SIPC fund constitutes a loan by the US Government, and as such, by law, must be scored. The obstacle here: only the Trustee and SIPC know what the potential impact would be on the Treasury’s line of credit should FAS-NE be implemented for direct investors!
The Capital Markets Subcommittee (chaired by Congressman Kanjorski) has subpoena powers over the SIPC and the Trustee. NIAP has been insisting that Congressman Kanjorski direct the SIPC and the Trustee to turn over the relevant information to allow FAS-NE to be scored, and has even assisted the Committee to assemble the questions to secure this information. The good news is that this request for information is being sent out to SIPC. While some have raised concerns that this information could endanger our efforts, we and the lobby firm feel that is unlikely, and that this information, so closely guarded by SIPC and Trustee, will provide merit to our arguments. At the very least, it will allow us to get beyond this procedural impasse.
Upcoming Hearings
Congressman Kanjorski’s press announcement demonstrates considerable awareness of and sensitivity to our issues. (If you have not read the release, you may do so here; and we urge you to do so. – Click here for release.) We are providing some guidance to the Committee regarding the hearings and know that the Committee’s current position is that they’ve heard from the victims, and need to hear now from a broader range of experts, and to consider some of the bigger picture issues regarding the SIPC and SIPA system. We have some concerns here as to who they plan on hearing from. Our belief is that the Committee seeks a broader take on the failures of SIPC more generally, and improvements needed to the investor protection regime. We will certainly press for panelists who can best represent our interests. It is also our believe that Gary Ackerman’s office is seeking to use these hearings to gain input and help spur the necessary amendments to and passage of HR5032.
Congressional briefing session
We will be holding a briefing session for Members of the Committee and their key staffers just prior to the hearings. In that session we will be presenting briefing documents, questions to ask the hearing panelists, and other materials. Again, we are working closely with the lobby firm, PR and other experts to assist with this. We are also planning extensive separate meetings with key members and staff before, and again, as follow-up.
Many of you have taken the lead in creating some very valuable documents that speak with the victims’ voice, and we would request your assistance by forwarding to us the materials you may have. NIAP has also purchased 50 copies of “The Club No One Wanted to Join,” compiled by fellow victim Alexandra Roth, for distribution to the Committee.
It’s essential at this point that we keep our message clear and speak with one voice as much as possible. It will help the cause if we leverage NIAP’s significant size, credibility, and very positive relationship with key staff members of Paul Kanjorski’s and Barney Frank’s offices among others. It is very important that the group’s message not be diluted. Of great concern is confusion created by dissent within the ranks of the direct investors – confusion that has already been expressed by Members of Congress and their staffs. It’s not that we don’t encourage different thoughts and opinions — we simply request that you discuss them with us and steer them through NIAP. It is critical at this point that we avoid giving the impression that the victims do no have their act together. This is critical up to and during the briefing session and hearings. Again, if you have something that could be beneficial to this effort, please bring this forward to us.
Indirect Investors
We have supported and will continue to support relief for indirect investors. HR5032 was introduced by one of Congress’ most effective young legislators, Congressman Ed Perlmutter. Perlmutter is very astute, is working very closely with a large contingent of indirect investors, and is central to the cause. He understands the problems with this legislation from an indirect investor’s perspective, and we hope the appropriate modifications will be added by Mr. Perlmutter. While we will raise the indirects’ concerns to Congressman Perlmutter and will remain in close touch with his office, we will also take guidance from his office in terms of what is realistic, and help take that direction to other Congressional members. Given our limited capacity, the bulk of NIAPs energies on this particular piece of legislation needs to be focused on FAS-NE and clawback issues. Our support for relief for indirects will continue, but we cannot see ourselves attempting to sell other congressional members on benefits that Congressman Perlmutter will not support. It is therefore important for indirect investors – including those affiliated with NIAP — to continue to work closely with him.
Grassroots
Moving forward we will need a strong, organized, focused and sustainable grassroots effort. The Stop Clawback Now! campaign (which includes Stop Cash-In/Cash-Out) is part of that effort. Over the coming weeks, we are going to call on you to step up with a letter writing campaign to help expedite and guide the legislation, and make sure the Committee stays on track. Your hundreds of letters have already had great impact.
In the interim, we cannot and will not discourage others from sending personal stories and other letters or materials to the Kanjorski Committee. We ask you to please be respectful and clear if you do so. More importantly, we strongly encourage you to work closely with NIAPs outreach coordinators, Ilene Kent and DJ Mionis, to maximize impact. This effort is not about building visibility for NIAP – in fact we encourage those who write letters not to mention NIAP – but to leverage our grassroots infrastructure for maximum impact.
I’ll report more in the coming weeks: there’s plenty more to talk about, including all the work being done on the tax side. In the interim, we ask you to support NIAP’s efforts (and your interests) and respectfully request that you coordinate actions with NIAP as much as you can. I also thank those who have been so generous with their time and energy thus far, as well as those who have been keeping the various sites going. Feel free to contact us with questions, and we’ll do the best we can to respond in a timely fashion.
Please also visit the NIAP website at: www.investoraction.org for more information.
Keep the faith!
Most sincerely,
Ron Stein
