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Victims OrganizationsLegislative Initiatives
Attempts to Right the Wrong
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Initial Shock Bernard Madof is arrested on one count of securities fraud
for allegedly operating a multi billion dollar Ponzi schemeon December 11, 2008, one day after he confesses to hissons.
Shocked investors starved for information seek answers toquestions that will impact the rest of their lives
Are there any securities left in their accounts
Will SIPC be there to provide immediate funds
Are any assets left at Madofs firm, if so, how long toaccumulate assets, and who gets compensated
What action will the government take assist investors
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Source: www.madofftrustee.com
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Grim Reality Shocked investors starved for information seek answers to
questions that will impact the rest of their lives Are there any securities left in their accounts?
No, decades of account statements prove to be fake. Madofneverexecuted any trades in the investment advisory business.
Will SIPC be there to provide immediate funds? Indirect investors (those invested through feeder funds, funds of funds,
and self-directed retirement vehicles) are determinedby the Trustee notto be customers.
Some direct investors ultimately receive funds (though hardly immediate)but all account statements are ignored by the Trustee.
Are any assets left at Madofs firm, if so, how long to accumulateassets, and who gets compensated?
Any remaining assets estimated to be work several hundred milliondollars, may become available through litigation, but this could takeyears.
What action will the government to assist investors? Multiple pieces of legislation have been proposed. None have gotten out
of Committee.
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Victims Groups
Who are the members Anyone who invested with Madofeither directly orindirectly through feeder funds
Proof of investment required (to exclude press andattorneys
Purpose of the groups Share information Solicit members who are willing to talk to the press Organize multiple congressional letter writing
campaigns
Organize members when events occur
Public Websites (e.g., www.investoraction.org) Provide information and guidance about legislation and
litigation Serve as a conduit to share media reports
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MadofSurvivors and NIAP Shortly after the frauds discovery, the U.S. attorney obtains
and publishes a list of direct investors, including investornames and address, the beginning of a media onslaught.
January of 2009 MadofSurvivors is formed as an on-line forum for Madofvictims, using the Google Groups
platform. NIAP (Network for Investor Action and Protection) was formed in
late 2009 as a 501 c3 and 501 c4 (which allows for lobbyeforts).
The book The Club that No One Wanted to Join was born ofthat group. Both work to educate the investing public aboutthe risks associated with investing in the securities industry,details of the Madof situation, and to secure legislative actionto ensure fairness for all ponzi scheme victims.
NIAP has been working with a DC lobbying firm working pro-bono to assist in legislative initiative on the hill.
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MadofCustomers Mobilize
Massive letter writing campaign aimed at Houseand Senate Banking Committee members.
Media forums and information sessions
Frequent electronic and media interviews Website development to share information with
investors, the public and the press
The Club No One Wanted to Join
Attend hearings
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Government to the Rescue Many pieces of legislation have been put
forward by well-meaning (?) legislators.
Hearings are held, legislators grandstand forcameras, but not one bill has left Committee
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Government Assistance Madof fraud victims and other victims of Ponzi
schemes enjoyed a rare but welcomed ruling: In March 2009, the IRS Commissioner approved Rev Proc.
2009 -- a safe harbor treatment for investments thatwere then deemed to be fraudulent
This allows Ponzi crime victims to recover 5 years ofback taxes paid on those fact 1099s but ONLY fiveyears.
When SIPC denied the majority of the claims taxreturns were amended and refund claims to theIRS for theft losses increased by some 300million. Thus the broker-dealer community'sresponsibility was passed on to the Americantaxpayer and the states Departments of Revenue.
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Too Good to be True?
Those complicit in Madofs crimes did receive outsizedreturns. While the innocent investors received returnslower than American Mutual, Fidelity, Vanguard andothers for the same period. Madofknew that frauds thatpay extraordinary returns attract attention and do not
last for decades.
Jefry Picowers accounts showed annual returns rangingfrom 120% to more than 550% from 1996 through 1998,and 950% in 1999. According to a June 28, 2009, MSNBCarticle, that would make the Picowers the biggest
beneficiaries of Madof's scam, exceeding even Madofhimself. (Picowers widow settled with federal authoritiesfor $7.2 billion.)
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Too Good to be True?
Trustee, Irving Picard indicated that out of the lessthan 5,000 Madofbrokerage accounts there were245 special accounts that belonged to family and
friends, including Picower, Stanley Chais andothers.
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The Club no One Wanted to Join Madoff Victims in Their Own
Words pgs. 214 215
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List of Proposed Legislation
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Bill Number Date of Introduction
Bill Sponsor Objective or Bill Name
HR 2798 2/10/2009 Arcuri NY Increase SIPC Coverage
HR 1159 2/24/2009 Meek FL Net Operating Loss Carryback 5yrs to 10 yrs
HR 3817 10/15/2009 Kanjorski PA The Investor Protection Act of 2009
S. 3166 3/15/2010 Schumer NY Ponzi Scheme Victims Bill of RightsAct of 2010
HR 5032 4/15/2010 Ackerman NY
Ponzi Scheme Investor ProtectionAct of 2010
HR 5058 4/15/2010 Pascrell-NJ Ponzi Scheme Victims Tax Relief Act
of 2010HR 6531 12/16/2010 Garrett NJ Equitable Treatment of Investors Act
HR 757 02/17/2011 Garrett NJ Same as 111-6538, but for newCongress
HR 6659 12/20/2012 Garrett NJ Equitable Treatment of Investor Act(Marker Legislation for 113rd)
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Equitable Treatment of Investors Act
The Equitable Treatment of Investors Act amendsThe Securities Investors Protection Act (SIPA) of1970.
The last significant amendment was in 1980 whenthe limit of protection was set at $500,000 -- anamount equal to $1.4 million in todays dollars.
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Key Elements of the EquitableTreatment of Investors Act
NET EQUITY BASED ON LAST STATEMENT
What your broker owes you less what your owe yourbroker, as per the SIPA.
This essential to a system that does not include thepossession of actual security certificates but only a "bookentry" system based on the essential trust of accountstatements
TREATMENT OF CERTAIN COMMODITY FUTURESCONTRACTS
Adds claims for commodity futures contracts where nownone exists
There is currently no protection in place as the customers of
MF Global are painfully aware.
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Key Elements of the EquitableTreatment of Investors Act
RELIANCE ON FINAL CUSTOMER STATEMENT
Customers of registered brokers are entitled to rely ontheir customer statements as evidence of what theirbroker owes them.
SIPA was put in place to insure the reasonable expectations
of investors.In a world where customers no longer holdphysical securities, how could it be any other way
COMPENSATION FOR TRUSTEE AND ATTORNEY Givesthe court authority to approve fees and costs as in
a regular bankruptcy
TIMING OF SIPC ADVANCES
SIPA calls for timely payouts in fact, timelyoccurs 7 times in the statute.
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Key Elements of the EquitableTreatment of Investors Act
PROHIBITION ON CERTAIN RECOVERIES
The trustee may not recover property transferred by the debtorto a customer
APPOINTMENT OF TRUSTEES
Provide a list of qualified candidates to the Court who will makethe final decision. As it stands, SIPC chooses the same trusteesover and over.
COMMISSION AUTHORITY TO REQUIRE SIPC ACTION
The SEC may require SIPC to discharge its obligations In theevent of the refusal to commit its funds or otherwise to act forthe protection of customers of any member of SIPC.
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List of Passed Legislation
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And we all should be very concerned aboutthe safety of our investments
Now and in the future.
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Legislation Cong Scott Garrett (R-NJ) has been the most
active.
Working with NIAP and the lobby firm, he has writtenletters and demanded answers from the SEC and SIPC
and caused the General Accounting O
ce to undertakean investigation into SIPC.
Whats ahead?
NIAP is now partnered with the Stanford Victims
Coalitions there is strength in numbers.
For status updates, and additional information,visit www.investoraction.org
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C t t & S i l M di
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Contact & Social MediaTim Murray
Network for Investor Action & Protection
http://www.investoraction.org/
Investor Protection Channel on YouTube
www.tinyurl.com/InvestorProtection
Google tp1murray
Email [email protected]
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http://www.tinyurl.com/InvestorProtectionhttp://www.investoraction.org/http://www.tinyurl.com/InvestorProtectionhttp://www.tinyurl.com/InvestorProtectionhttp://www.investoraction.org/http://www.investoraction.org/