association of certified fraud examiners dallas:ft. 23rd annual fraud conference tim murray slide...

7/30/2019 Association of Certified Fraud Examiners Dallas:Ft. 23rd Annual Fraud Conference Tim Murray Slide Show

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Victims OrganizationsLegislative Initiatives

Attempts to Right the Wrong

1Thursday, May 16, 2013


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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

http://www.investoraction.org/http://www.investoraction.org/


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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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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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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

http://www.investoraction.org/http://www.investoraction.org/http://www.investoraction.org/http://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]

http://www.tinyurl.com/InvestorProtectionhttp://www.investoraction.org/http://www.tinyurl.com/InvestorProtectionhttp://www.tinyurl.com/InvestorProtectionhttp://www.investoraction.org/http://www.investoraction.org/

association of certified fraud examiners dallas:ft. 23rd annual fraud conference tim murray slide...

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