[Congressional Record Volume 141, Number 103 (Thursday, June 22, 1995)]
[Senate]
[Pages S8935-S8943]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                PRIVATE SECURITIES LITIGATION REFORM ACT

  The Senate continued with the consideration of the bill.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. D'AMATO. Mr. President, I now propound a unanimous consent 
request that Senator Grams, who has been waiting for several hours now, 
be permitted to put in his opening statement, Senator Boxer her opening 
statement, and that then we go to Senator Shelby for the purposes of 
submitting his amendment on proportional liability that we have already 
agreed to vote on at 10:55. So I propound that as a unanimous consent 
request.
  The PRESIDING OFFICER. Is there objection? The Chair hears none, and 
it is so ordered.
  Mr. D'AMATO. I thank the Chair.
  Mr. GRAMS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. GRAMS. Mr. President, I rise in support of S. 240, the Private 
Securities Litigation Reform Act of 1995.
  As we all know, the United States is facing a litigation crisis. 
Piles of new and often frivolous lawsuits are being filed every day in 
our Nation's courtrooms, bottling up our judicial system and crowding 
out those suits which have merit and demand justice.
  Already, the Senate has addressed the problems in our product 
liability laws and debated the issue of medical malpractice reform.
  But few areas of our tort system deserve and require as comprehensive 
a review as the field of securities litigation.
  Let me briefly describe the problem. For years, a small number of 
attorneys have made it their life's work to bring class-action lawsuits 
against companies whose stock values--for one reason or another--have 
fallen.
  These so-called strike suits are rarely filed with any evidence of 
fraud or wrongdoing--in fact, they are often filed simply with the 
knowledge that the value of a stock has dropped.
  This is possible because of the implied right of action developed by 
the courts under rule 10(b)-5 of the Securities Act of 1934. Because 
Congress has failed to limit this right of action through statute, it 
is relatively simple for attorneys to file frivolous cases and harass 
defendants under these judge-made rules.
  Even worse, these attorneys rarely serve any real injured class of 
investors. Instead, they use professional plaintiffs who buy nominal 
amounts of stock, simply to serve as the pawns of an expensive chess 
match.
  Due to the costly array of litigation expenses, such as extensive 
discovery, defendants will often choose to settle cases, rather than 
bring them to a final judgment in court.
  In addition, under joint and several liability, plaintiffs' attorneys 
can bring secondary defendants, such as accountants, directors, and 
others, into these cases and force them to settle as well.
  These settlements are often too small to benefit the alleged class of 
injured investors. But they are not too small to make a healthy living 
for an attorney who is motivated solely by profit, not justice.
  To call this the practice of law would be inaccurate. It is more 
appropriately called legal blackmail or extortion, and it is happening 
every day, at the expense of job providers, workers, and consumers.
  S. 240 addresses this problem by placing some important limitations 
on the implied right of action in rule 10(b)-5.
  By helping put the brakes on the attorneys' race to the courthouse, 
this legislation would make it easier for defendants to protect 
themselves from frivolous ``strike'' suits, encourage voluntary 
disclosure of information from issuers of stock to potential investors, 
and reduce the cost of raising capital which is so necessary for jobs 
creation.
  It includes a number of important provisions, including tougher 
pleading requirements for securities fraud actions, mandatory sanctions 
for attorneys who file needless litigation, and restrictions on 
windfall recoveries for plaintiffs who profit from a rebound in the 
market after an alleged fraud.
  I am also pleased that S. 240 reforms the rules governing secondary 
defendants. This measure establishes a two-tiered system which allows 
most parties to be held proportionately liable only for the percentage 
of damages attributable to their actions; in other words, it puts an 
end to the practice of ``deep pockets'' litigation.
  Mr. President, this legislation is not a perfect bill. There are many 
of us who believe it should do more. [[Page S 8936]] 
  We could, for example, have a stronger safe harbor protection for 
forward-looking statements or a ``loser pays'' provisions similar to 
the bill passed by the House. Today, however, we cannot let the perfect 
be the envy of the good.
  Likewise, there will be attempts made to weaken this bill--efforts 
which I urge my colleagues to reject. In particular, I hope this body 
will resist any attempt to extend the statute of limitations already 
found in law. If our purpose is to reduce frivolous litigation and 
protect consumers from higher prices, any such effort must be rejected.
  There are some critics of the bill who suggest that this legislation 
is bad for the average American.
  Well, Mr. President, tell that to the innocent defendant who's forced 
to settle for millions of dollars simply because of one crafty lawyer, 
tell it to the worker who was laid off because his employer had to pay 
attorneys' fees instead of his salary, tell it to the consumer who has 
to pay higher prices for everyday products simply because of the cost 
of frivolous litigation.
  And most importantly, tell it to the hard-working, honest attorneys 
who watch the public image of their profession being stomped into the 
ground by a few quick change artists. They are the ones who suffer 
because of the abuses in our current system. They are the ones who need 
our help.
  By voting for this legislation, we will take an important step 
forward in helping reduce the cost of frivolous litigation, litigation 
which robs job providers the opportunity to buy new equipment for plant 
safety, provide higher pay and better benefits for employees, and to 
create new jobs.
  And that hurts average, hard-working, middle-class Americans--my kids 
and yours.
  For their sake--in the name of justice--we must pass this important 
measure to fix our badly broken tort system. I, tonight, urge my 
colleagues to join me in this effort and to vote for S. 240.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from California.
  Mrs. BOXER. Thank you very much, Mr. President. I know it has been a 
very long and hard day for many of us. Some of us felt very strongly 
about Dr. Foster, and we had a tough day on that one. Some of us had 
our bases closed, and it has been awfully difficult sometimes to face 
disappointments like this.
  But here we are, it is 9:20 and we have a bill before us that is very 
important. I want to speak to this bill and as I told the chairman, my 
friend, I will do it as quickly as I can, but I wanted to cover some of 
the important issues that we face.
  I speak to this bill not only as a Senator from California but as a 
former stockbroker, a former stockbroker will understand the sacred 
responsibility of recommending investments to people who need those 
investments to be sound. I can tell you, in those days, if I invested 
in a stock for an elderly person, I literally worried a lot about them, 
and if things turned around, I was very quick to get on the phone and 
talk with them about it. I took this responsibility very seriously, and 
most stockbrokers do.
  But there are those broker-dealers, investment advisers, and others 
who do not take their responsibilities as seriously as they should. So 
I think it is very important, in light of Orange County--and those were 
my constituents who were left holding the bag because there were some 
broker-dealers who were more than dishonest, unscrupulous, and they had 
done it before and they continued to do it. I want to make sure that 
investors are protected.
  When the debate opened on S. 240, we heard a great deal of discussion 
by its proponents about companies who were being sued unfairly. No one, 
Mr. President, should be sued unfairly. The vast majority of businesses 
are decent, are good, and they do not deserve frivolous lawsuits. Those 
frivolous lawsuits should be stopped. I am ready to stop them. They do 
happen. But as my friend from Nevada, Senator Bryan, said, let us not 
use the issue of frivolous lawsuits to take this legislation so far 
that it hurts legitimate plaintiffs, legitimate lawyers. We do not want 
to stop decent people in their tracks, innocent investors. We do not 
want them to be stuck or ruined. We do not want them, in some cases, 
frankly, to be financially destroyed because we are writing a law that 
perhaps goes too far.
  Our colleague from Nevada showed us very clearly that there is no 
explosion of these investor lawsuits. Indeed, it is extraordinary. They 
have remained very level--the same number now as we saw 20 years ago. 
That does not mean they are all perfect lawsuits. Some of them are 
frivolous. But the fact is we have no explosion here, and that has been 
clearly stated by my friend from Nevada.
  We need to approach this bill from our own experience. I want to say 
that this is a very complicated issue. I want to say to those who may 
be watching this debate, it may be complicated, but it could easily 
affect you. It is just like the S&L crisis, when the Congress acted to 
deregulate and walked away. It was a complicated bill. People did not 
follow it, and then they got burned. So we have to be very careful.
  I have met the victims of Charles Keating. I talked about that with 
my friend from Nevada. I met the victims from the Orange County 
bankruptcy, and I say to them that I do not intend to forget them as we 
go through this bill. I want to try to make this bill better. I will 
support it and perhaps offer amendments to do that. I want to make sure 
investors are not shut out of the courtroom. That is not the American 
way. That is what motivates me.
  I want to tell a little bit about this bill by way of some charts 
that I have. I want to show you what newspapers have been saying about 
this bill, S. 240. There are many people who take it to the floor and 
they have extolled this bill in its current form. They like it. Many of 
them have worked very hard on it and they are very close to it. I want 
you to see what some of the newspapers are saying about S. 240.
  The Palm Beach Post of June 5, 1995:

       Congress has set out to help stop market con artists. 
     Congress is creating legislation that would virtually strip 
     the rights of defrauded investors--the bill installs heat 
     shields around white collar crooks and brokers or accountants 
     who aid and abet their scams. Investors who know the 
     legislation do not like it.

  This is Jane Bryant Quinn from Newsweek. She is an advocate for 
investors, and she says:

       S. 240 makes it easier for corporations and stockbrokers to 
     mislead investors. Class action suits against deceivers would 
     be costly for small investors to file and incredibly 
     difficult to win.

  How about the Seattle Times, May 29, 1995, a month ago. They say 
this, and so many colleagues have embraced this, and some say it does 
not go far enough:

       This legislation has proceeded almost unnoticed because it 
     is hideously complicated, and there may be a feeling it does 
     not touch many lives. Wrong. Taxpayers have a vital stake in 
     these changes. Longstanding protections are in jeopardy.

  The Raleigh, NC, News and Observer:

       S. 240 is bad news for investors, private and public. It 
     would tie victims in legal knots while immunizing white-
     collar crooks against having to pay for their misdeeds.

  The Philadelphia Inquirer, in June 1995:

       A crook is a crook, and S. 240 would relax penalties for 
     many stock crooks.

  The St. Louis Post Dispatch, May 1995:

       Don't protect securities fraud.

  The Contra Costa Times in my home State:

       Why would any Member of Congress vote to protect those 
     involved in fraud at the expense of investors?

  That is a reasonable question.
  The Seattle Post Intelligencer:

       The legislation is opposed by the U.S. Conference of 
     Mayors, the Government Finance Officers Association, the 
     American Association of Retired Persons, and the North 
     American Securities Administrators Association.

  Mr. SARBANES. Will the Senator yield?
  Mrs. BOXER. Yes, I am happy to.
  Mr. SARBANES. Not only is that a diverse group from which you just 
cited, the U.S. Conference of Mayors, the Government Finance Officers 
Association, the American Association of Retired Persons, and the North 
American Securities Administrators Association. Now, none of those 
groups has a vested interest, so to speak, in this conflict.
  I understand that you have the trial lawyers who have a vested 
interest and the corporations who have a vested interest, and they are 
at one another, [[Page S 8937]] and they are at sort of loggerheads 
over this thing. One makes one set of assertions and the other makes 
another set of assertions.
  Everyone whom you cited there--as did the Senator from Nevada earlier 
in the debate, who listed additional organizations as well--all of whom 
are sort of outside the fray, they are coming and taking an outside, 
objective look at this thing. They have reached the judgment that this 
legislation is deficient. We are not getting outside groups reaching 
the judgment that the legislation, as is, is OK. The outside groups 
that say it is OK are players in the legislation. There are groups that 
say it is bad who are also players. But these are all organizations, in 
effect, that represent the public interest, the consumer. We have a 
whole list of consumer organizations as well. I think it is very 
important. I think Members really have to stop and think about this, 
because we are getting the same thing out of the editorial boards of 
the newspapers around the country. Overwhelmingly, those editorial 
boards are critical of this legislation.
  They see it goes too far. Most write editorials and say there are 
some bad practices that need to be corrected, but this legislation goes 
well beyond that and overreaches.
  I appreciate the Senator yielding. I think it is a very important 
point. None of those organizations have a vested interest in this 
conflict, unlike many other groups that do have such an interest.
  Mrs. BOXER. I thank my colleague, the ranking member of the full 
committee, for his statements.
  I would say what we are doing here is just showing what the one 
newspaper is quoted as saying. There is a list of many, many pages, and 
I will at some point in this debate go further into it.
  My friend is so right. So many consumer groups oppose this: Consumer 
Federation of America, Consumers for Civil Justice, Consumers Union, 
the Fraternal Order of Police oppose this. Why? Because they are 
worried about their retirement. They do not want some scam artist to 
get away with it.
  As this debate moves forward, we will go more and more into the 
groups who oppose this legislation.
  I am going to ask for the next series of charts which show who are 
the main targets of investor fraud. We talk about the companies, and 
believe me, I want to help the good companies. I do not want to help 
the companies that defraud investors. I think we need to look at who 
the targets are.
  This is an article that appeared in the New York Times in May of this 
year, a month ago. ``If the Hair is Gray, Con Artists See Green, the 
Elderly are Prime Targets.''
  When we talk about changing security laws that protect investors, we 
need to step back and look at who the targets are, who are the ones 
most likely to get hurt if we weaken these laws too much.
  Let me read a little bit:

       Betty Norman was no match for the telephone con men who 
     emptied her pockets of more than $40,000.
       A plain-talking widow who runs a small motel in Michigan, a 
     town of State prisons and apple orchards, Mrs. Norman, born 
     and raised here, was taught to believe that people are 
     essentially honest. So she trusted salespeople who picked up 
     details about her life in seemingly casual telephone chats 
     while pitching her pens, costume jewelry and other trinkets. 
     After being swindled out of thousands of dollars, she lost 
     even more to people promising to recover her original 
     investments.

  Now, this is what Mrs. Norman says:

       ``It makes you feel like taking your life, to think you 
     you've been skinned,'' said Mrs. Norman, 68, who for months 
     was too mortified to reveal it to her grown children. ``I've 
     been struggling along. People here have lent me money and I'm 
     trying to get it paid back.''

  So, we are seeing that--whether it is selling goods to the elderly or 
selling them investments--clearly, the elderly are the prime targets.
  Now, I want to show something that I think is extraordinary. It is 
really something that ought to go to the Smithsonian. It is actually 
one Charles Keating gave to his salespeople when they were trying to 
con innocent senior citizens. I know that every single Senator, from 
both parties, would be sick if they took a look at this.
  You are now a trainee for Charles Keating, and they blow up this 
paper. Here is what it says. They want to get someone to write a check 
for $20,000 to Charles Keating's company, American Continental Corp., 
in care of Lincoln Savings & Loan. You remember Lincoln Savings & Loan, 
right?
  Here is the training document for the salespeople. To show how cruel 
these people are, how awful they are, this is the name they put, the 
fictitious name: Edna Gert Snidlip, 1 Geriatric Way, Retiredville, 
California, account number. And they are trying to get this sample 
elderly person to write a check for $20,000. This is the way they think 
of senior citizens.
  I will show what they said on another piece of paper that we have 
blown up, another document that shows what they handed out.
  At the very end, number 13, and these are all the things they have to 
think about, ``Always remember, the weak, meek, and ignorant, are 
always good targets.''
  Now, what we have to do as we look at S. 240 is make sure that it 
passes the Keating test. Can we get a crook like Charles Keating, if we 
weaken our securities laws too much?
  What the Senator from Maryland, Senator Sarbanes, is trying to do, 
and the Senator from Nevada is trying to do, and the Senator from 
Alabama, and this Senator, and I hope others, we are trying to fix S. 
240, so we do not allow these charlatans, these crooks, these 
criminals, to target elderly people, to go after the weak, the meek, 
and the ignorant as targets, and get away with it.
  Remember, the Senator from Nevada, who was a prosecutor, has said if 
S. 240 had been the law of the land, the people who were conned by 
Charles Keating would not have recovered what they have now recovered. 
It is about 40 to 60 percent of their losses.
  Mr. SARBANES. Is that an instruction sheet they gave to their 
salesmen?
  Mrs. BOXER. This is an instruction sheet they gave to their 
salespeople, exactly. This was in the period of discovery, when the 
attorneys went in to make their case against Charles Keating, they were 
able to come up with these documents which are on file at the court. We 
took them out.
  I thought it shows the people of America that there are, sad to say, 
bad people, bad people who will try to get the elderly to make 
investments that are no good.
  As the Senator knows, the Keating case, they led people to believe 
that their investments were, in fact, insured by the Federal 
Government, and people lost everything.
  Mr. D'AMATO. Might I make an inquiry?
  Mrs. BOXER. Certainly.
  Mr. D'AMATO. I understand the horrible and the terrible things that 
were done to these people, the unscrupulous tactics that were used, but 
I ask what the relevance of insider trading is to the legislative 
proposal that we have before us.
  This legislation does not deal with insider trading. Insider trading 
remains completely banned. There are other existing sections of the 
securities law which deals with insider trading. We do not make it any 
easier for insider trading to occur.
  The fact is that this bill does not protect fraudulent conduct. It 
absolutely does not.
  If you knowingly advertise falsely, you will be in violation of this 
bill, the safe harbor does not protect these false statements nor does 
it apply to ITO's or to small emerging companies. Also, the Securities 
Exchange Commission will still have the authority to bring any suit 
that it can bring today.
  When we bring up the name of Charles Keating, and the terrible things 
that his salespeople were trained to do, we imply that this legislation 
will allow this kind of conduct. This legislation will not sanction 
that kind of conduct.
  Mrs. BOXER. And I respond to my friend that we are changing the laws 
that protected the people who were conned by Charles Keating.
  The fact of the matter is, Charles Keating ripped off the assets of 
the savings and loan, went bankrupt, and these poor people who were 
left with nothing had to go after other people. And in this bill you 
make it far more difficult. That is why Senator Shelby is offering an 
amendment on this.
  Mr. D'AMATO addressed the Chair.
  Mrs. BOXER. The other point--I would like to just finish my point 
because my friend raised two issues. My [[Page S 8938]] colleague is 
asking me about insider trading. The Senator is exactly right.
  Mr. D'AMATO. Does the Senator know what fraud provisions we are 
changing? I would like to know. If she can point out to me a particular 
provision that will permit fraud, then I want to strike it. You say we 
have changed the law without identifying what section we have changed 
and allude to the practices of somebody we all agree was contemptible 
but his actions are not relevant. If you can point it out these 
provisions I would be delighted to review them.
  The comment that we will make it possible for people to engage in 
fraudulent conduct and wipe away the protections that now exist, is 
not, in my opinion, square with the facts.
  Mrs. BOXER. I would like to respond to my friend very clearly. I am 
making an opening statement tonight. I told my friend, I will be 
supporting amendments to make this bill better; amendments that will 
not leave people prey to people like Charles Keating. The Senator wants 
to know specifically? You can talk about the safe harbor. We are going 
to do that. I was happy to hear my friend from Connecticut saying maybe 
he will have a little change there. We welcome that. We are going to 
look at pleadings. And on insider trading, which we are going to talk 
about, the bill is silent about it. That is my problem.
  Mr. D'AMATO. But this legislation does not deal with insider trading. 
Insider trading provisions are as vigilant and tough as ever. If there 
are constructive suggestions to make insider trading laws more 
effective, to appropriately protect defrauded people, we should 
certainly consider them. But this bill, as it does not address insider 
trading.
  Mrs. BOXER. That is my point.
  Mr. D'AMATO. To suggest that this bill will somehow make it easier 
for insider trading, because that is the implication when you cite 
Charles Keating and his misdeeds, that somehow we are going to make it 
easier for these people to prey on the elderly to is not true. I might 
just make one observation, this bill does, makes it possible for those 
who are truly aggrieved, not the entrepreneurial lawyer, to bring suit 
against violators and to receive their fair share of the settlement 
money.
  It allows the institutional investors and the pension managers who 
are at risk, whose clients are at risk, to have the opportunity to 
manage a lawsuit, instead of giving this control to lawyers who have no 
concern for the defrauded investors. These lawyers do not give two 
hoots and a holler about the stockholders, and walk off with millions 
of dollars in settlement fees when the stockholders get a penny or 2 
pennies per share. I suggest to the Senator that this bill helps 
pensioners, who hold $4.5 trillion in securities, by giving them the 
authority to choose the lawyers who control the suits. It gives them 
the ability to agree to a settlement as opposed to a charlatan, who 
owns 10 shares of stock and now is employed by lawyers.
  That is what we tried to do with this legislation. I point this out 
because as I listen to my colleague's statement it sounds to me like 
this legislation will open a door for the Charles Keatings, this is 
just not accurate.
  Mrs. BOXER. If I could just reclaim my time--and I will yield in a 
moment--I really need to say to my friend from New York: He may not 
agree with me, but to stand there and say that it --and my friend is a 
good debater--it is unequivocal that pensioners are better off--you 
should see the people who oppose your bill.
  It seems to me--
  Mr. D'AMATO. I know the people who oppose the bill.
  Mrs. BOXER. Let me read the list: American Association of Community 
Colleges, American Association of Retired Persons, American Council on 
Education, American Federation of State, County and Municipal 
Employees, the Association of the Bar of the City of New York, the 
Association of Community College Trustees, the Association of Governing 
Boards of Universities and Colleges. It goes on. The Consumer 
Federation of America. Et cetera, et cetera.
  I just read before--the Senator was not on the floor--some 
incredible, incredible editorials that have been written across this 
Nation by people who have no vested interest at all.
  How about the Investors Rights Association of America? How about the 
Municipal Treasurers Association of the United States and Canada?
  My friend has to, I hope, leave a little bit of room for dissension 
here. I know the bill was voted out overwhelmingly. But in the course 
of this debate I am going to be supporting amendments and perhaps 
offering some that are going to improve this bill. Because I do not 
agree with my friend. I do not agree with my friend that investors are 
better protected. I will be happy to yield to my friend from Maryland 
who sought to engage in a colloquy.
  Mr. SARBANES. I would say to the distinguished Senator from New York, 
on the morning of the markup of this bill in the committee, the 
Chairman of the Securities and Exchange Commission wrote to us and 
stressed that the substitute committee print failed to adhere to his 
belief that a safe harbor should never protect fraudulent statements. 
This is what he said:

       I continue to have serious concerns about the safe harbor 
     fraud exclusion as it relates to the stringent standard of 
     proof that must be satisfied before a private plaintiff can 
     prevail. As Chairman of the Securities and Exchange 
     Commission, I cannot embrace proposals which allow willful 
     fraud to receive the benefit of safe harbor protection. The 
     scienter standard in the amendment may be so high as to 
     preclude all but the most obvious frauds.

  That is not me talking. That is me quoting the Chairman of the 
Securities and Exchange Commission. He expressing very deep concern 
about the safe harbor provision in this legislation. So there is a very 
direct answer to the Senator from New York.
  Second, we offered in the committee an aiding-and-abettingamendment. 
Earlier in the debate the distinguished Senator from Nevada pointed out 
about half of the recovery in the Keating case that helped these 
elderly citizens who had been swindled to get at least some of their 
money back, about half of the money they got back was because they were 
able to move against aiders and abettors.
  There is no aider and abettor provision in this legislation for 
private litigants--which is, of course, how they were able to proceed 
in order to get their money back. And later there will be an amendment 
offered to provide aider and abettor liability in private actions.
  So there again, unless we get that provision in, the ability that 
people who have been swindled in the Keating matter had to recover at 
least some of their losses would otherwise not be available to them.
  So I say to my friend from California, there are two very clear 
examples to support the proposition she was just arguing.
  I thank the Senator for yielding.
  Mr. DODD. May I make a comment?
  Mrs. BOXER. Without losing my right to the floor, and briefly, I 
yield to my friend.
  Mr. DODD. I thank my colleague from California.
  Mr. President, we are dealing here with apples and oranges. Talking 
about the Keating case has the desired effect because people recall 
what happened to innocent investors. But under the Keating situation we 
were talking about a failure of the bank regulatory system. Here we are 
talking about securities laws, two entirely different areas of the law.
  What Mr. Keating and his cohorts were charged with was not violation 
of fraud and forward-looking statements, they lied to them about 
present facts. That is a vastly different situation. No safe harbor 
provisions were necessary in the Keating case, because he told those 
people, in these absolutely ridiculous and outrageous statements and 
instructions, that ``your money is being guaranteed. You are 
protected.'' It was not forward looking, he was lying about the present 
situation.
  What the safe harbor provisions deal with are forward-looking 
statements, entirely different fact situations than existed in the 
Keating case.
  I want to go into that at some length and I will later on, on this, 
but that is a very different fact situation than what we are talking 
about here.
  Last, I just make this one point.
  One of the major provisions of S. 240 has to deal with the 
requirement that we have the auditors reach out. Look, this is a 
provision that was added by Congressman Wyden on the House side [[Page S 
8939]] who for years had 30 hearings on this provision which we have 
incorporated in this bill. Had that provision, by the way--one 
provision of this bill that does apply to Keating--had the auditors 
been required to seek out the fraud which does not exist on the books, 
that is the one area, I would argue, in S. 240 that might have made a 
difference in the Keating case.
  What we have done with this bill is add a new requirement that 
auditors must do that. That would have assisted in the prosecution of 
Mr. Keating. That is a part of this bill. But forward-looking 
statements and lying about present facts are very different, and safe 
harbor would not have applied.
  I thank my colleague for yielding.
  Mrs. BOXER. I am happy to yield.
  I say it is my understanding--and we are going to debate this--that 
it is not as clear as the Senator made it. We are going to bring that 
out as we move forward in this debate.
  My friend from New York says insider trading is not in this bill; 
exactly my point. I would like to see us connect insider trading to 
these forward-looking statements. And I want to explain what I am 
talking about. We know insider trading. ``It's back, but with a new 
cast of characters.'' That is Business Week. That is December 1994.
  I want to quote from a book written by Gene Marcial, ``The Secrets of 
Wall Street'':

       Don't kid yourselves: Very little has changed on Wall 
     Street. Half a dozen years after the scandals of the 1980's, 
     when any number of Street veterans were charged with 
     violations of securities laws and several high-profile 
     insiders were marched off to jail, insider trading and market 
     manipulation--in cases 100 percent illegal--are still the 
     most zealously desired play in the financial world. It's 
     almost the only way to make the truly big bucks. All the 
     market savvy in the world will come up short if you're 
     playing against other investors who have market savvy plus 
     inside information: Sorry, but that is the way the game is 
     played.

  How does that fit into this bill? What this bill does not address is 
forward-looking statements made in combination with insider trading.
  Let me show you what I mean. Here is a forward-looking statement. 
Crazy Eddie. Some of you may remember a business run by a crook. Here 
comes the forward-looking statement.

       We are confident that our market penetration can grow 
     appreciably . . .
       Glowing evidence of consumer acceptance of the Crazy Eddie 
     ``Name'' augurs well for continuing growth outside of New 
     York . . .

  All during the time of this forward-looking statement, Crazy Eddie 
and his friends are unloading the stock, and they are unloading it at a 
high point. And after awhile, just a little bit later, you see this 
forward-looking statement was fraudulent and the top officer flees the 
country with millions of dollars, and the CEO is convicted of fraud.
  So my point, I say to my friends--and what I tried to do in the 
committee, but we could not get agreement at that time, I am hoping we 
can get an agreement--is to make a point that, if you have a forward-
looking statement in connection with insider trades, in other words, 
you can show--because, by the way, the insider trades are definitely 
recorded with the SEC, fortunately; some have 40 days to do it; I would 
like to make it 5 business days--if you can show that there is a 
forward-looking statement in connection with an insider trade, that you 
meet the heightened Keating requirement and you cannot take advantage 
of the safe harbor. My understanding is that if we made that change, it 
would be very helpful to this bill.
  Mr. DODD. Will my colleague yield?
  Mrs. BOXER. Sure.
  Mr. DODD. As I see the fact situation here, in the Crazy Eddie case, 
these are knowingly false statements that were made. The provisions of 
S. 240 are fine. My point is that the insider trading laws are on the 
books. Frankly, if you have some new ideas on insider trading--we do 
not cover cattle rustling in this bill either. It does not mean it may 
not be important.
  Mrs. BOXER. May not be important?
  Mr. DODD. My point is you have very good laws today. We wrote some 
laws on insider trading which I dealt with in our committee a few years 
ago. But the implication here is somehow that Crazy Eddie would have 
gone scot-free if S. 240 were the law of the land.
  Mrs. BOXER. No.
  Mr. DODD. The Senator is not suggesting that, is she?
  Mrs. BOXER. No. I would like to explain it before my friend gets too 
agitated. Let me explain it to my friend.
  What I am suggesting--and I tried to explain it to my friends in the 
committee, but no one was interested in talking about it. I am trying 
to explain it now. The Senator is right. He made clearly false 
statements. But he might get away with it under the new safe harbor 
because it is a more difficult standard to meet. What we are saying is 
that, if you can show, going into the case, unequivocally that in 
connection and conjunction with a false statement, a forward-looking 
statement, there is insider trading, you do not have to meet the 
requirements of the new safe harbor, and you do not have to meet the 
pleadings requirement because what we are really saying is here ipso 
facto, if you are unloading a stock the day after you make a phony 
statement, that should meet the heightened requirement.
  Mr. DODD. Is there anything that you believe--we now know in this 
case there were knowingly false statements that were made. Is there 
anything in S. 240 that would in any way make it possible for a Crazy 
Eddie to have gone scot-free?
  Mrs. BOXER. Yes.
  Mr. DODD. Why?
  Mrs. BOXER. Because the safe harbor is quite different the way it is 
written in S. 240, and it would be much more difficult for investors to 
move against this particular company.
  Mr. DODD. S. 240 says knowingly false statements.
  Mrs. BOXER. I know. But it is a much higher level. You have to know 
the intent and all the rest.
  All we are saying is in cases of insider trading--I hope my friends 
can go along with this because I think it is good law; that is, ipso 
facto, if you can show that there is insider trading in connection with 
a forward-looking statement, that you meet the new safe harbor and the 
pleading requirements. That is all we are suggesting.
  We will be offering that amendment. I hope we can have some support. 
I think it makes a lot of sense.
  I want to say something about the laws that deal with insider 
trading. I hope my friends can help me on this because I think we all 
want to go after the bad people. I know we do.
  Mr. SARBANES. Will the Senator yield?
  Mrs. BOXER. Yes.
  Mr. SARBANES. I say to the Senator from Connecticut, I cannot give a 
definitive answer to his question because there has not been a court 
interpretation of the standard that you had put in this bill, the safe 
harbor. But it is clear that under this standard, that Crazy Eddie was 
held to a standard that was not as stringent as the standard you have 
written into this legislation. That is clear. There is no argument 
about that. The standard by which Crazy Eddie was held under the 
existing law was a less stringent standard than the standard the 
Senator has written into this bill, because his standard--he says it is 
knowingly made with the expectation, purpose, and actual intent of 
misleading investors, and, of course, the Chairman of the SEC indicated 
he was fearful that this would allow willful fraud and still enjoy the 
benefit of safe harbor protection.
  The other thing, I say to my friend, because I wanted to make this 
point earlier, is that I do think that the insider trading issue is 
more related to this bill by far than cattle rustling, if I may state 
that to my colleague, because, as I understand it, his effort was to 
counter my good friend from California to say, ``Well, you know, what 
has insider trading got to do with this bill? What does cattle rustling 
have to do with this bill?'' I think there is a difference between 
insider trading as it relates to this kind of legislation and cattle 
rustling.
  Mr. DODD. I think my colleague from Maryland fully understood the 
point I was making on this. Yes, there is a different standard we are 
applying here. But the implication of using Crazy Eddie as an example I 
think is wrong.
  But, second, what we are trying to do here is to minimize the kind of 
frivolous litigation where some people have a position that there 
should be no safe harbor, that we should do away with safe harbor 
altogether. I disagree with that. I think you can make a case for that. 
[[Page S 8940]] 
  But the idea of arguing, on the one hand, that we ought to have a 
safe harbor, and, second, making it so transparent that anyone can 
bring a lawsuit based on any kind of forward-looking statement is going 
against the trend of the balance we are trying to strike here where you 
have companies withholding information, pulling back, fearful that 
anything they say, no matter how well intended, becomes the automatic 
subject of a litigation when stocks fluctuate.
  So we are trying to strike that balance, if I might just say to my 
colleague from Maryland.
  Mr. SARBANES. If I could bring my dear friend back into the 
parameters, no one that I know of out here has argued that there should 
be no safe harbor whatever, which is the statement the Senator just 
made.
  Mr. DODD. I said some may. I do not know.
  Mr. SARBANES. It is a red herring. It is a diversionary thing.
  Mr. DODD. Crazy Eddie is a red herring.
  Mr. SARBANES. We are trying to get at what is a proper approach on 
the safe harbor issue. Now, it is a complicated issue. The Senator 
himself said that earlier in the day, a very complicated issue. But the 
potential for harm and damage, if you do not get it right, is enormous.
  Mr. DODD. On both sides.
  Mr. SARBANES. Is enormous.
  Mr. DODD. Will my colleague agree, on both sides?
  Mr. SARBANES. Not quite. Because until 1979 the SEC would not even 
permit forward-looking statements and yet our markets did very well. 
They grew. People prospered. Investments were made. The SEC would not 
even allow a forward-looking statement because they were so worried 
about what might happen to the investors.
  Then people came in and made the argument, well, you know, this is 
difficult; we ought to be able to make some projection. And they began 
to try to accommodate that, which is what they have been trying to do. 
So we have been trying to make some changes. But you have to get it 
right. And when the chairman of the SEC comes in with a letter when he 
came to the committee, it ought to give you pause. You ought to pause. 
You ought to stop and think about this thing.
  We ought not to have to enact something, then have devastation happen 
to investors and then come back and try to get it right, I say to my 
friend.
  Mr. DODD. If my colleague will yield on that, we are already seeing--
the reason the bill exists at all is because of the kind of devastation 
that can occur here. And so we are trying to strike that balance here.
  Mr. SARBANES. That is right. And we have to strike the balance in the 
right place. That is all I am saying to my distinguished friend.
  Mrs. BOXER. If I may reclaim my time at this point, I have enjoyed 
the give and take but I am bringing it back to real people. And my 
friends can talk all they want about safe harbor and all that. Let me 
tell you what I am talking about.
  I used to be a stockbroker, I say to my friend, and I took that job 
very seriously. And I had a lot of widows and they came into me and, 
God, I worried. I am not concerned about the good people that my friend 
from Connecticut talks about. I want to help them. I want to protect 
them from frivolous lawsuits. I wish to also, however, say while I am 
doing that I do not want to hurt the average investor, and they can 
tell you from today until tomorrow it has nothing to do with the 
Keating case. Fine, they can say it all they want. But I will prove it 
as we go through this debate. But I wish to take you back to what 
happened to real people. This is just one case. There are many. I will 
show you another article behind here.
  ``Regulatory Alarms Ring on Wall Street'' New York Times, Friday June 
9, 1995:

       With the frenzy of merger deals and takeover battles these 
     days, it seems like old times on Wall Street in more ways 
     than one. Securities regulators say they are opening 
     investigations into insider trading at a rate not seen since 
     the mid 1980's, the era in which Ivan Boesky, who went to 
     jail for trading on inside information, became a household 
     name.

  The point I am trying to make, my friends, yes, I want to have a safe 
harbor. I voted for the safe harbor that was in the Dodd-Domenici bill. 
And my friend from Connecticut said, well, we have moved past that. We 
can do better.
  I think what was in the Dodd-Domenici bill made sense to give this to 
the SEC and let them develop a safe harbor. They know more than any of 
us.
  Mr. DODD. Will my colleague yield on this one?
  Mrs. BOXER. Yes.
  Mr. DODD. The Senator is absolutely correct. I asked a year and a 
half ago. A year and a half ago I said to the SEC, in response to the 
letter by the chairman, a year and a half ago I said, ``Look, let's let 
you do it. Would you get some answers back.''
  Month after month we inquired: What are you going to do on this? We 
would like to know. A year and a half went by and the SEC basically, 
because they wanted no change whatsoever, refused to provide any 
response. I say that to my colleague in frustration. We have had this 
happen with other agencies. They were not interested in doing this at 
all, despite their claims to the contrary. That is why we put the 
provision in here. Frankly, I would have preferred that they would have 
done it. But, frankly, after a year and a half, the patience of a 
Senator runs out when an agency refuses to respond.
  Mrs. BOXER. I say to my friend, I know of his good faith and his good 
will and his good patience, but you know what? I think it is dangerous: 
Well, we tried and they did not do it, so we are going to write this 
our way.
  I was in the House when we started the whole mess with the S&L's. 
Everyone thought: We can handle it; we know what is best; we will 
regulate them. Great. We do not need the agency to tell us how to do 
it. We are going to legislate.
  I say to my friend from Connecticut, whom I admire--and we are 
friends, and we agree on 98 percent of the things around here--on this 
particular case, I hope he can get some more patience because I am a 
little concerned about the direction, and it is not just me. It is list 
after list of consumer groups and senior groups and securities 
administrators. They have no ax to grind. They are scared for the 
investors.
  We do not want to go too far. We should find that balance. We should 
crack down on frivolous lawsuits, but let us be careful.
  The point I am making with this, as my friend from Maryland pointed 
out, there is a tougher standard now. That is the whole point of the 
bill. Let us not play games with it. It is a tougher standard to meet, 
on purpose. The Senator himself has said, others have said we are 
worried about these suits against good, decent people and we are 
raising the bar; we are making it tougher.
  What I am suggesting is if in connection with a forward-looking 
statement there is insider trading and it is clear and convincing and 
everyone knows it because they have to file it, then that should meet 
the standard right away, and the case moves over.
  That is all I am saying. I hope I can work with my friend from 
Connecticut. I think when he looks at it he is going to think this is 
good. He does not want to protect people who make these statements; 
they are false; they dump their stock.
  You know what happened? All the people in here that bought it on the 
basis of this lost so much. And I think there are ways we can work 
together to strengthen this bill so that when we have this connection--
by the way, it happens many, many times with this insider trading, with 
these false statements, and the public gets it in the neck. And now 
they have to meet a higher standard.
  And my friend from New York, I do not agree with him on this business 
about choosing the attorney. Now, in this bill we say the richest 
person, the person with the most invested gets to pick the attorney.
  Mr. D'AMATO. If I might I ask, does the Senator mean to tell me that, 
for example, the pension manager of the city of New York, a $20-some-
odd billion fund, should not be given greater latitude given the 
magnitude of the investment they manage than a professional plaintiff 
who buys 10 shares of stock and who is retained basically by a lawyer 
who rushes to file a suit? You would not want to give to the pension [[Page S 
8941]] managers the ability to have a greater say in who is selected 
when half of the dollars lost are invested by pension funds?
  I would say I would rather have that any time. So when you say who is 
going to pick the lawyer, I would rather have people who have a real 
stake, who really invested billions of dollars, who really have 
something at risk, pick the lawyer. Than entrepenurial lawyers who 
simply watch for the stock to move 5 points one way or the other way. 
The Senator feels one way, I feel the public needs to be protected, and 
the way to protect the stockholders, the little people is to give them 
a say. They do not get a say now. They absolutely do not. What is going 
on now is a travesty.
  Mrs. BOXER. Well, I assume that was a question, and so I will attempt 
to answer it this way. I say to my friend, we have a disagreement, and 
so does the SEC. They do not agree. They want to work on this 
provision. Just to say because someone has the most money, that is the 
end of it, they get to pick the lawyer, I think is a problem.
  If you look at the Keating case, by the way, it is very interesting 
because in some of these cases, as the SEC pointed out in their recent 
communication, it may well be that the largest stockholder is somehow 
in cahoots with the fraudulent individual.
  Now, I would rather give--
  Mr. D'AMATO. Are you really suggesting--
  Mrs. BOXER. May I finish my point, I say to my friend? I so admire my 
friend's tenacity, but let me finish my point and then I will be so 
happy to yield. Two people from Brooklyn, and I know it is hard. Two 
people from Brooklyn, I know it is hard. I want to yield to my friend.
  Mr. D'AMATO. You do not have to.
  Mrs. BOXER. I would like to remember my point, which is that under 
the current law, the judge gets to make the decision based on who is 
the most competent lawyer. I would assume judges are not dumb. They 
know if there is a phony plaintiff. I think that is another area on 
which we can perhaps compromise that the SEC has found problems with.
  My colleagues will be glad to know that I am reaching the end of my 
remarks tonight. I know my chairman is absolutely thrilled with that, 
but I want to point out that I was yielding to many of my colleagues 
throughout this time. I wanted to do that. I think we have some 
legitimate differences.
  Look, I only have one goal here. This is a tough issue for me. I 
represent so many wonderful companies who are complaining about this. I 
want to resolve this in the right way. I represent so many investors 
that got bilked.
  Why do I represent all these people? Because I come from the largest 
State. I have 32 million people. I have thousands and thousands of 
investors, thousands of companies, and I want to be able to support a 
bill that strikes the balance that my friend from Connecticut talked 
about.
  I think this bill, in its current form, does not do that. Now, I am 
not the only one to say that. Respected people in this Senate have said 
it tonight, people like Dick Bryan, people like Paul Sarbanes. These 
are not people who do not know their facts. These are fair people.
  We have a list of people who look after consumers, who look after 
investors who are begging us to fix this bill. I want to make sure that 
when this process ends, we have adopted some amendment, we have made 
sure that we do not have unintended consequences. We certainly had them 
in the S&L debacle. Not one of us ever dreamed we would have the 
problems we had when we deregulated.
  Please, please view my comments tonight in the spirit in which they 
are offered. I want to be able to support a bill that does the right 
thing, but let us heed what Arthur Levitt and the SEC is saying in 
regard to the safe harbor, in regard to joint and several, in regard to 
the statute of limitations, in regard to the provisions regarding 
selecting an attorney. These are complicated matters, but the bottom 
line for me is making sure we protect the investors and that we protect 
the good business people, and if we do the wrong thing, we could be 
very, very sorry.
  So let us proceed with caution, with comity. I hope we can improve 
this bill, and I look forward to working with my colleagues on the 
amendments that will be offered.
  I yield the floor.
  Mr. D'AMATO addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. D'AMATO. Mr. President, I will be brief considering the late 
hour.
  I cannot let go unchallenged the statement that would imply that 
somehow this legislation will open up the door for people like Charles 
Keating to do the kinds of things that he did. This legislation does 
not deal with the criminal law or criminal conduct.
  This bill does deal with the civil suits which are being brought and 
stating that there has to be a showing of intent to cause harm when 
making forward statements. These forward statements are defined in a 
very limited fashion, they include only projections. In order for a 
statement to be a projection, the company must state that it is a 
projection and warn investors that these projections may not come true.
  If we want companies to be able to make these projections, and most 
people agree that it is in the consumers interest that they make them, 
then you have to give them this protection against frivolous suits. The 
question of who should represent the people, is not, in my opinion, a 
question of rich investors trampling the concerns of small investors. 
We are trying to give pension funds which operate on behalf of millions 
of people, many of whom are in the public sector, more control over 
their suits. We want to address more investors' concerns, not fewer. 
That is what we are attempting to do with this legislation.
  Fraudulent conduct is not protected by the safe harbor section in 
this bill. This bill specifically excludes from protection any 
statements made with the expectation, purpose, and intent of misleading 
investors. If you are trying to mislead your investors you do not get 
protection. It is designed to protect honest companies from abusive 
suits.
  There will be amendments to attempt to improve on the language of the 
bill. We will have exhaustive debate on all the issues on which my 
colleagues have concern and we will have votes on those amendments.
  I just do not think it is fair to bring up the cases of Charles 
Keating or Crazy Eddie in which criminal violations were committed and 
which have absolutely no relation to the provisions in this 
legislation. One could easily assume when they hear the names of these 
outstandingly monstrous cases that are indelibly imprinted on so many 
people that somehow we are going to open the door to these kinds of 
actions. That is just not fair, and it is not an accurate 
representation of what we are attempting to do here. Although I 
certainly believe that reasonable people can disagree, as is their 
right, but I do not believe these analogies are correct or fair, with 
respect to this legislation.
  Finally, I will conclude by saying that I did not sponsor this 
legislation, because I thought that the initial provisions of the 
legislation would have precluded and made it impossible for many people 
who are truly wronged to bring a suit. It was only after we were able 
to craft a compromise and some of the most onerous provisions, both of 
the original legislation and of the draft, were dropped, did I sponsor 
this bill.
  For example, along the way, there was thought that an intentional 
misstatement would be protected in the safe harbor if a person did not 
rely upon it, which meant that somebody could actually deliberately 
distort the facts and could not be sued unless the person who brought 
the suit actually read that statement.
  I could not support that, and I insisted that provision in the draft 
be dropped. We now have a provision which says only that there has to 
be an intentional misstatement.
  It is in that spirit that we crafted an agreement. I might point to 
the House bill which has loser pays provision. We do not have a 
provision like that, but, yes, we do have a provision that says the 
courts shall ascertain, upon a dismissal of a suit, whether or not 
there has been an abuse, because too many of my colleagues in the law 
have brought these suits because it is an easy thing to get a company 
to settle.
 And that is not what the judicial system should be about, to wring out 
settlements from [[Page S 8942]] people because they have wealth or 
because they cannot stand the litigation that might hurt them for 2 or 
3 years; litigation that is meritless, or will keep them from doing 
business or obtaining the necessary financing. That is simply wrong. 
So, yes, we have sought to change that.

  Do we seek to change that to disadvantage people? No, but to make the 
system operate on the basis that it should, to protect the truly 
aggrieved, to give them the right to sue, and to give the people who 
really lose the ability to decide who is going to represent them. A 
lawyer who finds his plaintiffs by pressing a button on a computer and 
calling up his list of investors with 10 shares in any particular 
company should not speak for the class of defrauded investors. That is 
wrong and is making a mockery of the system. That is why people are 
angry. The business community is absolutely right when they say we need 
fundamental change.
  As I have said, I initially had great reservations about this 
legislation. My friend Senator Dodd knows that, as does Senator 
Domenici. I studied this legislation and became convinced that many of 
the original reforms were necessary, while others, I felt went too far. 
I mention this to explain why I have not been a cosponsor--because I 
wanted to achieve a balance. When you have balance, there are parties 
on both sides who are not happy because, unfortunately, they all want 
their side to be more balanced. Some want loser pays. Some want a 
larger safe harbor; they would like companies to have no responsibility 
and no ability for anyone to sue them. Well, that is wrong. Of course 
on the other side, some of the lawyers want to be able to bring suit on 
anything that moves and some things that do not. They do not want to 
have accountability. The judges do not want to have to finding. They 
are overburdened and overworked, sometimes they have a year or 2-year 
backlog of cases. Here is Congress telling them they have made those 
findings, that they are in the public interest and the public has to be 
served. We are suffering in this country as a result of these frivolous 
lawsuits.
  So one way for us to find the balance is ask the Judges only to look 
at cases which are dismissed, to find out whether or not sanctions 
should be brought. We hope that will help deter frivolous suits. Maybe 
after one or two sanctions are imposed we will have sent a message to 
those who are abusing the system.
  Mr. President, I hope that we can proceed on this tomorrow. As I 
understand it, Senator Shelby will lay down the first amendment. We 
will come into session at 9 o'clock. We will move to this bill at 9:30, 
when Senator Shelby will offer his amendment dealing with proportionate 
liability, and I hope to hear debate from both sides. We will vote at 
10:55.
  If there is nothing further----
  Mr. SARBANES. Mr. President, I will be very quick. I think we have 
had a good opening debate. I very strongly commend to my colleagues the 
very thoughtful and perceptive statements that were made by Senator 
Bryan and Senator Boxer. I hope Members will review those very 
carefully.
  We have to focus this debate on what the real issues are that divide 
us. There are provisions in this legislation--I was listening to the 
chairman of the committee talking just now, and he mentioned a number 
of provisions that we are not contesting. We accept those and think 
they are designed to deal with some abuses that have been taking place. 
But we do want to get the focus on other provisions where we think a 
proper balance has not been struck, where we think investors will be 
jeopardized, and where we think immunity is being provided to potential 
wrongdoers that ought not to be provided to them.
  This is a very complicated question, there is no doubt about it. My 
good friend from New York, the chairman now, got very excited about the 
appointment of the lead plaintiff in a class action. Well, let me read 
you what the SEC said about that, and it is not all black and white, I 
admit that. Here is what they said:

       One provision of section 102 requires a court generally to 
     appoint as lead plaintiff the class member that has the 
     largest financial interest in the case. While this approach 
     has merit, it may create additional litigation concerning the 
     qualification of the lead plaintiff, particularly when the 
     class member with the greatest financial interest in the 
     litigation has ties to management or interests that may be 
     different from other class members.

  Now, I am not pretending this is simple. There is the problem. The 
SEC has stated this, and we need to think about it and address it. We 
may be making a mistake. I am sort of puzzled a bit by the absolute 
certainty of the people on the other side of this. I think this is 
complicated. I am not absolutely certain that the position I am 
advocating anticipates all of the problems. But, clearly, outside 
observers, in many respects, are far more knowledgeable than we are--
the State securities regulators, the chairman of the SEC, and the 
finance officer people have all come in here expressing a lot of 
misgivings. One group said, ``We think you need these amendments. If 
you get these amendments in, we will take a different view of the bill. 
Without these amendments, we oppose the bill.'' They, in effect, are 
saying they recognize that there are other aspects or features of the 
bill that are acceptable or desirable.
  As I said earlier, parts of this bill are desirable; parts of it are 
not desirable. We need to address, in my judgment, the undesirable 
parts. If we can do that, I think we can end up strengthening the bill, 
changing its thrust, achieving a better balance, and eliminating, 
hopefully, the differences between us.
  As the very able Senator from California pointed out, that is the 
quest that she is on now, as we come to address this legislation.
  So, again, I strongly commend to my colleagues the opening statement 
of Senator Bryan and the opening statement of Senator Boxer. I say to 
them that this is a complicated issue. They need to consider it very 
carefully, because we will have to live with the consequences of this 
thing. As one commentator observed, ``The pendulum had swung too far 
toward the lawyers, and now it is swinging too far the other way. 
Unfortunately, some major investor frauds may have to take place before 
it again moves back toward the center.''
  I want to get it to the center before we send it out of here, so the 
major investor frauds will never happen. I do not want a situation 
where we send it out of here, then the major investor frauds happen, 
and everybody comes back and says, oh, my goodness, we overreached. Let 
us correct it now and avoid it. Get the pendulum, as this says, in the 
center to begin with.
  I thank the Chair.
  Mr. DODD. Mr. President, very briefly, I do not debate what my 
colleague has said. Some of us have been at this for 4 or 5 years 
trying to strike a balance.
  As I pointed out earlier today, the first couple of years, any 
suggestion about doing anything in this area was greeted, in many 
quarters, with total hostility. A threshold has been reached in the 
last year or so now, and the people are finally agreeing that the 
present system is not working well. And it has taken some time to get 
people to agree to that particular position.
  As my colleague from Maryland knows far better than I, as you try and 
put together a legislative package here, it is in a complicated area 
where, unfortunately, only a relatively small number of people get 
involved in issues like this. The galleries are empty.
  Not for lack of people who are probably in the building covering 
these matters, but this does not help itself to the 30-second sound 
bite, to the 30-second campaign ad or a bumper sticker. These are 
highly complicated areas.
  Striking the balance is truly my interest here. In the years I have 
spent as chairman of the Security Subcommittee and as ranking minority 
member, I have authored many pieces of legislation in this area, and 
forever keeping in mind confidence.
  Investor confidence. Confidence in our markets is what has made our 
markets so attractive to people. Why people, as the Senator from 
Maryland pointed out, why people come from around the world. It is not 
just because the dollars are here, but the confidence they have in our 
markets.
  I think there has been an erosion in that confidence because of some 
of the activities we have seen. Trying to strike that balance is truly 
the interest of this Senator, the Senator from [[Page S 8943]] New 
York, the Senator from New Mexico, and others.
  There will be some amendments. Some of them, as my colleagues know, I 
support. The statute of limitations, I support that. My colleague from 
New York wants that. I wanted to keep that in the bill.
  We will be together on a few of these things. When we deal with the 
legislative process, it is darn near impossible to strike that perfect 
balance all the time.
  The Senator from Maryland is correct. Anyone who sits here and says 
with absolute certainty they know what will happen as a result of 
legislation they pass, has not been here very long, or never been in 
the legislative process. We know the system is not working well. We are 
trying to correct it.
  Obviously, how the markets respond, what happens down the road in 
many ways, we will have to deal with as it occurs. Maybe we have not 
gone far enough. Maybe we have gone far in some areas.
  No one here claims perfection. Clearly, we need to address a present 
situation that is not working. My hope and desire over the next 2 or 3 
days, we have the four, five, six amendments that I think we will have, 
that possibly we can address some of these issues, modify the bill if 
that is necessary, in a few areas to accommodate some of these 
interests, but move the process along so we have a chance to address 
the underlying concerns people have raised about the present situation.
  I thank my colleague for listening. I yield the floor.

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