[Congressional Record Volume 141, Number 192 (Tuesday, December 5, 1995)]
[Senate]
[Pages S17991-S17997]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995--CONFERENCE REPORT

  The Senate continued with the consideration of the conference report.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. BIDEN. Mr. President, I rise today to oppose, in the strongest 
terms possible, H.R. 1058--inappropriately titled the ``Private 
Securities Litigation Reform Act of 1995.'' This bill has nothing to do 
with reform in the normal sense of the term. Rather, the bill is about 
protection from liability for fraud--pure and simple. The bill is the 
worst kind of special interest legislation that the American public is 
sick and tired of.
  It will give corporations a license to lie to investors and will 
severely restrict the ability of defrauded investors to recover their 
hard-earned dollars from the unscrupulous and reckless individuals and 
corporations who swindled them.
  Six months ago, I stood on the Senate floor and urged my colleagues 
to oppose this bill in its earlier incarnation because--put simply--it 
was a bad bill. Because it was a bad bill, every major consumer group, 
State attorneys general, State and county treasurers, mayors, finance 
officers, labor unions, the American Association of Retired Persons, 
the National League of Cities, educators, and hundreds of other 
nations, State, and local organizations, opposed the bill.
  It is easy to understand why when you consider that a city like San 
Francisco has over $8 billion in pension funds and other investments 
and when more than 60 State and local governments nationwide have lost 
more than $3.6 billion in securities markets, partly due to derivative 
investments.
  Despite the tremendous opposition to H.R. 1058, which was a bad bill 
in June, it is a worse bill now. Therefore, I strongly urge my 
colleagues to oppose it.
  What is most disturbing about this bill is the impact that it will 
have on what are often the forgotten Americans--that is, average 
middle-class Americans.
  At a time when job and wage insecurity are at all-time highs, and 
family budgets are straining at the seams, middle-class Americans have 
begun investing their hard-earned dollars in stocks in record numbers. 
In fact, as the Washington Post reported just a few days ago, 
securities have supplanted real estate as the No. 1 source of family 
nest eggs.
  Middle-class Americans believe they must invest because there may not 
be a decent pension when they retire--either they will be let go too 
soon because of corporate down-sizing or their company, to which they 
have been loyal, will not be there 20 or 30, or even 10 years from now.
  Middle-class Americans also want to invest for the future because 
they aren't sure that Social Security or Medicare will be there for 
them in their later years when they are most vulnerable.
  Last, middle-class Americans believe they must invest to ensure that 
their children are able to receive an education that provides them with 
the essential skills to enable them to become productive and integral 
participants in what will be an extremely competitive and global work 
force in the 21st century.
  Because middle-class Americans recognize the need to secure and 
protect their financial futures, they have entered to stock market 
directly--or through mutual funds--to such a degree that the most 
significant asset held by American families today is not their home, 
but their 401(k) plan. Today, assets in 401(k) plans total more than 
$500 billion. Assets in investment retirement accounts total more than 
$1 trillion. The majority of these funds are in stocks.
  Under these circumstances, this Nation's two primary securities 
laws--the Securities Act of 1933 and the Securities and Exchange Act of 
1934--have become even more, not less, important.
  The principal philosophy governing these two laws--enacted more than 
60 years ago after the stock market crash of 1929, caused largely by a 
crisis of confidence due to unregulated fraudulent stock promotion--is 
that investors and prospective investors should have access to all 
material information about corporations that offer securities so that 
the public can make informed investment decisions and that honest 
markets should be maintained by strong antifraud enforcement.
  At a time when middle-class Americans are investing in record numbers 
because they believe they must, the U.S. Congress should be 
strengthening the most fundamental protections for investors in our 
securities laws, not gutting them. Yet, gutting these laws is exactly 
what this bill does.
  This bill strikes a severe blow to the heart of the middle class. Let 
me tell you about just a few of the devastating provisions in this 
bill.
  One of the most outrageous provisions in this bill is the safe harbor 
provision. This provision, by providing broad immunity from liability 
for fraudulent corporate predictions and projections, essentially gives 
corporations a license to lie. This provision is much worse than the 
safe harbor provision in the Senate bill.

[[Page S 17992]]

  The Senate bill language that made knowingly fraudulent defendants 
ineligible for the safe harbor was eliminated. Now, under this bill, 
deliberately fraudulent statements, written or oral, as long as they 
are accompanied by cautionary language, will be immunized from private 
liability. Let me repeat--this bill protects deliberately fraudulent 
statements.
  Let me give you a frightening but likely scenario that could occur 
under the safe harbor provision in this bill: In an effort to entice 
unsuspecting consumers to purchase stock, company X makes a bunch of 
optimistic and fraudulent predictions about how great a new product 
will perform and how the company's profits will increase because of the 
manufacture of this new product. The company gets its lawyers and 
accountants to vouch for the representations.
  Based on these rosy predictions, your uncle, your grandmother, your 
sister's teacher's union, your church, and the State of California 
decide to purchase the stock. All of them wind up losing their money 
when the fraud is exposed. Your grandmother believes the company should 
not be able to get away with lying to her. The company's lawyers argue, 
however, that even though there were fraudulent statements, there was a 
paragraph of cautionary language in some filing at the Securities and 
Exchange Commission. Under this bill, grandma loses, all the swindled 
investors lose, and the fraudulent company and its lawyers and 
accountants win.
  This is absolutely outrageous. And it's just one example of the many 
anti-investor provisions in this bill.
  To add insult to injury, this bill also fails to restore traditional 
aiding and abetting liability for securities fraud in private actions. 
Thus, lawyers, accountants, and others who turn a blind eye to the 
fraudulent activity of their clients, or who recklessly aid and abet 
their clients, will be let off scott free.
  The bill also dramatically erodes the doctrine of joint and several 
liability and moves to a system of proportionate liability. The bottom 
line for an investor is that under this bill, if a corporate defendant 
is found guilty of fraud and goes bankrupt, the victim will not be able 
to recover all of his losses. In essence, what this bill does is 
determine, as policy matter, that it is more important to protect 
adjudged wrongdoers from having to pay more than their strict 
proportion of the harm than it is to protect the innocent victims of 
fraud.
  Another of the troubling provisions in this bill, is the one which 
adopts a higher pleading standard than was in the Senate bill--higher 
in fact than the standard adopted by the second circuit--which is 
currently the highest standard in the land.
  As my colleague Senator Specter discussed earlier, it was Senator 
Specter who offered an amendment that clarified that the heightened 
pleading standard in the Senate bill could be satisfied by evidence of 
a defendant's motive and opportunity to commit securities fraud. The 
current version of this bill, however, eliminates the language in the 
Specter amendment.
  This bill is also worse than the Senate bill because it imposes a 
mandatory loser-pays fee shifting penalty under rule 11 of the Federal 
Rules of Civil Procedure that is harsher on plaintiffs than on 
defendants.
  Under current law, rule 11 gives courts the discretion to impose 
sanctions for pleadings and motions that are unwarranted, without 
evidentiary support, or otherwise abusive.
  The Senate bill required courts to determine whether any party 
violated rule 11 and to presume that the appropriate penalty for 
violating rule 11 is fee shifting. Under the Senate bill, the party who 
violated rule 11 would have to pay the opposing party's legal fees 
incurred as a direct result of the violation.
  The bill on the floor today is worse than the Senate bill because it 
unfairly increased the penalty imposed against plaintiffs who are found 
to have violated rule 11 while not doing so for defendants who are 
found to have violated rule 11. The presumptive penalty for plaintiffs 
is have to pay all of the defendant's legal fees and costs incurred in 
the entire action.
  Proponents of this bill claim that the bill is balanced and fair. Is 
this provision balanced or fair? Not by any stretch of the imagination.
  This bill, unlike the Senate bill, also adopts a provision, modeled 
on the House bill, that may require plaintiffs to post a bond to cover 
a possible fee-shifting penalty. Moreover, there is no limitation on 
the amount of the bond. This could be a major obstacle for individual 
victims or their attorneys in bringing a meritorious action against a 
large corporation defendant. The bill also fails to restore an adequate 
statute of limitations for private securities fraud actions, and gives 
the greatest control in cases to the wealthiest plaintiffs.
  Lastly, as someone who has long sought to do what he could to combat 
crimes of all kind, I also find it incredible that language in the 
Senate bill concerning the application of our RICO laws in securities 
fraud cases has been almost eliminated entirely.
  Under an amendment I offered, the Senate bill allowed the RICO 
statute to be used in a securities fraud civil case if at least one 
person in the civil case has been criminally convicted. Under this 
bill, RICO could only be used in the civil case against the person who 
was actually criminally convicted.
  The safe harbor, proportionate liability, pleading, aiding and 
abetting, fee-shifting, and RICO provisions, are bad enough alone, but 
together, they will actually encourage the kind of conduct our 
securities laws were designed to eliminate.
  I am sure that there is not one Member in this body who does not want 
to bring an end to all frivolous lawsuits, not just shareholder 
lawsuits. Yet, the legislation before us today is not the answer--it is 
far from it.
  Indeed, the managing editor of Money magazine, the largest financial 
publication in the United States, with over 10 million, largely middle-
class readers, said it well when he stated, and I quote:

       At a time when massive securities fraud has become one of 
     this country's growth industries, this law would cheat 
     victims out of whatever chance they may have of getting their 
     money back . . . in the final analysis, this legislation . . 
     . would actually be a grand slam for the sleaziest element of 
     the financial industry, at the expense of ordinary citizens.

  The president of the Fraternal Order of Police said it best, however, 
when, in his letter to the President urging him to veto the bill, he 
stated:

       Mr. President, our 270,000 members stand with you in your 
     commitment to a war on crime; the men and women of the 
     Fraternal Order of Police are the foot soldiers in the war. 
     On their behalf, I urge you to reject a bill which would make 
     it less risky for white collar criminals to steal from police 
     pension funds while the police are risking their lives 
     against violent criminals!

  I urge my colleagues to heed these words.
  Mr. BRYAN. Mr. President, I thank the distinguished senior Senator 
for his statement and for his insight.
  Mr. COHEN. Mr. President, I am well aware of the hazards of abusive 
class action lawsuits and unethical attorney conduct.
  Just before Thanksgiving there was an article on the front page of 
the New York Times about a constituent of mine who received a benefit 
of $2.91 from a class action suit concerning overcharges in mortgage 
escrow accounts, but had $91.00 removed from his account to pay the 
attorney's fees of class counsel. I will soon be introducing 
legislation to protect consumers from these types of abuses.
  There are undoubtedly abusive securities class actions as well. But 
the key to reforming this area of the law, like all litigation reform, 
is to devise remedies that will weed out the frivolous lawsuits while 
allowing the meritorious ones to go forward.
  The conference report under consideration contains a number of 
necessary and well-crafted reforms. It requires that class members 
receive intelligible notices explaining the terms of class action 
settlements, prohibits secret settlement agreements, and promotes 
enforcement of rules sanctioning attorneys for unethical behavior.
  Unfortunately, the conference report also contains provisions that 
will prevent potentially meritorious cases from being pursued. In some 
instances, those who knowingly and intentionally mislead investors will 
be fully immunized from liability. Consequently, I will vote against 
this conference bill as I did when it was first considered by the 
Senate.
  I am especially concerned about the consequences that the bill will 
have on 

[[Page S 17993]]
the elderly. The Special Committee on Aging, which I chair, has held a 
series of hearings on fraud against small, unsophisticated investors.
  The committee's investigation revealed that in an era of low interest 
rates, when retirees are seeking out higher yield investments, the 
elderly are particularly vulnerable to securities scams. Fraud against 
the elderly is particularly odious because their savings cannot be 
replaced by new earnings--losses resulting from fraud can affect 
middle-income seniors' standard of living for the rest of their lives.
  The safe-harbor contained in the conference report shields issuers of 
securities, or those working on their behalf, from lawsuits based on 
predictive statements they make about the future performance of a 
stock. The immunity is absolute, so long as the predictions are 
accompanied with cautionary statements indicating that actual results 
may differ from those predicted.
  The effect of this safe harbor is that corporate officials are immune 
from suit even if they make factual statements that they know to be 
false and that are intended to mislead investors. At least under the 
Senate bill, knowing and intentionally misleading statements would have 
been actionable. I am disappointed that the conference committee chose 
to broaden, rather than narrow, this provision.
  I am also concerned about the cumulative effect of some of the 
procedural changes made to the bill.
  The bill requires that before initiating a suit a plaintiff must be 
able to allege specific facts giving rise to a strong inference of the 
defendants' state of mind. A Senate amendment clarifying how plaintiffs 
could meet this burden was dropped by the conference. In addition, the 
bill prohibits plaintiffs from taking any discovery before it must 
defend a motion to dismiss the lawsuit.
  Together, the pleading standard and the bar on discovery will make it 
extraordinarily difficult to maintain a lawsuit because it is virtually 
impossible to prove the state of mind of a party until you have an 
opportunity to conduct interviews and examine documents.
  These and other provisions will not only deter frivolous lawsuits, 
but will create roadblocks and obstacles to suits that seek recoveries 
for genuine victims of fraud. For decades these private class action 
lawsuits have provided a necessary supplement to the enforcement 
efforts of the Securities and Exchange Commission.
  Enforcement of the securities laws and the confidence in our markets 
that these laws have engendered have contributed to making our stock 
markets the most robust in the world. The benefits this legislation is 
intended to achieve--the deterrence of abusive litigation--does not 
justify the potential costs of weakening an enforcement scheme that has 
effectively protected our markets for many years.
  Mr. GRAMS. Mr. President, I rise in support of the conference report.
  I am proud to say that I served on the conference committee which 
produced this report. As a freshman Senator, I was particularly honored 
to play a role in crafting legislation which will benefit so many 
Americans who find themselves victimized by the social costs of 
frivolous litigation.
  The legislation before us today, H.R. 1058, is entitled the ``Private 
Securities Litigation Reform Act of 1995.'' In my opinion, a better 
title would have been the ``Investors, Workers and Consumers Legal 
Protection Act.'' After all, this legislation is designed to protect 
those very people--investors, workers and consumers--from the high cost 
of meritless and abusive litigation.
  Today, we have an opportunity to make some modest and reasonable 
changes which will help weed out the most abusive lawsuits in the field 
of securities litigation while at the same time, preserving the right 
of action for shareholders who are truly victimized by securities 
fraud.
  I am particularly pleased with a number of the provisions in this 
bill, including:
  Mandatory sanctions against attorneys who file abusive lawsuits;
  Codification of the pleading standard adopted by the second circuit 
court of appeals;
  Elimination of bounty payments to named plaintiff, plaintiff referral 
fees, and undeserved windfall damages;
  A safe harbor for forward-looking statements to encourage companies 
to voluntarily disclose information to help investors make better 
decisions; and
  A reduction in the level of liability for secondary defendants who do 
not knowingly engage in securities fraud.
  In addition, I am pleased that this legislation does not extend the 
current statute of limitations established by the U.S. Supreme Court in 
the 1991 Lampf decision. That's one year from the date the plaintiff 
knew of the alleged violation and 3 years from the date the alleged 
violation occurred.
  While some critics of this legislation have seized upon the statute 
of limitations as a wedge to defeat this important bill, they have 
failed to present a convincing case for why this period should be 
extended.
  They have tried to suggest that the current statute of limitations 
has curbed the number of meritorious cases filed in the courts, but the 
evidence proves otherwise.
  According to the administrative office of the U.S. courts, during the 
4 years prior to the Lampf decision, the average number of cases filed 
was 162 per year. In the 4-year period since Lampf, the average number 
of cases filed has risen to 278 per year, an increase of nearly 72 
percent.
  Contrary to the claims of the bill's opponents, securities litigation 
has increased under Lampf, not decreased. This should not be 
surprising, given the fact that many of these claims can now be filed 
within days, even hours, after a movement in the market.
  There are a number of other reasons why the current statute of 
limitations should be preserved.
  A longer period would simply allow speculators too much time to wait 
and see how their decisions to buy or sell securities turned out, 
permitting them to abuse our legal system to cover their losses in the 
market.
  In addition, a longer period of limitations would make it more 
difficult for innocent defendants to protect themselves in court. 
Forcing companies to keep track of every rise and fall of their stock 
value for 5 years and allowing strike suit attorneys to attack job 
creators well after the memory of a reasonable person would have faded 
would only lead to more frivolous litigation, more exorbitant 
settlements, and more pain for investors, workers and consumers.
  Under current law, plaintiffs with meritorious claims have more than 
enough time to file their suits; unfortunately, so too do strike suit 
attorneys. Even with the enactment of this bill, some meritless claims 
will survive. If our intent is to reverse the current litigation 
explosion, why would we want to invite more frivolous lawsuits by 
extending the statute of limitations?
  In June, when this legislation was debated on the Senate floor, 52 of 
our colleagues wisely decided to retain the current statute of 
limitations. That was the right decision in June and it is the right 
decision today, and I am pleased that this conference report preserves 
current law.
  Finally, I'd like to say something about how this legislation will 
benefit everyday Americans. Securities litigation reform is not a 
subject discussed every morning around the kitchen table, but its 
results will have a major and beneficial impact on most Americans.
  It will protect the worker who worries about being laid off because 
his employer had to pay attorneys' fees instead of his salary.
  It will help the consumer who has to pay higher prices for products 
today because of the hidden cost of frivolous litigation.
  It will pay off for the legitimate investors and pensioners whose 
life savings are being jeopardized by strike suit attorneys.
  And finally, it will benefit the thousands of honest, hard-working 
attorneys who have watched the public image of their profession being 
tarnished by a few greedy quick change artists.
  It is for the sake of these Americans that we have put in long hours 
of hard work to craft this balanced and reasonable bill.
  None of us are totally satisfied with this legislation. There are 
some supporters who feel that certain provisions in the conference 
report go too far. 

[[Page S 17994]]
 There are others like me who would like to see this legislation go 
further. But I think we can all agree that this conference report does 
what it's supposed to do: protect legitimate investors, save jobs, and 
preserve the right of actions for true victims of securities fraud.
  When I think of this bill, I am reminded of a quote by one of the 
strike suit attorneys who testified on this subject before the Senate 
Banking Committee. In a moment of honesty, this prominent and wealthy 
securities action lawsuit attorney said: ``I have the best practice of 
law in the world. I have no clients.''
  In my opinion, these words best illustrate the problem that this 
legislation is designed to address.
  I commend the managers of the conference, Senator D'Amato and 
Congressman Bliley, for crafting this report, as well as our 
colleagues, Senators Domenici and Dodd for pushing this issue for so 
many years.
  As a conferee, I am proud to have played a role in this legislation 
and urge my colleagues to adopt the conference report.
  Mr. BRYAN. Mr. President, I ask unanimous consent I be allowed to use 
a portion of the time of the senior Senator from Minnesota as he will 
not be on the floor.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BRYAN. Mr. President, if I may, there has been some discussion as 
to the position of the Securities and Exchange Commission on this piece 
of legislation. I have in my possession a letter dated November 22, 
signed by Arthur Levitt, the Chairman of the Securities and Exchange 
Commission, who has written to the Los Angeles Times, the editor, Mr. 
Coffey. I am just going to read a portion of his statement: ``I am 
concerned and disappointed with several major points in today's Los 
Angeles Times article entitled `SEC Chief Shift on Investor Bill is 
Linked to Senate Pressure.' '' The Chairman goes on to say, ``The 
article is wrong in reporting that I now support the litigation reform 
bill.''
  I think that needs to be said. The Chairman of the SEC has not and 
does not support the legislation in the current form.
  I ask unanimous consent that the letter be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                               U.S. Securities and


                                          Exchange Commission,

                                Washington, DC, November 22, 1995.
     Shelby Coffey III,
     Editor, Los Angeles Times, Times Mirror Square, Los Angeles, 
         CA.
       Dear Mr. Coffey: I am concerned and disappointed with 
     several major points in today's Los Angeles Times article 
     entitled ``SEC Chief Shift on Investor Bill Is Linked to 
     Senate Pressure.''
       The article is wrong in reporting that I now support the 
     litigation reform bill.
       The article is wrong in reporting that I've reversed my 
     position.
       The article is wrong in reporting that my position was 
     influenced by political pressure.
       In the sub-heading and again in the lead sentence of the 
     article, I am represented to ``back'' and ``support'' the 
     proposed legislation. This is simply not the case. This point 
     was repeatedly stressed to the reporter.
       Secondly, the position outlined in the SEC's letter in no 
     way can be construed as a reversal of the SEC's position. The 
     article fails to describe the significant changes that were 
     made in the most recent draft of the legislation that 
     precipitated our letter. To do so would have made it clear 
     that our letter did not represent any ``reversal.''
       Finally, my staff repeatedly and unequivocally expressed to 
     Mr. Paltrow that it was simply not true to say that the SEC 
     responded to political pressure in issuing our letter. The 
     letter represents the Commission's position arrived at 
     thoughtfully, independently and deliberately. To suggest 
     anything less is an insult. To build an entire story about 
     political influence around one quote from one Senate staff 
     member opining about the motivations of the SEC is, at best, 
     unfair; especially when you consider that the two SEC 
     Commissioners who signed the letter--the only people in any 
     position to accurately describe the circumstances surrounding 
     it--unambiguously denied that they did so in response to 
     political pressures.
       I hope you will correct these misstatements.
           Sincerely,
                                          Arthur Levitt, Chairman.

  Mr. BRYAN. Mr. President, I realize it is very easy to demonize 
lawyers. Some of my colleague who have taken the opportunity this 
afternoon and this morning to do so would not be the first to do that. 
Dating back to the time of Shakespeare, ``The first thing we ought to 
do,'' Shakespeare said, ``is kill all the lawyers.''
  I believe this is not a warm, cuddly group that is easy to love. 
Having once practiced law, I share some of that antipathy to lawyers, 
when lawyers get out of line, as they from time to time do.
  As I indicated, I fully support the provisions that deal with the 
frivolous lawsuits, and my colleague from Minnesota itemized a number 
of those.
  Let me try to turn this to a broader perspective: Over 150 editorials 
and columns that have appeared in newspapers across the United States, 
in every region, newspapers whose philosophies are conservative, 
liberal, middle of the road. Overwhelmingly, the informed judgment and 
opinion by these editorial writers is in strong opposition to the 
bill--not because they do not recognize, as I, and I think all of my 
colleagues do, that we need to make some changes with respect to the 
frivolous lawsuits, but because this bill goes far beyond that.
  It is really a Trojan horse in which those who seek to minimize or 
immunize themselves from liability have entered into the courtyard 
under this frivolous lawsuit flag, when in point of fact they are 
trying to protect themselves from liability after their misconduct has 
been adjudicated.
  Among those organizations that have expressed their opposition are 
the National League of Cities, the National Association of Counties, 
the Government Finance Officers Association, the U.S. Conference of 
Mayors, the Municipal Treasurers Association. I do not know what the 
political affiliation is of all of these people, but I daresay if you 
examine it you would find Republicans and Democrats alike that hold 
these offices, all essentially reaching the same conclusion, that they 
and their constituent interests, namely, the people who live in these 
various communities, are at risk in terms of being protected in the 
event that investor fraud causes them to lose money in any of the 
portfolios they hold in behalf of the public, as members of counties or 
cities, municipal officers, and others.

  I suspect that this group is about as neutral and objective as any 
that you might find. I think it is instructive that virtually all have 
expressed their strong opposition. They are extremely concerned that 
they might be the next Orange County. It could happen in their State, 
in their county, in their city to their university investment 
portfolio, and they know that they would be irreparably damaged if we 
do not take corrective action to balance this piece of legislation.
  In recent weeks, well over 1,000 State and local officials and 
opinion leaders have written the Congress and the President to express 
their strong opposition. Among those letters, Mr. President, is a 
letter signed by 99 California government officials, including the 
Mayors of San Francisco and San Jose and officials in 43 of the State's 
58 counties; a letter signed by 34 county treasurers in Arkansas; a 
letter signed by 24 opinion leaders in Iowa, including the State's 
Attorney General Tom Miller; a letter signed by 51 public officials in 
Georgia; a letter signed by 51 Maine opinion leaders, including State 
Treasurer Sam Shapiro and 9 State legislators; a letter signed by 60 
public officials in Massachusetts, including the Massachusetts 
Association of County Commissioners; a letter signed by 33 opinion 
leaders in Montana, including Attorney General Joseph Mazurek and State 
Auditor Mark O'Keefe; a letter signed by 39 officials in New Jersey, 
including the New Jersey Conference of Mayors and the New Jersey League 
of Municipalities; a letter signed by 27 Ohio public officials, 
including the mayor of Cincinnati and the Ohio County Treasurers 
Association; a letter signed by 27 Vermont opinion leaders.

  My point is that this spans the continent, from east to west, from 
north to south. Whether one is liberal, conservative, or middle of the 
road, virtually all have concluded that this legislation overreaches 
and clearly places those persons in their communities and their States 
at risk as a consequence of this legislation.
  Mr. President, I reserve whatever time I have remaining and note the 
presence on the floor of my distinguished friend and colleague, the 
Senator from Alabama, Senator Shelby.
  The PRESIDING OFFICER. The Senator from Alabama has 7 minutes.

[[Page S 17995]]

  Mr. SHELBY. Mr. President, I am disappointed to say that the 
conference report before us today is not a balanced bill. It was not a 
balanced bill when it left the Senate several months ago, and it has 
not improved by any measure in conference.
  Plain and simple, Mr. President, it remains unbalanced against the 
defrauded investor.
  I am disappointed, as I was when the Senate passed S. 240, because I 
believe that there are some worthy provisions in this bill that would 
go far in reducing frivolous suits without compromising the rights of 
victims of fraud.
  These few, worthy provisions, however, are insufficient to overcome 
the unbalanced nature of this bill.
  While I support efforts to reduce frivolous litigation, I simply 
cannot support the approach taken here today.
  This past year I have actively sought alternatives that would seek a 
middle ground between weeding out meritless litigation and preserving 
legitimate claims.
  I have actively sought alternatives that would seek a middle ground 
between eliminating economic incentives to pursue frivolous litigation 
and protecting the rights of the defrauded investor.
  And, I have actively sought alternatives that would seek a middle 
ground between opportunistic strike suits and preserving the powerful 
check of private litigation on professional misconduct.
  Earlier this year, I joined Senator Bryan in introducing a securities 
litigation reform bill that, I believe, struck the proper balance 
between protecting investors and reducing meritless litigation.
  Our bill contained some of the same worthy provisions also 
incorporated in this conference report, like the ban on referral fees 
and the payment of attorney fees from the SEC disgorgement fund, 
increasing fraud detection and enforcement and ensuring 
adequate disclosure of settlement terms.

  In addition, however, our bill sought balance by including several 
provisions to protect the rights of the defrauded investor.
  It restored aiding and abetting liability; extended the statute of 
limitations for private fraud actions to the earlier of 5 years after 
the violation or 2 years after discovery, and ensured that the victim 
of fraud was made whole in the case of an insolvent joint and several 
defendant.
  When S. 240 came before the Senate I, again, sought to improve the 
balance of the bill by offering an amendment on proportionate 
liability.
  My amendment would have ensured that the insolvency of the defendant 
does not prevent the innocent victim from obtaining a full recovery by 
making proportionate defendants liable for the remaining uncollectible 
amount of an insolvent joint and several defendant.
  Again, this provision would have weighted in favor of the victim of 
the fraud over the perpetrator of the fraud--a balance which is still 
missing from the conference report before us today.
  Mr. President, these provisions are crucial, in my view, to ensuring 
that rights of defrauded investors are not unfairly impaired in an 
effort to reduce litigation--meritorious or meritless.
  Mr. President, the conference report fails to do what S. 240 failed 
to do--and I, therefore, cannot support it.
  The conference report, put simply, fails to ensure adequate 
protection of the rights of the innocent victim of securities fraud, 
and, in fact, makes it harder for the small investor to gain access to 
the courts and obtain a full recovery for securities fraud.
  The PRESIDING OFFICER. Who yields time?
  Mr. BRYAN. Mr. President, let me express my appreciation to the 
Senator from Alabama for his comments and for his balance. I believe he 
would agree with me that there are abuses that need to be corrected. 
None of us who oppose this legislation are arguing the status quo is 
what we favor. Indeed, he is a cosponsor with me of the legislation 
that would have dealt with a number of those things. The Senator will 
recall that incorporated in that we had provisions to eliminate bonus 
payments being paid to brokers. That is dead wrong. He and I agree on 
that.
  The Senator would agree with me, I am sure, that payments that would 
be made as bonus payments to certain plaintiffs are wrong as well. The 
referral fees--we clearly agree that before a settlement should be 
effected, the lawyers on behalf of the plaintiffs need to make a full 
disclosure as to what the terms of the settlement are to be. And we 
fully agreed that, if there are frivolous lawsuits, the courts need to 
be very aggressive in imposing sanctions.
  I note my friend wants to respond. I will not purport to speak for 
him.
  Mr. SHELBY. If the Senator from Nevada will yield just for a few 
brief comments?
  Mr. BRYAN. I will be happy to.
  Mr. SHELBY. I believe in any piece of legislation we need balance. We 
need balance for the people who are the issuers of stock in the public 
domain. But, on the other hand, we need some safeguards for the 
investor. If you do not have balance in a situation, you are going to 
have trouble later.
  I believe this bill is not a panacea. This bill is fraught with 
danger. I think it is a bad bill the way it is constructed today, but 
it could have been a good bill if we had stayed with the basics and if 
we were able to work out a bipartisan approach to a very serious thing, 
and that is excessive litigation.
  No one, I believe, in his right mind could do anything but agree that 
a lot of litigation is out of control in America. But how do you 
balance that? I believe we have that responsibility and obligation, to 
make sure it is balanced, especially when you are dealing with people 
who probably are not going to be as sophisticated about the marketplace 
as people who come to the marketplace, but will invest their life 
savings and will invest everything they have. And what remedy will they 
have in the future as victims? I think this is what some of this is 
about.

  Mr. BRYAN. Mr. President, I note the distinguished Senator from New 
Mexico is on the floor, and he previously had some time. I would be 
willing to offer him some time and ask unanimous consent that we split 
the remainder of the time.
  Mr. DOMENICI. How much time does the Senator have?
  Mr. BRYAN. I think we have about 5 minutes.
  Mr. DOMENICI. I do not need that time. I will take 2 of the 5. It is 
very generous of the Senator to split it with me.
  Mr. BRYAN. Three.
  Mr. DOMENICI. I do not really need that much, but I will accept it.
  Mr. President, I would have stopped the distinguished Senator from 
Nevada had I had a chance and asked a question. I did not do that 
because I just did not get in the right position with reference to his 
speech.
  He mentioned a lot of organizations, institutions, and editorial 
writers who are opposed to this bill. I guess if I had a chance to ask 
those associations, institutions, and editorial writers a question, I 
would just ask one. Let us assume in addressing them that I am saying, 
``Mr. Jones,''--that addresses all of them--``did you know that the 
investors' share of what is collected in a lawsuit of the type we are 
concerned about, out of every dollar collected, that 14 cents goes to 
the investor?'' That is that poor stockholder that everybody is talking 
about being sorry for. Fourteen cents goes to that person, and the 
balance, if my arithmetic is correct, 86 cents goes to the lawyers, 
court costs, deposition costs, and the other things.
  That is why the program needs to be fixed. There is no doubt about 
it. This part of the American judicial system and litigation system is 
not working. It is not worth the consequences to the enterprises being 
affected that normal litigation brings to the marketplace of American 
capitalism. It is sort of part of the system that has gone eccentric, 
that lawyers have found a bird's nest on the ground, and this is the 
result--settlements all over the place, deep pocket lawsuits, and even 
with all of that available to the lawyers of this country, 14 cents 
goes to that little investor whom everybody is trying to protect.
  I would like to close by saying I am very pleased that the oldest and 
largest investment group around that takes care of small stockholders, 
the National Association of Investors Corp., which has a letter to the 
President saying protect their stockholders, endorses this.
  There is a long list here of investors who say to the President, ``We 
want 

[[Page S 17996]]
your support.'' There is a huge list from the American Business 
Conference to the public trading companies, maybe 30 of them.
  I ask unanimous consent that all of these be printed in the Record in 
support of the cause that this bill contains.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                           National Association of


                                        Investors Corporation,

                                  Royal Oak, MI, October 25, 1995.
     The President,
     The White House,
     Washington, DC.
       Mr. President: I am writing as chairman of America's oldest 
     and largest organization of small investors--the lifeblood of 
     our nation's capital markets. NAIC is a prime mover behind 
     the popular trend of investment clubs, where investors share 
     information and expertise while reducing risks. The number of 
     investment clubs affiliated with NAIC has grown to 17,000, 
     representing more than 325,000 individual investors.
       Mr. President, America's small investors urgently want 
     reform of our broken system of securities litigation.
       We pride ourselves in making our own investment decisions, 
     based on information in the marketplace. But because of the 
     current legal system, we have been getting less and less 
     access to voluntary information from publicly traded 
     companies. Companies balk at disclosing useful information 
     for fear of frivolous class-action securities lawsuits. To 
     make matters worse, meritless securities lawsuits unjustly 
     take money from the pockets of small investors by driving 
     down the value of growth companies in which we invest. In the 
     past four years alone, class-action securities suits have 
     milked more than $2.5 billion from American companies. 
     Plaintiff's lawyers have pocketed approximately one-third--
     $825 million--of these funds that otherwise could have gone 
     to more productive use.
       We want to be able to recover our investments in cases 
     where we have been defrauded. Just as important, we want 
     protection from unscrupulous ``strike suit'' attorneys who 
     file baseless suits that coerce companies into spending our 
     investment capital on settlement and defense costs.
       That is why NAIC members support securities litigation 
     reform legislation that cracks down on frivolous securities 
     lawsuits while strengthening effective protection against 
     real fraud. The bill's strong new fraud prevention provision 
     would require public auditors to identify and report illegal 
     activities as soon as discovered. This reform bill stops the 
     abusive practice of using ``professional plaintiffs'' who buy 
     small amounts of stock in many companies simply to gain the 
     right to sue. It gives real investors more power to direct 
     securities lawsuits.
       Mr. President, on behalf of small investors across the 
     nation, I urge you to work with Congress to enact securities 
     litigation reform into law this year.
           Sincerely yours,
     Thomas E. O'Hara.
                                                                    ____


 Investors and Those Who Protect Investors Have Spoken Out in Favor of 
                      Securities Litigation Reform

       National Association of Investors Corporation, the largest 
     individual shareowners organization in the United States.
       Managers of public and private pension funds, including: 
     New York City Pension Funds, Connecticut Retirement and Trust 
     Funds, Oregon Public Employees' Retirement System, State 
     Universities Retirement System of Illinois, Teachers 
     Retirement System of Texas, State of Wisconsin Investment 
     Board, Washington State Investment Board, Eastman Kodak 
     Retirement Plan.
       State treasurers and state officials responsible for state 
     securities laws and pension funds, including: Treasurer, 
     Commonwealth of Massachusetts, Treasurer, State of Ohio, 
     Treasurer, State of Illinois, Commissioner of Corporations, 
     California, Treasurer, State of North Carolina, Treasurer, 
     State of South Carolina, Treasurer, State of Delaware, 
     Treasurer, State of Colorado.
       Senior citizen investors spoke out in a recent poll in 
     favor of legal reforms to curb lawsuit abuse.
                                                                    ____


               Supporters of Securities Litigation Reform

       American Business Conference.--Members of the American 
     Business Conference include 100 chief executive officers of 
     high-growth companies with revenues over $25 million. ABC 
     serves as the voice of the midsize, high-growth job creating 
     sector of the economy.
       American Electronics Association.--The American Electronics 
     Association represents some 3,000 companies in 44 states that 
     span the breadth of the electronics industry, from silicon to 
     software, to all levels of computers and communication 
     networks, and systems integration.
       American Financial Services Association.--The American 
     Financial Services Association is a national trade 
     association for financial service firms and small business. 
     Its 360 members include consumer and auto finance companies, 
     credit card issuers, and diversified financial services 
     firms.
       American Institute of Certified Public Accountants.--The 
     American Institute of Certified Public Accountants is the 
     national professional organization of over 310,000 CPAs in 
     public practice, industry, government, and academia.
       Association for Investment Management and Research.--The 
     Association for Management and Research is an international 
     nonprofit membership organization of investment practitioners 
     and educators with more than 40,000 members and candidates.
       Association of Private Pension and Welfare Plans.--The 
     Association of Private Pension and Welfare Plans membership 
     represents the entire spectrum of the private pension and 
     employee benefits community: Fortune 500 companies, banks, 
     insurance companies, law, accounting, consulting, investment 
     and actuarial firms. APPWP members either sponsor directly or 
     administer employee benefit plans covering more than 100 
     million Americans.
       Association of Publicly Traded Companies.--The Association 
     of Publicly Traded Companies has an active membership of over 
     500 corporations consisting of a broad cross section of 
     publicly traded companies, especially those traded on the 
     NASDAQ national market.
       BIOCOM/San Diego (Formerly the Biomedical Industry 
     Council).--BIOCOM/San Diego is a business association 
     representing over 60 biotechnology and medical device 
     companies in San Diego, CA.
       Biotechnology Industry Organization.--The Biotechnology 
     Industry Organization represents more than 525 companies, 
     academic institutions, state biotechnology centers and other 
     organizations involved in the research and development of 
     health care, agriculture and environmental biotechnology 
     products.
       Business Software Alliance.--The Business Software Alliance 
     promotes the contained growth of the software industry 
     through its international public policy, education and 
     enforcement programs in more than 60 countries, including the 
     U.S., throughout North America, Asia, Europe and Latin 
     America. BSA represents leading publishers of software for 
     personal computers.
       Information Technology Association of America.--The 
     Information Technology Association is a major trade 
     association representing over 5,700 direct and affiliated 
     member companies which provide worldwide computer software, 
     consulting and information processing services.
       National Association of Investors Corporation.--The 
     National Association of Investors Corporation is the largest 
     individual shareowners organizations in the United States. 
     NAIC has a dues-paid membership of investment clubs and other 
     groups totalling more than 273,000 individual investors.
       National Association of Manufacturers.--The National 
     Association of Manufacturers is the nation's oldest voluntary 
     business association, comprised of more than 13,000 member 
     companies and subsidiaries, large and small, located in every 
     state. Its members range in size from the very large to the 
     more than 9,000 small members that have fewer than 500 
     employees each. NAM member companies employ 85% of all 
     workers in manufacturing and produce more than 80% of the 
     nation's manufactured goods.
       National Investor Relations Institute.--The National 
     Investor Relations Institute, now in its 25th year, is a 
     professional association of 2,300 corporate officers and 
     investor relations consultants responsible for communication 
     between corporate management, shareholders, security analysts 
     and other financial publics.
       National Venture Capital Association.--The National Venture 
     Capital Association is made up of 200 professional venture 
     capital organizations NVCA's affiliate, the American 
     Entrepreneurs for Economic Growth, represents 6,600 CEOs who 
     run emerging growth companies that employ over 760,000 
     people.
       Public Securities Association.--The Public Securities 
     Association is the international trade association of banks 
     and brokerage firms which deal in municipal securities, 
     mortgages and other asset-based securities, U.S. government 
     and federal agency securities, and money market instruments.
       Securities Industry Association.--The Securities Industry 
     Association is the securities industry's trade association 
     representing the business interests of more than 700 
     securities firms in North America which collectively account 
     for about 90% of securities firm revenue in the U.S.
       Semiconductor Industry Association.--The Semiconductor 
     Industry Association represents the $43 billion U.S. 
     semiconductor industry on public policy and industry affairs. 
     The industry invests 11% of sales on R&D and 15% of sales on 
     new plant and equipment--more than a quarter of its revenue 
     reinvested in the future--and thus seeks to improve America's 
     equity capital markets.
       Software Publishers Association.--The Software Publishers 
     Association is the principal trade association of the 
     personal computer software industry, with a membership of 
     over 1,000 companies, representing 90% of U.S. software 
     publishers. SPA members range from all of the well-known 
     industry leaders to hundreds of smaller companies; all of 
     which develop and market business, consumer, and education 
     software. SPA members sold more than $30 billion of software 
     in 1992, accounting for more than half of total worldwide 
     software sales.


              Managers of Private or Public Pension Funds

       Champion International Pension Plan.--Champion 
     International Pension Plan controls over $1.8 billion in 
     total assets.

[[Page S 17997]]

       Connecticut Retirement and Trust Fund.--The Connecticut 
     Retirement and Trust Fund invests over $11 billion on behalf 
     of over 140,000 employees and beneficiaries.
       Eastman Kodak Retirement Plan.--Eastman Kodak Retirement 
     Plan manages over $10.9 billion in total assets and is ranked 
     as one of the largest 60 pension plans in the U.S.
       Massachusetts Bay Transportation Association.--With over 
     12,000 participants, the Massachusetts Bay Transportation 
     Association controls over $772 million in total assets.
       New York City Pension Funds.--Over $49 billion have been 
     invested in the fund to insure the retirement security of 
     227,000 retirees and 138,000 vested employees.
       Oregon Public Employees' Retirement System.--Assets 
     controlled by the fund total over $17.2 billion. The Oregon 
     Public Employees' Retirement System is ranked among the 
     largest 30 pension plans in the U.S.
       State of Wisconsin Investment Board.--One of the 10 largest 
     pension funds in the United States, the State of Wisconsin 
     Investment Board manages over $33 billion contributed by the 
     State's public employees.
       State Universities Retirement System of Illinois.--The 
     State Universities Retirement System is ranked as one of the 
     country's 100 largest pension funds with total assets of $5.3 
     billion.
       Teachers Retirement System of Texas.--The Teachers 
     Retirement System of Texas controls over $36.5 billion in 
     total assets on behalf of its 700,000 members.
       Washington State Investment Board.--With assets totaling 
     over $19.7 billion, the Washington State Investment Board is 
     ranked in the largest 25 pension funds.

  Mr. DOMENICI. I yield the floor.
  I thank my friend for the time.
  Mr. BRYAN. Mr. President, let me compliment my friend from New 
Mexico. I know he is sincere. He has been laboring in the vineyards for 
a good many years on this legislation. Let me say by way of rebuttal 
that, if this legislation was about how we could increase that 14 cents 
that the investors currently receive according to the information 
provided, I would like to work with him. In point of fact, the concern 
is that this legislation will, in many cases, reduce the recovery to 
zero and in no instance is there a provision in this bill that would 
enhance the recovery beyond the 14 cents even if recovery is possible.
  Finally, let me say by way of winding it up, our friend, the 
distinguished chairman of the Select Committee on Aging, has certainly 
provided a number of insights in terms of who really gets hurt in this 
legislation. He points out cogently and definitively that the seniors 
in America are going to be among its principal victims.
  Mr. President, I note that our time is up. If there is any remainder 
of time, I yield it.
  Have the yeas and nays been asked for?
  The PRESIDING OFFICER (Mr. Santorum). They have not.
  Mr. BRYAN. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the conference 
report to accompany H.R. 1058, the Private Securities Litigation Reform 
Act of 1995.
  The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. BOND (when his name was called). Present.
  Mr. LOTT. I announce that the Senator from Texas [Mr. Gramm] and the 
Senator from Delaware [Mr. Roth] are necessarily absent.
  Mr. FORD. I announce that the Senator from New Jersey [Mr. Bradley] 
is necessarily absent.
  The PRESIDING OFFICER (Mr. Abraham). Are there any other Senators in 
the Chamber who desire to vote?
  The result was announced--yeas 65, nays 30, as follows:

                      [Rollcall Vote No. 589 Leg.]

                                YEAS--65

     Abraham
     Ashcroft
     Baucus
     Bennett
     Bingaman
     Brown
     Burns
     Campbell
     Chafee
     Coats
     Cochran
     Coverdell
     Craig
     D'Amato
     DeWine
     Dodd
     Dole
     Domenici
     Exon
     Faircloth
     Feinstein
     Ford
     Frist
     Gorton
     Grams
     Grassley
     Gregg
     Harkin
     Hatch
     Hatfield
     Helms
     Hutchison
     Inhofe
     Jeffords
     Johnston
     Kassebaum
     Kempthorne
     Kennedy
     Kerry
     Kohl
     Kyl
     Lieberman
     Lott
     Lugar
     Mack
     McConnell
     Mikulski
     Moseley-Braun
     Murkowski
     Murray
     Nickles
     Pell
     Pressler
     Reid
     Robb
     Rockefeller
     Santorum
     Simpson
     Smith
     Snowe
     Stevens
     Thomas
     Thompson
     Thurmond
     Warner

                                NAYS--30

     Akaka
     Biden
     Boxer
     Breaux
     Bryan
     Bumpers
     Byrd
     Cohen
     Conrad
     Daschle
     Dorgan
     Feingold
     Glenn
     Graham
     Heflin
     Hollings
     Inouye
     Kerrey
     Lautenberg
     Leahy
     Levin
     McCain
     Moynihan
     Nunn
     Pryor
     Sarbanes
     Shelby
     Simon
     Specter
     Wellstone

                        ``ANSWERED PRESENT''--1

       
     Bond
       

                             NOT VOTING--3

     Bradley
     Gramm
     Roth
  So, the conference report was agreed to.

                          ____________________