[Congressional Record Volume 160, Number 152 (Friday, December 12, 2014)]
[Extensions of Remarks]
[Pages E1827-E1828]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        FINANCIAL VICTIMIZATION

                                 ______
                                 

                           HON. SCOTT GARRETT

                             of new jersey

                    in the house of representatives

                      Thursday, December 11, 2014

  Mr. GARRETT. Mr. Speaker, for approximately the past six years, 
innocent customers of three failed broker-dealers--the securities firms 
of Bernie Madoff, Allan Stanford, and McGill, Smith, have been unfairly 
victimized time and time again despite the existence of remedial 
legislation enacted by Congress for the specific purpose of protecting 
such customers.
  Initially these customers were victimized by the nefarious 
fraudsters, whose Ponzi schemes caused the failure of several 
securities firms and resulted in financial devastation for so many. 
Next, these customers were victimized by the Securities Investor 
Protection

[[Page E1828]]

Corporation (SIPC) and their henchmen, whose antics, behavior, and 
positions were the antithesis of investor protection--financial self 
interest and preservation clearly appeared to be their guiding mantra. 
Finally, when SIPC sought the Court's blessing for its wrongful conduct 
and breach of trust, the court's bizarre deference to SIPC and their 
blatant misapplication of the Securities Investor Protection Act (SIPA) 
resulted in a perverted process and erroneous interpretations of SIPA, 
which, further victimized these customers by depriving them of the 
financial protections and benefits mandated by SIPA and exposed them to 
draconian claw-back lawsuits seeking to strip them of what few 
remaining assets they might still possess.
  Examples abound supporting these conclusions. If someone walked into 
a securities firm and purchased a stock or a bond, who would believe 
that such a person would not be considered a ``customer'' and would be 
denied basic Congressionally created customer protections? Why would a 
customer of a failed securities house, one who had no knowledge of a 
Ponzi scheme operated by the broker-dealer, be subjected to costly 
litigation to defend the returns their account statements told them 
they had earned from their investments? Why would a customer of a 
broker-dealer receive a monthly ``account statement'', purporting to 
evidence their financial position at the firm, and later the parties 
charged with protecting the rights of those customers be allowed to 
disregard those statements and eliminate all stated returns in the 
account? And who could have ever anticipated that this same entity 
would elect to adopt a ``valuation'' methodology patently designed to 
provide the lowest values to the customers in order to maximize its own 
bank accounts and resources? While these results seem fanciful and far 
fetched, they are the realities that innocent customers of these three 
broker dealers have had to endure.
  While the courts are charged with the responsibility of interpreting 
statutes, that function properly involves determining Congressional 
intent. If, as here, the Courts have misinterpreted that intent, it is 
then the role of Congress to reaffirm what it actually meant and to 
clarify how Congress meant to achieve the desired results. Thus the 
Garrett-Maloney bill is not an attempt to rewrite SIPA retroactively. 
Rather it is intended to reaffirm what Congress meant all along--the 
protection of innocent customers who have been defrauded by a dishonest 
broker-dealer.
  When Congress reconvenes in January, we will expeditiously address 
these important issues--victims have been victimized for too long. 
Victims will receive what they are due. Victims who had no actual 
knowledge of the frauds will be extricated from the harassing ``claw 
back'' lawsuits. Much progress was made on these issues during the past 
two years--numerous hearings were held and support for the Garrett-
Maloney bill is now robust and bipartisan. Addressing these issues, and 
providing appropriate remedies for the victims, will be a top priority 
in January, indeed an urgent one.

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