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Ralph Nader > In the Public Interest > Senate Banking Committee

“Why is the Senate Banking Committee rushing to mark up the huge securities fraud bill (S.240) in a one day meeting before the Memorial Day Congressional recess?”, I asked a Senate aide. “Because of Courtney Ward’s departure,” he replied.

Courtney Ward, I was informed, is leaving the Committee staff of Senator Christopher Dodd (D-CT) to join the J.P. Morgan Company a New York banking and securities firm. Senator Dodd wants to get what critics have called the “crooks and swindlers’ protection act” out of the Committee before Mr. Ward starts his new job on the Washington-Wall Street shuttle.

Welcome to the Congressional — financial complex at work. In the midst of a fifteen year-long financial crime wave, dutifully documented in the Wall St. Journal and other business publications, the Congress is not strengthening these corporate crime and fraud laws: it is, astonishingly enough, dramatically weakening them.

The various draft versions of S. 240 have nothing in them that helps the defrauded investors — be they savers, pensioners, or public institutions investing public funds like Counties and state governments. Far from that desirable objective, this legislation and the draconian bill that already passed Gingrich’s House of Representatives, would over-regulate the defrauded investors by hamstringing both them and their lawyers from going to court and getting their money back.

Senators Chris Dodd, Phil Gramm and Pete Domenici are the chief culprits. Typically, they have received substantial contributions from the industries and professions that are seeking to escape responsibility for their deceptive, fraudulent and sometimes outright criminal behavior.

Billions of fleece dollars from millions of Americans are at stake here. The state agencies regulating securities, along with county and state associations, trade unions, AARP, consumer and institutional investors have opposed this bill. To no avail, yet. The Wall St. rollercoaster is rolling through Congress greased with campaign finance money.

Securities and Exchange Chairman, Arthur Levitt, has testified in opposition to many provisions of the bills. He does not like shortening the period of time during which investor class actions can be filed in court. He wants to restore the legal responsibility to private investors of those firms –‘such as accounting and law firms — that aid and abet these schemes.

And he especially wants deleted a provision that even immunizes financial crooks who willfully and recklessly defraud people unless the victims can prove the crook’s state of mind or intent.

What Chairman Levitt wants Congress to do is to provide the SEC with more general authority to deal with any problems through its agency rule-making. The Republicans and some Democrats in Congress want none of this. They want to limit the liability of these suave crooks and swindlers in the law itself and prevent the open hearings and more deliberate processes of the SEC from deciding.

This nation is being mistreated to a runaway, corrupt Congressional move here. In spite of massive evidence of past financial frauds (the Savings and Loan debacle is costing American taxpayers one half a trillion dollars in principal and interest for the bailout) the Capitol Hill minions of the financial industry composed of banks, securities firms, investment bankers, insurance companies are not listening.

These politicians refuse even to listen to their own Congressional Research Service whose recent report concluded that there is no explosion of “warrantless class action suits.” “By the standard of. . . the federal courts. . . these potentially ‘abusive’ securities suits [by investors] remain exceptionally small.” Yet when you ask these Congressional friends of Fraud why they are doing this, they say that there are too many frivolous suits. The facts mean nothing to them.

There are too many giant frauds, like the Prudential Securities racket, that have cost investors over one billion dollars, the Towers Financial Ponzi scheme that cost investors $460 million and hundreds of other diverse crimes and deceptions in recent years.

Call your Representative or Senators and ask them to mail you a copy of the securities fraud bills and explain to you whether they support or oppose them.

By the way, Courtney Ward got his bill rushed out by a vote of 11 to 4 in the Senate Banking Committee. He can take it as a trophy to J.P. Morgan, Inc. when he reports to work in June.