Share this article

print logo

Victims of Madoff, Stanford join forces in pressing for restitution

WASHINGTON -- Victims of Bernard Madoff and accused Ponzi schemer Allen Stanford are banding together to lobby Congress for a law that could require Wall Street firms to pay billions of dollars to cover some of the losses they suffered.

As the groups' leaders separately walked the Capitol hallways in recent months, they learned how to find the Senate's Dirksen Office Building and to call their proposal "revenue neutral," meaning no cost to taxpayers.

They also gleaned another lesson: The broader the geographic base of support, the better the chance of legislative success. The result is a coalition of the Democratic-backed, East Coast and mostly Jewish investors defrauded by Madoff with the Republican-backed, largely Christian Sun Belt residents victimized by Stanford. The disparate groups now find themselves bound by a common notion: They've been cheated, and they want the government to make them whole.

"We had been trying for a year, breaking our necks to get attention from Democratic members," said Angela Shaw, 40, of Dallas, whose family lost $4.5 million in the Texas-based Stanford's alleged fraud.

Together, the groups hope to persuade Congress to add a requirement to the regulatory overhaul bill, now under Senate consideration, that brokerage firms pay about $4 billion in additional fees to the Securities Investor Protection Corp. fund. The SIPC protects U.S. investors' accounts against fraud or bankruptcy. The victims also want Congress to require the fund to compensate them up to $500,000 each in losses.

The lobbying effort "gives new meaning to the word chutzpah," said James Cox, a professor at Duke University School of Law. "This is just a tax increase. It's levied on banks, but customers end up paying."

Until recently, the two groups had operated separately, not winning much support except from lawmakers in their regions.

The Stanford group had backing from Richard Shelby of Alabama, the senior Republican on the Senate Banking Committee, and such other panel Republicans as Bob Corker of Tennessee, David Vitter of Louisiana and Kay Bailey Hutchison of Texas.

But Shaw needed Democratic votes. An aide to Vitter suggested she join forces with Helen Davis Chaitman, 68, a New York-based lawyer with Becker & Poliakoff and the Madoff victim leading a similar effort.

Sen. Christopher Dodd of Connecticut, the Banking Committee's chairman, and other panel Democrats such as Charles E. Schumer of New York, Jack Reed of Rhode Island and Robert Menendez of New Jersey were sympathetic.

The Madoff victims also had hired professional lobbyists in December. Russ Klenet, one of their advocates, has his own history with Ponzi schemes.

Klenet, of Russ Klenet and Associates in Fort Lauderdale, Fla., lobbied for Mutual Benefits Corp., whose executives in 2005 had settled for $25 million an Securities and Exchange Commission complaint that they defrauded 31,000 investors of more than $1 billion. The company sold investments in life insurance policies that were purchased from terminally ill people.

Klenet said he was one of 11 lobbyists hired by the company and that he aided the SEC investigation, which led him to empathize with the Madoff investors.

The Senate Banking Committee, which has been negotiating privately for months on the regulatory bill, has not met formally to discuss the victims' request. The House in December passed an overhaul measure without any restitution.

No lawmaker has come out against the investors' campaign, which may face some obstacles. While the financial industry, which benefited from a $700 billion bailout fund in 2008, has low standing in Congress, its lobbyists could argue, once they learn about the victims' request, that they had nothing to do with the frauds.

Stanford was indicted in June on charges of defrauding at least 30,000 investors of $7 billion through a Ponzi scheme that authorities allege sold bogus certificates of deposit. Stanford, in jail awaiting trial, denies the charges.

Madoff, now serving a 150-year prison sentence, pleaded guilty to a fraud that cost investors up to $65 billion.

There are no comments - be the first to comment