Victims Organizations Legislative Initiatives

1. Victims OrganizationsLegislative Initiatives Attempts to Right the Wrong

2. Initial Shock • Bernard Madoff is arrested on one count of securities fraud for allegedly operating a multi billion dollar Ponzi scheme on December 11, 2008, one day after he confesses to his sons. • Shocked investors starved for information seek answers to questions that will impact the rest of their lives • Are there any securities left in their accounts • Will SIPC be there to provide immediate funds • Are any assets left at Madoff’s firm, if so, how long to accumulate assets, and who gets compensated • What action will the government take assist investors 2

3. 3 Source: www.madofftrustee.com

4. Grim Reality • Shocked investors starved for information seek answers to questions that will impact the rest of their lives • Are there any securities left in their accounts? • No, decades of account statements prove to be fake. Madoff never executed any trades in the investment advisory business. • Will SIPC be there to provide immediate funds? • Indirect investors (those invested through feeder funds, funds of funds, and self-directed retirement vehicles) are determinedby the Trustee not to be “customers.” • Some direct investors ultimately receive funds (though hardly immediate) but all account statements are ignored by the Trustee. • Are any assets left at Madoff’s firm, if so, how long to accumulate assets, and who gets compensated? • Any remaining assets – estimated to be work several hundred million dollars, may become available through litigation, but this could take years. • What action will the government to assist investors? • Multiple pieces of legislation have been proposed. None have gotten out of Committee. 4

5. Victims’ Groups • Who are the members • Anyone who invested with Madoff either directly or indirectly through feeder funds • Proof of investment required (to exclude press and attorneys • Purpose of the groups • Share information • Solicit members who are willing to talk to the press • Organize multiple congressional letter writing campaigns • Organize members when events occur • Public Websites (e.g., www.investoraction.org) • Provide information and guidance about legislation and litigation • Serve as a conduit to share media reports • Provide information and guidance about legislation and litigation • Serve as a conduit to share media reports 5

6. Madoff Survivors and NIAP • Shortly after the fraud’s discovery, the U.S. attorney obtains and publishes a list of direct investors, including investor names and address, the beginning of a media onslaught. • January of 2009 – “Madoff Survivors” is formed as an on-line forum for Madoff victims, using the Google Groups platform. • NIAP (Network for Investor Action and Protection) was formed in late 2009 as a 501 c3 and 501 c4 (which allows for lobby efforts). • The book “The Club that No One Wanted to Join” was born of that group. Both work to educate the investing public about the risks associated with investing in the securities industry, details of the Madoff situation, and to secure legislative action to ensure fairness for all ponzi scheme victims. • NIAP has been working with a DC lobbying firm – working pro-bono to assist in legislative initiative on the hill. 6

7. Madoff Customers Mobilize • Massive letter writing campaign aimed at House and Senate Banking Committee members. • Media forums and information sessions • Frequent electronic and media interviews • Website development to share information with investors, the public and the press • “The Club No One Wanted to Join” • Attend hearings 7

8. Government to the RescueOrRoadKill in the Rearview Mirror • Many pieces of legislation have been put forward by well-meaning (?) legislators. • Hearings are held, legislators grandstand for cameras, but not one bill has left Committee 8

9. Government Assistance • Madoff fraud victims and other victims of Ponzi schemes enjoyed a rare – but welcomed ruling: • In March 2009, the IRS Commissioner approved Rev Proc. 2009 -- a “safe harbor” treatment for investments that were then deemed to be fraudulent • This allows Ponzi crime victims to recover 5 years of back taxes paid on those fact 1099s – but ONLY five years. • When SIPC denied the majority of the claims tax returns were amended and refund claims to the IRS for theft losses increased by some 300 million. Thus the broker-dealer community's responsibility was passed on to the American taxpayer and the states’ Departments of Revenue. 9

10. Too Good to be True? • Those complicit in Madoff’s crimes did receive outsized returns. While the innocent investors received returns lower than American Mutual, Fidelity, Vanguard and others for the same period. Madoff knew that frauds that pay extraordinary returns attract attention and do not last for decades. • Jeffry Picower’s accounts showed annual returns ranging from 120% to more than 550% from 1996 through 1998, and 950% in 1999. According to a June 28, 2009, MSNBC article, that would make the Picowers the biggest beneficiaries of Madoff's scam, exceeding even Madoff himself. (Picower’s widow settled with federal authorities for $7.2 billion.)

11. Too Good to be True? • Trustee, Irving Picard indicated that out of the less than 5,000 Madoff brokerage accounts there were 245 special accounts that belonged to family and friends, including Picower, Stanley Chais and others. The Club no One Wanted to Join Madoff Victims in Their Own Words pgs. 214 − 215

12. List of Proposed Legislation 10

13. Equitable Treatment of Investors Act • The Equitable Treatment of Investors Act amends The Securities Investors Protection Act (SIPA) of 1970. • The last significant amendment was in 1980 when the limit of protection was set at $500,000 -- an amount equal to $1.4 million in today’s dollars. 11

14. Key Elements of the Equitable Treatment of Investors Act • NET EQUITY BASED ON LAST STATEMENT • What your broker owes you less what your owe your broker, as per the SIPA. • This essential to a system that does not include the possession of actual security certificates but only a "book entry" system based on the essential trust of account statements • TREATMENT OF CERTAIN COMMODITY FUTURES CONTRACTS • Adds claims for commodity futures contracts where now none exists • There is currently no protection in place as the customers of MF Global are painfully aware. 12

15. Key Elements of the Equitable Treatment of Investors Act • RELIANCE ON FINAL CUSTOMER STATEMENT • Customers of registered brokers are entitled to rely on their customer statements as evidence of what their broker owes them. • SIPA was put in place to insure the reasonable expectations of investors.In a world where customers no longer hold physical securities, how could it be any other way • COMPENSATION FOR TRUSTEE AND ATTORNEY — Gives the court authority to approve fees and costs as in a regular bankruptcy • TIMING OF SIPC ADVANCES • SIPA calls for “timely” payouts – in fact, “timely” occurs 7 times in the statute. 13

16. Key Elements of the Equitable Treatment of Investors Act • PROHIBITION ON CERTAIN RECOVERIES • The trustee may not recover property transferred by the debtor to a customer • APPOINTMENT OF TRUSTEES • Provide a list of qualified candidates to the Court who will make the final decision. As it stands, SIPC chooses the same trustees over and over. • COMMISSION AUTHORITY TO REQUIRE SIPC ACTION • The SEC may require SIPC to discharge its obligations In the event of the refusal to commit its funds or otherwise to act for the protection of customers of any member of SIPC. 14

17. List of Passed Legislation And we all should be very concerned about the safety of our investments Now and in the future. 15

18. Legislation • Cong Scott Garrett (R-NJ) has been the most active. • Working with NIAP and the lobby firm, he has written letters and demanded answers from the SEC and SIPC and caused the General Accounting Office to undertake an investigation into SIPC. • What’s ahead? • NIAP is now partnered with the Stanford Victims Coalitions – there is strength in numbers. • For status updates, and additional information, visit www.investoraction.org 16

20. Contact & Social MediaTim Murray • Network for Investor Action & Protection • http://www.investoraction.org/ • Investor Protection Channel on YouTube • www.tinyurl.com/InvestorProtection • Google tp1murray • Email tp1murray@me.com