THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, July 20, 1995 TAG: 9507200001
SECTION: LOCAL PAGE: A14 EDITION: FINAL
TYPE: Another View
SOURCE: By DANIEL LeBLANC
LENGTH: Medium: 72 lines
What should happen when a swindler steals the life savings of a worker who has contributed to his or her retirement fund for decades? Simple. The crook should be punished, swiftly and severely. Right?
The new Congress does not agree. Most House and Senate members actually want to make it harder to punish wrongdoers who commit financial fraud. Union pension funds and individual investments would be placed in jeopardy by the Private Securities Litigation Reform Act, a section in the anti-worker Contract With America.
President Clinton should get his veto pen ready for this legislation, which zipped through the House and the Senate with the support of Virginia Sens. Chuck Robb and John Warner. It gives virtual legal immunity to stock brokers, lawyers and accountants involved in financial disasters such as the Charles Keating swindle.
The bill creates a series of hurdles for small investors seeking to band together in class-action lawsuits against financial crooks. Consider these outrageous proposals:
Victims would have to demonstrate the ``state of mind" of each defendant at the time of the alleged financial crime. And if that is accomplished, a ``safe harbor'' provision would protect those who falsely project high earnings for investors - even if a firm knew far in advance a stock would plummet.
The proposed curtailing of joint-and-several liability rules out victims recovering much of their losses if the mastermind of the fraud goes to jail and is bankrupt (such as Keating). The bill also allows ``aiders and abettors'' in financial fraud to get off the hook for their conduct. And a ``loser pays'' rule could force union members to pick up the legal costs of a Wall Street firm if a class-action case is lost; this would throw a wet blanket on even the most meritorious cases before they ever get started.
To a working family, a pension fund represents the dream of a comfortable retirement after years of hard labor. To an unscrupulous scam artist, that money is an opportunity to make a quick killing. Whether it comes in the form of deceitful advice to an individual investor or an elaborate scheme that places large pension funds at risk, financial fraud occurs in alarming frequency. A recent study concluded that securities fraud has increased 45 percent since 1988.
It is not hard to find examples of con artists and greedy manipulators in the investment world. Look at Orange County, Calif., and other municipalities across the nation which have lost a total of $2.9 billion over the past five years to shady derivatives traders. Under the legislation passed by Congress, the rogue's gallery of swindlers would land in the investor's Hall of Fame while their victims are left out in the cold.
Our historic securities laws were established more than six decades ago during the Great Depression to prevent another stock-market collapse and protect investors from wild speculation. These highly successful safeguards are now in danger of being overturned by the same vested interests they were designed to control. The results could make Black Friday look like a tea party.
Securities administrators and county treasurers all across America know our whole investment system suffers when scandal is allowed to flourish. Older people lose their life savings and younger families are reluctant to invest in their futures. Only the fat-cats and cheats win.
Some ``reform'' this is, when average Americans who put up their money on false promises, or have it systematically stolen from them, are hobbled in pursuit of justice.
So, it is veto time for President Clinton. He needs trade unions and working families to get re-elected - and we need him to protect our pensions and family investments. by CNB