[Extensions of Remarks]
[Pages E2357-E2358]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

SECURITIES LITIGATION REFORM

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HON. JOHN D. DINGELL

of michigan

in the house of representatives

Wednesday, December 13, 1995

Mr. DINGELL. Mr. Speaker, on December 6, 1995, the House passed the
conference report on H.R. 1058, the Private Securities Litigation
Reform Act of 1995. I am disappointed that the House approved this
legislation. Many experts predict that it will only marginally deter
frivolous lawsuits while causing significant harm to investors with
meritorious claims.
By this time next week, President Clinton will have had to veto the
bill or sign it. At this point, I would like to submit for the Record
two articles that point out the serious flaws in this bill and why it
should be vetoed.

[From the Bond Buyer, Dec. 5, 1995]

California Counties Ask Clinton To Veto Securities Bill

(By Joe Bel Bruno)

Los Angeles.--The California State Association of Counties
on Friday elected a new president--San Mateo County
supervisor Mike Nevin--whose first action was sending a
letter to President Clinton opposing the Securities
Litigation Reform Act.
CSAC, a nonprofit corporation that promotes the interests
of California's 58 counties before the state legislature and
Congress, contends the reform act will severely hinder local
governments' ability to recover losses related to securities
fraud.
``We need to have the ability to recover losses in the case
of securities fraud,'' Nevin said yesterday. ``We just wanted
to let the President know that this bill, if he signs it,
would make things tough on local governments and the
taxpayers. It would be sending the wrong message.''
The letter to Clinton was signed by 106 county and other
local government officials.
In addition to CSAC, signers of the letter include the
California Association of County Treasurer/Tax Collectors,
the city and county of San Francisco and the counties of
Sacramento, San Diego, San Mateo, Riverside, Alameda, Kern,
and Fresno. The letter was also signed by administrators of
several county retirement systems.
A House-Senate conference committee has cleared the way for
final congressional action on the bill. The Senate and House
are slated to vote on it on Dec. 5 and Dec. 6. As currently
worded, the bill would limit the type of securities-related
lawsuit that could be filed, as well as the dollar amount of
damages requested.
Steve Szalay, executive director of CSAC, said the
legislation would have a dramatic impact on local
governments. The legislation was a much-discussed topic at
the association's 101st annual meeting in San Jose last week,
he said.
``Local governments are victims of securities fraud; they
need access to the courts to recover their losses,'' he said
in a press statement. ``Orange County, on behalf of 187
independent California governments, is suing to recover about
$1.5 billion on the grounds that the investments made on its
behalf were unsuitable and violated the California
constitution and statutes.''
``This bill makes it very difficult for local governments
and taxpayers to recover their losses in securities fraud
cases, and it will give wrongdoers a green light to commit
more fraud,'' Szalay said.
The letter was drafted and signed by the association's new
board on Friday. Also elected to the association's board was
Yolo County supervisor Helen Thomson, first vice president;
and El Dorado County supervisor John Upton, second vice
president.
Nevin represents urban counties, while Thomson and Upton
represent suburban and rural counties, respectively. One of
the association's goals is educating the public about the
value and need for county programs and services. Founded in
1895, CSAC is headquartered in Sacramento and has a research
office in the District of Columbia.
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[[Page E2358]]

[From USA Today, Dec. 8, 1995]

Securities Lawsuit Bill May Hurt Investors

(By Christine Dugas)

A securities law aimed at reducing frivolous lawsuits also
may make it harder for investors with legitimate claims.
The bill, approved by Congress this week and awaiting
President Clinton's signature, means ``investors are going to
have to take a lot more responsibility for their own
welfare,'' says Philip Feigin, Colorado Securities
commissioner. ``It will be harder to get a case started and
more difficult to prevail.''
Among the bill's provisions:
Companies would be able to say anything about future
performance if they include some cautionary statements.
The amount of damages reckless wrongdoers would pay
generally would depend on their share of liability. So a
victim may not fully recover his or her damages if the main
lawbreaker has claimed bankruptcy. In the case of Charles
Keating's savings-and-loan fraud, Keating claimed bankruptcy,
so damages to victims were paid mainly by accountants and
lawyers who might not pay so much under this bill.
A judge would require investors or their lawyers to pay
defendant's legal fees if a lawsuit were considered
frivolous.
Investors would have to have specific evidence of fraud
before they could go to court.
Investors still would have only one year after fraud was
discovered, or three years after it occurred, to file suit.
``Now more than ever, investors must go beyond what
companies tell them, and do some independent checking,'' says
Maureen Thompson, legislative adviser for the North American
Securities Administrators Association.
Because efforts to stretch the statute of limitations
failed, investors still would have to check their investment
account statements promptly for irregularities. They also
would have to carefully document problems and consult a
lawyer quickly, says Gerri Detweiler, policy director of the
National Council of Individual Investors.
But it might be hard to find a lawyer to take investor
fraud cases. ``The law tells us we can't just have a good
case, we must have a great case,'' says Matthew Kelly, a
lawyer who represents investors at Roemer, Wallens & Mineaux
in Albany, N.Y.
The Securities and Exchange Commission, mean-while, is
unlikely to pursue investors' cases. ``It doesn't have the
resources,'' says Kim Schweitzer, counsel for the National
Association of Securities and Commercial Lawyers. ``Its
mandate is enforcement, not recovery for victims.''
The measure would benefit investors because companies would
have to disclose more information, says Louis Thompson Jr.,
president of the National Investor Relations Institute.
And some investors support the bill because they are fed up
with lawsuits that mainly enrich lawyers. The bill is aimed
at a small number of ``professional investors'' and lawyers
who file class-action lawsuits and take most of the proceeds.
``The money spent by corporations on frivolous lawsuits
would better serve all share-owners if it remained in the
company, resulting in higher net profits and earnings per
share,'' says Kenneth Janke, president of the National
Association of Investors.
But the legislation doesn't only stop frivolous lawsuits.
``It's a balancing act,'' Feigin says. ``Even good cases
might not make it.''

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