made by spouses and the sacrifices they make all the time so that their partners can contribute to public life. it's a kind of attitude that will discourage many that could contribute from doing so. >> i believe we are in grave danger of ignoring the impact on the public we serve if we think that this report is only of internal interest and significance to this house. that way, to my mind, leads to the guilded bunker mentality to which the lord speaker referred. i'm especially concerned that we do not continue to imagine that we can ourselves be the final ar bitter of our allowance package. my lords, that was exactly how m.p.'s got into the quagmire of scandal from which they have yet to emerge. >> peers debating supposed changes -- proposed changes to their allowances. one other story dominated here in westminster, the situation in afghanistan. gordon brown said he'd be prepared to deploy more troops if three conditions were met, that military equipment was adequate, that other countries were repaired to deploy more forces and that the afghan army was stronger. gordon brown and another leader paid visits to troops in afghan strap. he me -- brown pledge master's degree money to detect inch e. d's. he ademunsed he'd send more troops to afghanistan. >> faced with a terrorist threlt, some of our most effective strategy is to defend britain within our own borders. some asked why british troops are in afghanistan at all if terrorists are in yemen and so maul lee and even internet chat rooms. but as long as afghanistan is the epicenter of global terrorism, it is the government's judgment we must address the terrorist threat at its source. as long as 3/4 of the most serious terrorist plots against britain have ties to the pakistan-afghanistan border areas, we should be failing our duty if we did not to address the problem where it starts. a more stable after begun stan and pakistan bill help ensure a safer britain. >> he promised a political surge alongside a military one. lady -- he was asked about an end. >> does the prime minister agree with me we must never do or say anything that gives the impression to the taliban we will not see this through. nor should we raise false hope or inspect exations -- expectations that may be dashed, so can you assure the country and our forces as we approach the general election that any suggestion about timetables for handover will be based on a hard-headed assessment of the situation on the ground? isn't it the case that the british public want us to do what's right, not to speculate and risk the danger of raising false hopes. >> it's become mainstream to talk about the need for a big shift in our strategy in afghanistan. when i first questioned the effectiveness of our action there, six months ago, the calls for -- i was told it was unpatriotic to do so. the prime minister's changed since then have been doctor mattick and welcome. our approach to the mission in afghanistan has always been simple. western do it properly or not do it at all. does this eprime minister agree that success is not just about troop numbers and that focusing on troop numbers, heas has done today to the exclusion of other things is putting the cart before the horse? there is no point sending a single extra soldier until the strategy is in place. >> politicians have asked if british troops in afghanistan have enough equipment, particularly helicopters. the defense secretary came to the commons in december to announce a package of cuts to five million pounds of new equipment for afghanistan. >> we will reduce the size of the hairier force. and consolidate the area force. >> but the money saved would allow for spending elsewhere. >> and there will be 22 new chinook helicopters with the first 10 arriving during 2012-2013. a lot more chinooks will be welcome. we have to accept this will be 2013 before we get them. it will be 12 years since we went to afghanistan at that point. doesn't it now indicate the sheer stupidity of the government's decision to cut the helicopter budget 1.4 billion in 2004? >> how many will arrive in 2013 and when will the others get there and how does this fit with president obama's plan of withdrawal starting in 2011? should this not have been take an good deal earlier? >> while the deployment of the 22 chinooks into afghanistan, many of us believe they should have been ordered many months ago. does he understand that that mission was culpable and negligent and as a consequence, men have died needlessly? >> as i have said to him, he stands as a member of a party that supported our operations and yet has not put a single penny more for defense and he has to square that with comment he is just made. >> i asked our political correspondent if in the run up to the general election the situation in afghanistan was a party political issue? >> one paradox to me is the harder it gets in afghanistan, and the more casualties we've got, far from people say, we need to get out, people are starting to consolidate around the idea, we've got to give it one more go. whereas a few month ago, it was possible to see the liberal democrats dotcht the position of, let's get our troops out, they too, have noticeably stiffened up their position. i think it's down to obama and the american push. we are, like it or not, pretty much bound to whatever the american. it's almost inconceivable we could pull out if the americans were piling in. with obama announcing his surge, it seems we have little option but to follow that source and we have, we're sending 500 more troops that doesn't mean we're there forever and a day. obama, i think, has said july, 2011, i think it is, when he said american troops might be able to come out. we haven't been given that timetable in britain, but i do sense that politically afghanistan is not as divisive an issue as the delfties of the war might suggest an most politicians -- politicians of most parties seem to be of the view, let's give it one more view. >> the corridor here in the commons and the nearby house is where much of the scrutiny goes on. but damien green in 2008 a special committee was set up to investigate the circumstances around the affair. his homes an officers -- offices were searched by police and he was interrogated for nine hours as they investigated leaks if the home office. he was released without charge. many were interested in how the office came to be searched without a warrant. >> i was in a meeting, they rushed me when i came out of the building. they took me, they said, we're going to take you back to your home, i took them back there. about 200 yards before we saw that, i eventually let them in. he said, this is your home, is it? i decided sarcasm was probably the wrong response. it was clear it was my home, i had the house key. and the policeman who arrested me went outside on miz mobile and eight other policemen showed up five minutes later. about eight. all the searching party. that's just been to the wrong house. they can't find an m.p. at home when the aggress is published. newspapers never had any difficulty finding my home or photographers when they wanted pictures. that's why it was at 9:00 in the morning. >> the charge? this charge can technically lead to a life sentence. what's your view of that charge being investigated? >> while i was being interviewed by the police i was told i faced life imprisonment. so they -- i thought it was ludicrous. in the circumstances -- in other circumstances, i thought it -- i would have thought it was laughable but the situation is not very humorous. >> a few days later, it was the turn of mark martin to give evidence. he said it was a mistake to allow police on the premises without a warrant and without consulting him. >> i had assumed the search was authorized by a search warrant. this seemed to be -- to me to be so basic that i didn't ask the sergeant about the warrant when i was told of a search on the 27th of november. >> on 2nd december, the speaker held a meeting to discover what went on. joe had known about the police investigation were weeking before the search. >> during the course of a meeting on 2nd november, i asked why she had conducted herself in the manner. the clerk of the house intervened to say she had bamboozled the sergeant and tricked her into keeping the matter from her immediate superiors. >> and the continue -- he continues. >> an area which can have some social difficulties for 30 years and before that, never has anyone came to me and spoke to me and said, my house was searched and there was no warrant. there's always -- when there's a search there's always a warrant. that was basic. and that's when i expected a warrant. >> the next witness rejected claim he is bamboozled officials over the raid. mr. bateman in charge of security at parliament, deny head tricked the sergeant at arms into giving assent without involving her boss, then-speaker michael martin. >> don't you think you should have had permission, informed her clearly she did not have to consent because this is the basis of the difficulty here. >> i think she probably thought i was patronizing her if i did that, if -- after all the conversations we had, if i had a conversation explaining why we were seeking consent, i had a conversation explaining, if you don't consent we can get a warrant. i think she would have thought i was -- i think she would have looked -- >> excuse me. it's not a question of her not understanding what consent meant. it was a question of her understanding that she did not have give that consent and that indeed you would go and apply for a warrant. it's nothing to do with patronizing her, it's informing her of the facts which clearly you didn't do, as she said, for forever reason. >> my understanding is that she knew she did not have to consent. a conversation we had led me to believe that. >> led you to believe that, but you did not have to tell -- you did not tell her. >> it could have been based on understanding of her part, that was not clarified. >> everything she said to me seemed -- led me to believe that she knew what consent -- >> you did not explicitly have that conversation did you? >> at no time did i say she did not have to consent. >> then it was the turn of the sergeant at arm, eferble in -- official in charge of the security to appear. she admitted to aberror of judgment. she said the police didn't tell her she could have insisted on them getting a warrant. >> how could the speaker of the house of commons be left in such a situation as he was left in, in which he believed that there was a warrant for the search of it, how could the members of the house be left in such a situation? >> i think the assumption that when you say search, they assume warrant. >> don't you think it was part of your responsibility to make sure the speaker did know there wasn't a warrant? you know, to make sure he knew that, that he had that information? did you think he should have known that? or you should have, you know, made sure that he understood exactly the position that there wasn't a warrant? >> in hindsight, yes, i wish i had said that. but i didn't say it. i didn't say it, because the reason i said that believed i had the authority to give the consent -- in hindsight i should have made it clearer. >> they also wanted to know why the police didn't tell her she could have insisted on a warrant. >> would manipulated be a proper description? >> no, i think i'd be comfortable with pressured. >> do you think you were made to go in a particular direction? >> yes, i was pointed in a particular direction. >> may i take it that you feel you were pressured to go in a particular direction by the metropolitan police? >> yes, sir. >> were you conscious of that at the time? >> at the point where i went to seek advice from the top, i was under pressure. i didn't feel at the time i was being pressured in a particular direction, they had convinced me about the consent to search without a warrant. >> they convinced you by not telling you what the options were? >> that's true. >> am i correct in your understanding now, they failed to provide you with information to know -- in order for you to make a choice? >> i don't think they gave me the correct guidance under the code. >> if that isn't manipulation, what is it? >> i think i'd rather not go into that. >> that committee will publish its report in the new year. now, november brought the state opening of parliament, the official ceremony where the queen opens parliament and reads a speech writteny the government setting out the new bills it wants to introduce. this year it was slightly unusual as the session will be cut short by the general election, which has to be held by june at the latest. >> peers are clad inner min roads, some distinguished face, including the former -- including margaret, now lady, thatcher. the queen and duke arrived in the traditional irish state coach. as the peers stood, the queen and duke took their seat on the throne. this year saw a new black rod, the queen's messenger. he made his customary walk through the commons, and the door was closed. which mean he is has to bang on the door. black rod spoke his usual words of invitation. >> to atnd her majesty immediately in the house of peers. >> m.p.'s made their way from the commons to the lords. rival politicians always talk to each other, on this occasion, or at least appear to be talking to each other. the speech was handed to her majesty by the lord chance ler, jack straw. >> my government -- to all the members of the house of commons, my government's pyrity is to ensure sustained growth to deliver a fair and prosperous economy for families an businesses as the british economy recovers from the global economic downturn. through active employment and training programs, restructuring the financial sector, strengthening the national infrastructure and providing responseable investment my government will foster growth and employment. >> opening the debate on the speech, conservative leader david cameron said there were some good things in the program but others were not good. the asked gordon brown to call the general election now. >> what else has the got to do? this is the shortest queen's speech since 1997. they've run out of money, run out of time, run out of ideas and we've seen from the prime minister, they've run out of courage as well. >> gordon brown dismissed claims the queen's speech was motivated by politics. >> it will ease anxiety and give new rights to elderly. the first ever legislation to abolish child poverty. the second his foric energy and climate bill. a bill to make parent responseable for anti-social behavior of children, a bill banning cluster bombs, a bill to legislate for the development target, action on bank bonuses, regulation so that agency workers are never again denied the rights over workers have. >> nick cleg said it wouldn't address the problems. >> all the pageantry in the world cannot cover up the fact that this is a fantasy queen speech from a government running out of rope, from a parliament that's lost the trust of the british people. a queen's speech which won't give people the help on housing, on bank lending, on adult joblessness, they so desperately need in this recession. a queen's speech that won't fix our rotten problems. >> finally, at the end of october, the door to the commons table was thrown open for a group of young people to come and hold debate. the speaker welcomed 300 members of the u.k. youth parliament, aged between 11 and 18. several m.p.'s came along to hear them speak and the leader of the house spoke before the debate proper got under way. the subjects on the agenda, youth crime, lowering the voting age and university tuition fees. >> i cannot afford to go to university. the government will give me a loan. i'll go and get my degree and be in debt. but i'll work and hopefully gradually pay off that debt. tuition fees should not be abolished. it's unrealistic and unsustain. able. >> i don't expect the people who don't go to university to pay for my education from their taxes. why should people who get up to 6:00 in the morning, or like my father who didn't go to university, pay for my education. i should pay for my education, i should be this one to incur the debt and pay it afterwards. >> forget the debt when you go to university. this country is in 800 billion pounds of debt to begin with. that's biggest political scandal in this country in a generation. we cannot afford it. university education will suffer, universities are asking for more. the president of universities u.k. said u.k. higher education requires further injections of money for teaching and learning in particular. universities need more, mr. speaker, and member whors supporting this motion are going to deprive them of that. >> after you've got your degree, you're going to have a higher tax rate and make manager money, giving people more jobs, i think the education is one of the only ways you can do this. >> young people, very few young people watching this debate today will see how out of touch, unrealistic, and unaffordable scrapping tuition fees is. it's equivocal for students to make a financial investment in their degree. education is an investment and it's rational for students to borrow for this investment. >> encourage students to be -- fees encourage them to be selective in what they take too many young people have these degrees. >> what is the point of busting your hump other so many years, getting great a-levels, doing midnight black coffee sessions and missed course work if by the time it comes to it, you cannot afford to go to university, you're just above the threshold for help and your parents can't afford to send you. it's that person's dream to go to university, it's that person's way out, who is anybody to crush that dream and say, you cannot do it. this is what i propose. i propose a lowered university fee and those who then take the lowered university fee and attend university on that rate, pay the tax. pay a slightly higher tax on a sliding scale depending on what they earn. this would allow people who would otherwise not be able to attend university to attend it and then people who didn't attend university wouldn't -- would not need to pay the taxes. >> private school is how one person described university fees. university fee, do not worry me said one person, i'm not looking forward to a shadow of debt, said another. she described this as the curse of her generation and how she'll be unfairly shackled with debt from the word go. we have campaigned on abolishing university fees. these post-cards that were sent to our m. piece urging them to vote, these are sent from young people all other england. now is the time to be heard and it's time to hear answers. >> members of the u.k. youth parliament, showing them how it's done. that's it for now. please join us again when parliament returns on january 5, "for the record," our dairy roundup of events here at westminster. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> monday, expanding broad band to rural and underskembed areas of the country an update from the f.c.c.'s broad band initiative executive director on "the communicators" on c-span2. >> tomorrow is the start of the campaign management institute where former republican and democratic strategists discuss a variety of issues, such as the 2010 senate races, campaign strategy and polling techniques. that's live at 9:00 a.m. eastern on c-span2. now a house subcommittee looks at the bernard may dauf ponzi scan -- madoff ponzi scandal. witnesses include former madoff investors and the agency responsible for recovering money from fraudulent brokers. this is a 3 1/2 hour hearing. >> i ask unanimous consent that permission be granted to any nonmember of the subcommittee who comes present today to sit with the subcommittee. pursuant to committee rules, each side will have 15 minutes for opening statements. all members' opening statements will be made part of the opening record. good morning,ern. one year ago this week, federal authorities arrested mr. bernard madoff for participating in the largest ponzi scheme in u.s. history. it is therefore appropriate for us to meet for the third time to examine this massive securities fraud. as my colleagues know, i have sought to use the $65 billion deception as a case study to guide our work in reshaping and reforming our financial services regulatory system. last month, our committee passed h.r. 3817, the investor protection act, and we have now rolled this important securities reform bill into h.r. 4173, the wall street reform and consumer protection act, which the house will begin to consider today. both bills contain a number of provisions directly respond to mr. madoff's substantial swindle. the report repeated failures of the u.s. skerts and -- securities and exchange commission to detect the; maddoff fraud and allow it to continue for more than a decade. a lack of effective coordination, sufficient funding and staff expertise each contributed to this regulatory breakdown. in response, our bills double the authorized funding for the commission for five years to ensure the agency has the resources it needs to hire staff with appropriate expertise and to get the job done. the bill is also provide for an expeditious, independent, comprehensive review of the entire securities regulatory structure by a high caliber entity with experience in organizational change this study will identify specific reforms and improvements that commissions must put in place to ensure superior investor protection going forward. mr. madoff's episode also revealed the need to elevate the importance of whistleblowers like mr. marco polo who made repeated entrees to the commission regarding the con by establishing incentives so that more of them will come forward. our regulatory reform package therefore has a program to help identify wrong doers in our securities market and reward individuals whose tips lead to successful enforcement actions. we will effectively have more cops on the beat. in studying this case, we have additionally learned that the public company accounting oversight board lacked the powers it needed to examine and take action against the auditors of the broker dealers. our legislation close this is loophole so schemers like madoff will no longer be able to rely on inept or corrupt accounting firms to rubber stamp their accounting activities. . we've also broadened the eligible types of investments covered. we can do more. we will continue to move this process forward as we examine the ongoing efforts of the securities investor corporation to mitigate the sizable losses of mr. madoff's victims, as well as the casual -- the casualties of the stanford financial fraud. we will also explore the intended and other consequences of several proposed changes to the securities investor protection act to address these problems that some victims, including retirees, pensioners, charities, and others have encountered. while each of these amendments seeks to fix a perceived deficiency in the wall, each proposal will also benefit from a robust debate in order to identify potential problems possible. some think that the sipc should not claw back the problems -- the withdrawals from earlier people. later investors could be treated unfairly. some could prove especially devastating. we should walk that fine line in determining how to proceed, if at all. in closing, i like to extend my appreciation to my colleagues from new york, mr. ackerman and mr. maffei, and others who have helped me so let today's witnesses and advance the discussion on reforming the securities investor protection act. together i hope that we can learn more from these troubled advance and be your out how we can further improve our regulatory system. -- and figure out how we can further improve our regulatory system. and now like to recognize our ranking member. >> i thank the chairman. and i think all the witnesses, too, for joining us today. and from people similar situated to yourself, i had been informed and am keenly aware of the suffering that has been suffered and inflicted on so many investors, in my area and district of new jersey and across the country as well due to the madoff situation and the stanford fraud as well. mr. chairman, it is important we hold this hearing today to hear first hand from some of the victim's. not only to get a better understanding of their situation and their plight, but also to hear your ideas. having been through this experience personally, and how to make a specific process work better late and for all interested parties. let me take a moment and i can -- i seek unanimous consent to enter into the record two statements from colleagues of mine. both of them have been adversely impacted by the madoff fraud. >> without objection, so ordered. >> thank you. these were tragedies for so many innocent victims. the purpose of today's hearing is to examine ways to improve the sipa process so that the victims do not have to suffer again. there are a number of public proposals to reform the process. one is for individual coverage for individual investors rather than the standard $500,000 for the entire fund. some have talked about a qualified process in which some funds would be redeemed from investors in turner -- in the name of equity. there are also calls for a more timely process and extending coverage to brokers. all of these ideas deserve to be fully explored and abetted by the said committee, with a frank discussion of the pluses and some of the minuses as well. this is the least that we can do for the many investors affected by the past brought as well as future ones as well. quite honestly and unfortunately, there will be future schemes that will try to bilk unsuspecting investors. the sec's failure to detect the madoff situation, despite all the red flags and warning signs and testimony, it is well documented. we know that this type of thing could happen in the future. unfortunately, as mr. coffee has indicated in his testimony, low- level all the log justifies more serious reforms than have already been adopted by the sec, and there i agree and and completed to -- committing to exploring other ways of improving that. i welcome any insights that you may have on this with regard to the hearing today in going forward as well. one thing i think, and i will close on this -- one thing i do not think that we should be doing is to say, let's throw more money at the sec and not ask for any more results from them. unfortunately, it is part of the investor protection at approved by this committee, and the package of bills that will be going to the house floor this week, there is an authorization for the sec to be doubled, with basically no strings attached as to where the money goes. my colleague offered an amendment which i co-sponsored. it was scaled back future authorization increases for the sec and would have tied to any of those increases to first for them to have to fill some of the recommendations that were made by the inspector general. basically say, you have an organization that did not do its job. we will not reward you by sending you more money unless she can prove to was that you are implementing some of those changes, and if you want additional funding in the future, you have to continue on the better path. that is one area i would appreciate your comments on. i look forward to hearing your testimony and answering some of my questions. with that, i yield back. >> thank you, mr. garrett. >> thank you for your continued pursuit of this issue and this series of hearings that you chair. it's been a full year says bernard madoff called it his own house of cards and admitted that he had operated the largest ponzi scheme in history. you think that by this week, awful 12 months removed from his admission, our financial regulators, some of whom that have admitted they were negligent in protecting investors from his fraud, would have helped the many victims -- as many victims as they could. you would think that what the enormity of the ponzi scheme and human tragedy it has caused, they would be as generous as possible. and you would think that because his investors receive detailed, and genuine statements, his victims had every reasonable expectation that the money in their account was really there, belong to them, and that they were fully protected by the security laws. sadly, you would be wrong. instead, in the year since madoff has turned himself in, the largest and most sophisticated financial system and the world, rather than providing restitution and the largest fraud in history, has managed to create classes of victims who have turned against one another, fighting to the nail over pennies on the dollar on what they're reasonably thought belonged to them, and there is no end in sight. if there is anything we have learned in the past year, it is that the confidence that investors had in the system, from the sec possibility to police our markets, to the specific guarantee against fraud, was misplaced. today's hearing begins in earnest the process of providing additional legal remedies to madoff's victims. in my view, there are two issues that we must address as we clarify and expand the security investment protection act. the limitation of clawback form innocent victims who were neither complicit or negligent in a ponzi scheme, and some mechanism by which sipc insurance can be provided to the members of defrauded funds. i look forward to addressing these issues in the coming weeks and to hearing from our witnesses today. allied to it knowledge that our witnesses, madoff victims, and to thank them all for appearing before the subcommittee. there are hundreds of others who wanted to appear, most of whom could not afford a car fare, the bus fare, the train or plane fare, to get here. we appreciate the witnesses who are here being with us and testifying, and i look for it during their testimony. and mr. chairman, i would ask unanimous consent at the appropriate place that this folder a statement from additional witnesses be placed in the record. >> without objection, so ordered. and now we'll hear from the gentleman from new york for five minutes. >> let me thank you for holding this hearing and your attention to this matter. i also thank my colleague from new york, mr. ackerman, for the energy that he is shown on this matter. the first time i heard the name bernard madoff was a year ago tomorrow night, december 10. i was stopping by a holiday event on the north shore to meet with constituents. the person hosting it told me that shot was going through the room because they had just learned that day that there life fortunes, handled by mr. madoff who i had never heard of before, had been lost in a ponzi scheme. the arrests were made the next day in the story broke. i could see the shot in people's faces. since then, the situation has only got the wrong -- gotten worse. i have a number of questions regarding what has happened over the course of the past year. like mr. ackerman, you see a tragedy like this unfold in the news see over the course of the next year the victims being victimized again. i know there are no easy answers, but if there is an imputation of fraud to the victim's itself, it seems. somehow implying or imputing madoff's offenses to them. that somehow they should have known or that they are co- conspirators with bernard madoff. and yet there is no evidence to suggest that at all. we have a redefinition of net equity. we have the clawback, which could be devastating we have the fact that taxes were paid over the years on nonexistent profits. we have the feeder fund issue, or even a former member of congress who had never heard of bernie madoff, and it turns out that his life savings had been invested by bernard madoff. he lost everything. and then there's the whole issue what appears to be the most unfair -- to change definitions and decide he was going to go after and why, whether he has specific authority. these are all issues, because as the chairman said, and the ranking member also said, this will not be the last ponzi scheme. this will not be the last massive fraud. i don't think there's enough attention has been given to what do you do in a massive fraud like this. we have to address it, and we also have to find ways to protect those who are currently victims. i look for to the hearing and to working with all the members of the subcommittee and committee and trying to come up with legislation to address the real needs of the victims, and also to do what we can to ensure that there is better enforcement it in the future to make sure this does not happen again. and with that, i look for to the testimony and thank the witnesses for being here today. i think the victims for taking the time to be with us today. i yield back the balance of my time. >> thank you, mr. king. we will hear from the gentleman from florida, mr. klein, 40 w. of minutes. >> thank you for holding this important hearing. i also want to thank the witnesses and the victims who have come forward with their stories and with their rights to be made whole in different ways. mr. madoff's ponzi scheme, thought to be the largest securities fraud and art and history, has defrauded thousands of people in my commercial district in south florida, charities, watts of other people around the united states. this episode was not only an embarrassment to the sec as they allowed this massive fraud to continue for well over a decade, despite defeated -- despite repeated warnings, but time and again, they'd "investigated" mr. madoff and pronounced his business to be struck -- sound. if you are an investor, you would think that this would be an unsound -- a sound investment. there have been lots of issues that have party been mentioned by mr. king, callbacks, taxes paid, how will we be made whole from this terrible situation. and the fact that this has gone on for all year is really something that is a moral outrage and has not been resolved in some successful way. i think the most important thing we have to recognize as citizens and as members of congress and even people who are victims is that we have the rule flaw in the united states. we have responsibility as members of congress and americans to make sure that the sipc and the sec are living up to their statutory responsibility. considering that the madoff victims receive some protection from the government is important in restoring confidence in our entire investment system. and yet some investors we know where complicit and they should be prosecuted to the fullest extent of the law. most others were not. many hard-working americans have invested their life savings and the sipc symbol and the wind -- the sipc symbol in the window has to mean something. as i said, it has to mean something with you make an investment in the united states system. it go after these investors who lost everything now violates most people's sense of fairness on a consistent level. how can they be held to a higher standard than professional analysts at the sec? it has been determined that investors who drove more money than they racially put in an -- who took out more money than they initially put in an are not entitled to it. the sipc is to honor legitimate expectations of customers and instill confidence in our capital markets. it is important to provide sipc protection of the five and a thousand >> not only for the victims of this brought -- of $500,000 not only for the victims of this fraud but for the confidence of the securities market in the united states. i look for to that testimony and an appropriate conclusion. thank you. >> and now i ask unanimous consent -- [inaudible] that congressman ellison provide an opening statement. if there are no objections, he is recognized for two minutes. >> let me thank all the witnesses at will. i do not think i won the two minutes. i want to say that the amount of disruption that this massive ponzi scheme has caused americans cannot be overestimated. in my own congressional district in minnesota, i have heard from people who thought they were in a qualified erisa plan and things were not going to be as they expected. i've heard from people who ran charities for charitable work who had been devastated by the impact of this lapse. i look for to this hearing and from hearing -- and to hearing from the witnesses. i want thank the members of the committee as well. and i also want to say that i want to thank the work of mr. maffei, working together on something that may bring relief to some people. and i want thank you for the hearing. >> thank you, mr. ellison. now it is up to the panel and we want that the panel for appearing before the subcommittee today. without objection, your written statements will be entered into the record for you will be recognized for a five-minute summary of your statements. please contain yourself to 5 minutes. all like to recognize this jeannene langford, an investor in the mot family investors. and in direct investor in mr. madoff's fund. >> chairman kanjorski, ranking member, members of the committee, thank you for holding these hearings and looking into the sec's complicit 8 with bernard madoff investments. my name is jeannene langford and i live in san rafael, california as one of the more than 16,000 victims of the madoff ponzi scheme. i am grateful to have the opportunity to present how financially devastating the scandal was to me personally. it shattered my trust in my government's ability to serve and to protect us. i hope is that congress will choose to recognize and protect all indirect investors such as myself who were victimized by the scandal. i have worked for 30 years as an art and design professional and the stationery and craft industry. the past 17 years had been as a single payer, working to provide for myself and my daughter. in the areas where i have little expertise, i recognize the necessity to hire a specialist. personal investment was one of those areas. i knew that there were systems such as the sec in place to protect me. from my research, there was no reason to believe that this investment was not a viable place to put my life savings. i had no way of knowing the partnership where i placed my money was invested with madoff. the money i had invested with madoff represented my life savings. it was my retirement, a down payment for a house, investment for the business i was starting, and it was my daughter's education. in short, it was the foundation for my future. i do not have another 30 years to earn this money again. if the sec had done its job, i would have my savings, and i would not be looking at working the rest of my life just to get by. i was shocked to find out my money was gone, and i was outraged to find out that the very governing body that sanctioned this business did not protect me. i need help in understanding how the sec could ignore expert testimony, be lax in its investigation, be influenced by the aura of madoff and not carry out its duties. i find it tragic and ironic that the interpretation of the language by the sipc leaves out the indirect, hard-working people like myself who are not wealthy and who are now struggling to keep up because their lifetime of hard earned savings for their pension has been stolen. the so the very investors for whom the sipc insurance protection is most important. congress these to take action to restore confidence -- needs to take action to restore confidence for all future investors. i understand that an update to the definition of the word customer and sipa would ensure that the sipc symbol protect both indirect and direct investors in the financial markets, and would begin to restore a sense of trust. if nothing is changed, the current situation would be similar to having a catastrophic landslide, and the government came in to assist those on one side of the street but not the other. i cannot believe this is the intent of this committee or of congress. belli appreciates extending the sipc coverage through one amendment, and this does not go far enough. all of us who invested through family partnerships, trusts, hedge funds, feeder funds, and pension funds are victims of this crime. all of us who invested are also victims of the sec's inability to find the fraud. we are all victims at the same time and we all need to be granted equal protection. the sec's website reads, the mission of the u.s. securities and exchange commission is to protect investors. maintain fair, orderly, and efficient markets, and facilitate capital formation. i urge you to rectify this current disparity of protection by defining the mission that you set forth. >> thank you very much, ms. lankford. i like to recognize my colleague from minnesota to introduce our second witness. mr. ellison. >> thank you again, mr. chairman. i am pleased to introduce one of the witnesses, mr. joel green of upsher-smith laboratories, a pharmaceutical company in minnesota. i've heard from many people in my district and state who are victims of the madoff scandal. those people were not high rollers. there were regular, ordinary people who work hard every day to make america great, people like the ones mr. green represents, and his colleagues, who were part of a pension profit plan that invested with bernie madoff. the thought that they were protected by the securities investment protection corporation, sipc. however, they held themself and has not followed through on protection in many cases. that is why am pleased to work with my colleague on an amendment to clarify sipc protection. i look forward to continuing to work with you, mr. chairman, and others on the committee on this reform and others to ensure that sipc makes good on its promises. mr. greene. >> thank you, congressman ellison, and mr. maffei, and chairman and members of the committee. thank you for the opportunity to address your committee. as congressman ellison said, i am joel green with upsher-smith laboratories of minnesota. i'm here and ask your support for legislation that would protect working people throughout america whose retirements, securities -- whose retirement security is imperiled by the madoff fund. i urge your support for the amendment to extend sipc protection to cover the losses of individual members of qualified plans lost in the madoff fraud. i am sure -- but your smith laboratories is a pharmaceutical company formed in 1919 and has approximately 550 employees in the twin cities, denver, and around the country. in 1974, car owners established a profit sharing plan to share the profits with our company's employees, and beginning in 1995, the plan was invested with mr. madoff. over the next 12 years, the company contributed over $8 million to the plan for the benefit of our employees. on december 11, 2008, mr. madoff was arrested for fraud, and approximately 615 of our current and former employees lost their retirement savings that had been in a profit sharing account invested with mr. madoff. our plan and our plan participants are represented average american workers whose savings erisa was intended to promote and sipc was intended to protect it of our 615 plan participants, about 89% contribution balances of less than $50,000. this plan coverage is the average american worker. yet sipc has stated that only a single recovery of $500,000 is available. this is because the plants account with mr. madoff was held in the name of the plan trustee. but this was required by an administrative requirement imposed by erisa. our plan lost in excess of $8 million in contributions in the madoff fraud. if you include the false madoff profits, that would be in excess of $80 million. i say go sipc recovery of $500,000 will not cover the losses of our plan participants. the administrative role requiring that plan assets be invested in the name of a plan trustee cannot be allowed to defeat the public policy behind erisa to promote retirement savings of average american workers, nor can it be allowed to bid to keep the public policy behind sipc. for most americans, their primary investments are in their profit sharing plans and other qualified retirement plans. if the administrative role is allowed to get the sipc protection for the losses of individual plan participants, then sipc fails to protect the investments of the average american worker as congress intended when they adopted the security investment protection act and created sipc. this undermines the public policy of promoting retirement safety and security for profit sharing and other plans as congress intended when it adopted erisa. the sipc offers a proposal -- apparel -- the fdic offers a a parallel. they would cover eight -- each plan participant up to the plan limits. we have been asked by congressional staff in the spring whether it is possible as a matter of policy to extend sipc protection to cover the losses of individual participants of pension plans invested with madoff, and to extend other investors of feeder funds. with great compassion for those individual investors, and in great compassion for ms. lankford, we believe that the answer is yes, as a matter of public policy, a distinction can be made, though we support any relief that can be given to the individual feeder funds. erisa prevents individual plan participants from participating. individual investors are not prevented from investing in their own name. for these reasons, if it is station must be made on a policy basis, we believe that it is possible to provide sipc coverage for the losses of erisa, but again we do support relief for investors in feeder funds. thank you for your time and attention and consideration of this important legislation to extend sipc protection. >> i keep very much, mr. greene. and now my turn to my colleague from florida, mr. klein, to introduce the third witness. >> thank you, mr. chairman. it is my honor to introduce helen chaitman, the author of of a global what, lender liability." she is one of a number of people who lost assets in the ponzi scheme and has a view of the issue and has been helpful to me and many others in understanding the nature of what was wrong and what should be done to resolve it. miss chaitman. >> thank you, congressman klein. chairman kanjorski, thank you for having me here. distinguished representatives, i thank you as well. it was just about a year ago that i learned that i have off my life savings and my grandson's college fund and mr. madoff's limited liability company. and it took me a little bit of time to get over the shock and devastation. and when i did, i realize that i was one of the lucky ones because i am still working and able to support myself. i devoted myself to the next six months to working completely on a pro bono basis helping hundreds of destitute madoff investors and their 70's, 80's, and 90's who had been hit by financial tsunami from which they can never recover. this committee has dealt with that financial tsunami in the investor protection act of 2009. i am not here to speak about that. but unfortunately the madoff investors whom i represent, and i represent hundreds of them, had been hit by two additional tsunamis that this committee can do something about. my client profile is a person in his 70's, 80's, and 90's who work hard his entire life, the trusted his government, and many of my clients served in the second world war with distinction. i have clients who are disabled in the korean war, and there receive medals for their service. they trusted this government and they worked as honest, law- abiding citizens. they worked in professions, they built up businesses, and when they reach retirement age, they retired and they put their money and an entity that had been blessed repeatedly by the sec. mr. madoff bragged to potential investors that jealous funds had complained to the sec about his results, and he had been repeatedly investigated and always come out clean. these are people, of whom we should be proud and who should be protected, and instead these people have been victimized by the government since december 11, 2008. the sec a tsunami that hit my clients was the announcement by sipc, with the blessing of the sec, that the statute that this committee played a key role in drafting in 1970, that statute does not mean what it says. my clients relied upon the promise of sipc insurance. as required by the securities investor protection act, they invested in madoff, knowing that the first $500,000 in their accounts was insured by sipc. they invested in madoff, knowing that congress mandated that upon the liquidation of a broker, sipc must promptly pay up to $500,000 by replacing securities in a customer's account. the statute mandates how customers claim is to be determined. net equity is clearly spelled out in the statute. it is clearly spelled out on sipc's web site. even today. and yet sipc has decided that it does not in short the first $500,000 in the accounts. if only ensures the net investment, going through generations of investors, because a lot of my clients are people whose grandparents invested in madoff. what sipc is doing is going back three generations to and neck out investments, and they discount inherited balances unless the investor can come forward and prove how much the grandfather deposited into the account in 1970. a virtual impossibility. no one keeps records going back that far. and nowhere does the government put people on notice that if they want to have an sipc claim, they have to keep their records going back 30 and 40 years. so the sec tsunami was sipc's defiance of net equity. we know from mr. connolly's testimony which was posted yesterday that the sec does not feel it is bound by the statute. american citizens have to trust in the laws. if the statute gives them a promise of insurance, they have to rely upon that. and how can we as a country and still confidence in the capital markets if we do not stand by our laws and if we find i government -- we fund a governmental agency that defies the law? they had taken the position that people who delegate to their broker investment decisions do not get insurance as defined by the statute. they do not get net equity. the sec announced yesterday they get their net investment plus some adjustment for the increase or decrease in the buying power and the dollar over a period of 30 or 40 years. what is the purpose of this committee deliberating so carefully on the statute if the sec can ban decide we do not think congress got it right and we don't feel we have to go back to congress, we are going to decide what the law is? how can we make people feel comfortable that they are protected by this government, which they serve and to whom they pay taxes, if the sec, funded by taxpayer >dollars, ken, its nose at this institution? the third tsunami my clients had been hit with is that the sipc trusty has taken the position that he can demand repayment of all withdrawals within the last six years, even mandatory withdrawals from ira accounts on which people pay taxes, if the net investment going back for generations is a negative number. let me give you one very simple example. >> your time is almost up. the boilers okay, you'll have to look at my written testimony for the example. >> if you want to state the example, take the time. >> thank you so much. if my grandfather put $500,000 into madoff and in 1970, and he died in 2003, at which time the account was worth $3 million, and i took $1.5 million at that account to pay the estate taxes, and then from 2003 to 2008, the account went to $2 million, mr. picard would be saying to me, payback $1 million. your grandfather put in $500,000, if you took out $1.5 million, you owe me $1 million. my clients who have lost their life savings and were forced to sell their houses in a down market and who are cherishing the tax-free funds that they have received as the only bonds they have to live on for the rest of their lives, now are faced with giving up those moneys in order to do what? nobody wants that. i as an investor never took money out of my account and i in theory and the beneficiary of the clock back. in many of my clients like me who never took money out do not want this money. this is blood money. these people are entitled to keep what they took out. thank you. >> i thank you very much. [applause] the rules do not allow demonstrations, so i appreciate. i know that this is emotional. i will be little lenient but really that is not right. and now we will hear from our friend from a lot -- from colorado to introduce the next witness. >> i appreciate the witnesses being here today. they're straight for testimony that you're giving to all of us -- they're straight forward testimony. there are four things that we have to consider. one is on the floor of the house today. where was the examination? where was the investigation? where was the oversight? and whereas the prosecution of swindlers, croats, bombs, cheats -- whatever you want to call them. and colorado, we had at least three and as last eight or 10 years. they victimized hundreds and hundreds of people and colorado, some of my closest friends and colleagues losing their life savings to one ofseooks. what kind of environment led to these giant ponzi schemes and frogs? and i would like to thank the chairman and ranking member for bringing for the investor protection act and some of the precautions and safeguards built into that that we will hear on the floor of the house today. the other three aspects of this, what this testimony and this hearing is about, is the bankruptcy aspects and the clock back. the reach of sipc to anybody who was swindled and victimized by this, and finally, what tax ramifications are there and can someone take an immediate loss when they had been defrauded in this respect? we have a constituent of mine and friend, mr. pete leveton. he is the co-chairman of the agile fund investor committee, which represents over 200 indirect investors of agile group. i had been working with him and members of the agile fund investor committee for months trying to develop remedies to the inequities between direct mail fund investors and those in direct investors liked agile group. they're more than 15,000 in vessels -- individuals who invested and bernard madoff securities, they are ordinary people who invested their life savings in what they thought were safe pension plans, trust funds, and investment accounts. they did their own research and believe that groups like agile best suited their saving plans need. they trusted groups like these investors to turn investments into safe legal funds. unfortunately, agile and other investment firms were defrauded by bernard madoff, by stanford, by patters, and all of the savings and bonds of these individuals were lost. direct investors, except with its net investment role, from sipc are eligible to recoup the $500,000 on each investment account. in direct investors are not. we have the opportunity to restore copies of dignity to the indirect tibet -- investors who lost their life savings and some are losing their homes. they were trying to save for their future and retirement and i look for to the testimony of mr. leveton today to describe some of the travails of the people in colorado. >> chairman kanjorski, ranking member garrett, and members of the committee -- as congressman pearl muttered just said -- perlmutter, my name is pete leveton. i am an unpaid co-chairman of the agile group llc investor committee -- agile was a hedge fund manager based in boulder, colorado. thank you for giving me this opportunity to testify on behalf of agile's 205 investors, several hundred ponzi scheme victims from more than 20 states, and by extension, all madoff indirect investors who piled more than 11,000 claims honor before the bar date of july 2. it is clear from the statements that the congressman made earlier in this hearing that you have a clear understanding of many of the issues that i am going to try not to belabor. the indirect investors are not homogeneous. the group includes farmers, doctors, teachers, lawyers, businessmen, entreprenuers, and other hard-working americans who have over a period of years diligently saved for their retirement. many of us are your constituents. many of us are not devastated financially and psychologically -- are now devastated financially and psychologically. many are trying to sell their homes just to obtain money to live on. some indirect investors have had to beg for support from our siblings and our children. discrimination is not a word that any of us in this room would use lightly. however, because only direct investors are considered sipc customers, discrimination is exactly what indirect investors are facing very clearly not congress's intent when it passed sipa and created sipc in 1970. people who knowingly invested with bernard madoff have the potential of recovering $500,000. in direct investors, maybe most of us who had never heard of bernard l. madoff until it was too late, were not considered customers and we will recoup $0. i ask you -- where is that justice in that kind of an interpretation? because the sec has admitted extreme culpability in missing the warning signs of the madoff scam and others, and because the irs essentially endorsed madoff in 2004 by naming his firm as a non-bank custodian of ira's and other tax-deferred retirement accounts, we believe that congress has a duty to ensure it did equal sipc relief be provided to all victims, not just some victims as is currently the case. the concepts outlined in the maffei/ellison amendment would be wonderful if it were expanded to include all indirect investors. unfortunately it only addresses erisa plan victims. it excludes thousands of other indirect victims, including those in self funded retirement plans such as ira's. i ask you again -- where is the justice and that kind of an approach? we see no moral basis for congress to amend sipa to provide customer status to a relatively small, special interest group of indirect investors e nrisa plans and exclude all other indirect investors. we indirect investors lost our savings in the same fraudulent ponzi scheme, suffered the same financial devastation and erisa plan members and a direct investors. we firmly believe congress should end this discrimination and not perpetuated has the present draft of the amendment would do if passed as is. we urge congress to enact legislation which clearly defines sipc customers as all customers -- as all investors to place their monies into sipa- protected funds. we endorse an amendment that prevents clawback from investors to withdrew their money in good faith and can prove that. with regard to the 60-day payment amendment, we agreed that sipc payments should be based on a customer's balance as based on their last day, assuming that they had no -- that they did not know and had no reason to believe that the madoff operation or other ponzi schemes were fraudulent operations. regardless of what processing period is determined to be reasonable, we suggest strict parameters and guidelines be established and that sipc be required and be held accountable for meeting those standards and guidelines. in closing, i suggest that this could happen to you. the congressman mentioned that it did happen to one of the agile investors who was a previous members of congress -- member of congress. we look to you and your colleagues to carry out congress is our original intent when it in active sipa and help us recover a portion of our tax- deferred retirement account. thank you for the opportunity to prevent these matters. -- to present these matters. i'll be pleased answer any questions you may have. >> now we will hear from our friend from new york to introduce the next witness. >> thank you very much, mr. chairman, for holding this important hearing. thank you especially for allowing us from other subcommittees to sit again. i want to thank all of the witnesses, and mr. leveton, i assure you that mr. ellison and i will be discussing your discussions. -- your suggestion. we are informed by the plight of our own constituents and don't know about all aspects of this. to represent some of the people in my constituency today, i am pleased to introduce a good friend of mine. mr. lancette has served as a chairman of the local steam fitters union since 2005, is also the president of the central and northern new york building and construction trades council, representing 16,000 pensioners and their families from other unions and central new york. thank you for coming to speak with us and look for during her testimony. i want to thank -- bank the local 267. they suffered serious losses because of the madoff scandal. all the headlines have been full of wealthy and prominent investors who lost money, the pension funds of approximately 60,000 union workers and retirees in central and upstate new york were also exposed and suffered great losses. central new york unions lost at least $350 million, and as mr. lancette will tell us, local 267 loss $30 million. it is important to help them recover some of the funds that they have laws. the investor protection at could have provided the means to do that, but i as the chairman to continue to work with us after full regulatory reform has passed the full house. currently, sipc as allowed to advance only up to $500,000 per fine, not per individual in a pension fund. bondsman to the support the retirements of hundreds of thousands are only eligible for the same investor protection as one person. this makes no sense and that is why i've introduced an amendment to help workers in retirement who pension fund were exposed to that. i especially want thank my colleague from minnesota, mr. ellison, for helping me get relief to the innocent people who have become madoff's victims. i want to thank the chairman for holding this important hearing. mr. lancette, thank you for sharing your story with us. >> thank you very much. >> i'll like to thank chairman kanjorski, ranking in america garrett, and members of the subcommittee on capital markets, insurance, and government sponsored enterprise, and the representative for having me here. as you heard, my name is gregory lancette, currently the business managers of the plumbers and steamfitters local 267, syracuse, new york. i am chairman of the jointly administered multi-employer trust fund. i've served in its capacity since 2005. local 267 is a chartered local union of the united association of journeymen and apprentices in the plumbing and pipe fitting industries in the united states and canada. i'm here today on behalf of not only my 100,115 pension participants and their families, but i also stand here as president of the central and northern new york construction trade council which represents nearly 16,000 pensioners and their families also from central new york. today all like to discuss the drought -- a direct relationship between sipc and bernard madoff's ponzi scheme. sipc provides coverage for an individual limit of $500,000. my members pension investments have no real coverage. my members, like millions of workers across the country, rely on pooled investment for the future of their retirement. sipc coverage is not currently protect them rebel local 267 first invested with madoff securities in the 1990's. what i was elected in 2005, the investment was approximately 30% of our pension fund. we receive regular confirmation that our money was invested in s&p 500 companies, and while the return on the account slightly trailed the s&p 500 index, we were assured that the strategy offered adequate diversification and more volatility. we believe that the u.s. securities markets, monitored by the securities and exchange commission, provided protection for our members. the plumbers and steamfitters local 26 steyer 7 benefit funds had a market that you of approximately $34 million invested with the direct brokerage. also, the local to 67 at $6.5 million invested with beacon and associates. it is a basket of investments which comprise up to 40% of total assets invested in madoff. under the current formula, local to under 67 will receive $500,000 for the madoff direct account, and the reimbursement for the beacon account will be only $900, due to the fact that the amount of local 267's portion consisted of only 1.8% of their total assets. to summarize, local 267's pension lost almost $37 million and expected to recover $500,900 from sipc. as the chairman, i am regularly solicited by investment managers seeking to it buys the fund. our collective bonds pay hundreds of thousands of fis each year to securities industry and we should be prepared to provide adequate sipc coverage in the event of a fraud. i must take a moment to reiterate, that is the only reason i am here today. we hadn't money invested with bernie madoff. -- we had money invested with bernie madoff. he has stolen hundreds of thousands of -- hundreds of millions of >> and the sec failed to recognize his criminal behavior, even after being investigated half a dozen times. the reason behind the proposed amendments is that pension funds would be made closer to a whole. to compare what it being currently paid, it all 30 funds receive $500,000 reimbursement from sipc, a total of $15 million will be returned to the central new york area. compared to nearly $350 million in losses. 15 million return, 350 million gone. to further illustrate, local 267's pension loss of nearly $37 million equates to $33,000 per participant. this protection of pool investors would not be a eunuch. similar protection is available to any individual requirement account with bonds in the fdic insured banks. the portion of the amendment that would