Presented by:Richard Winsten, Esq. & Barbara Hart, Esq.

REFORMING THE NYS MARTIN ACT:

A.6060-A (Lancman, Bronson, Roberts, Weprin, Millman, Colton, Gabryszak, Linares, Hooper)

S4497-A (Libous, Parker, Savino, Squadron)

Legal Rights for Main Street: Pensioners, Madoff Victims, et al.

The NYS Martin Act – Section 352-c General Business Law

Grants the Attorney General sweeping investigative & prosecutorial powers in the securities area

In 1987 the New York Court of Appeals ruled that there is no private right of action under the Martin Act

The Attorney General is the only one that can sue perpetrators of securities fraud for restitution

Martin Act Continued

Statute of Limitations: 6 years Potential Defendants: primary & secondary

violators (i.e. aiders & abettors) Scienter Requirements: no pleading or proof

of intent to deceive required (i.e. negligence standard)

Martin Act Amendment Bills

Assembly bill A6060-A sponsored by Assemblyman Rory Lancman. Currently in Assembly Codes committee.

Senate bill S4497-A sponsored by Senator Thomas Libous. Currently in Senate Consumer Protections committee.

A.6060-A (Lancman) / S.4497-A (Libous) cont. Limited to Martin Act suits by public and

private pension funds and makes clear that Common Law fraud claims brought by Madoff victims are not preempted by the State Martin Act

Does not permit Martin Act suits by all large institutional investors - only pension funds

NY Public Pension Fund Losses from Three Financial Companies – Losses from 2008-2009

-$2,151.8-$735.3-$775.5-$641.0Total

-44.0-15.2-18-10.8NYCFPF

-46.4-19.1-14.3-13NYCPPF

-259.5-87.8-110.6-61.1NYCTRS

-298.4-101.1-120.5-76.8NYCERS

-353.7-134.2-25.6-193.9NYSTRS

-1,149.8-377.9-486.5-285.4NYSLRS

TotalCitigroupBank of America

AIG

Reported in millions of dollars

NY Public Pension Fund Losses from Three Financial Companies – Losses from 2008-2009

Percent change in stock price 3/31/08 to 3/31/09

o AIG: -98.5%o Bank of America: -86.7%o Citigroup: -95.1%o DJIA Index: -38.4%o S&P 500 Index: -43.9%

NYC & State Public Pension Fund Losses from Wall Street Meltdown

Reported in billions of dollars

-28.33%-$31.4$79.5$101.9$110.9Total, NYC

-25.6%-$109.6$262.9$353.5$372.5Total

-29%-0.61.52.02.2BOERS

-23%-1.65.66.87.2NYCFPF

-20%-4.517.421.121.9NYCPPF

-38%-14.123.132.337.1NYCTRS

-25%-10.631.939.742.5NYCERS

-31%-32.472.595.8104.9NYSTRS

% assets lost

2yr Losses 6/30/09

Net Assets 6/30/09

Net Assets 6/30/08

Net Assets 6/30/07

-29%-45.7110.9155.8156.6NYS&LRS

% assets lost

2yr Losses 3/31/09

Net Assets 3/31/09

Net Assets 3/31/08

Net Assets

3/31/07

NYS and Local Gov’t Employer Contributions

NYC Comptroller John Liu’s report: An Analysis of NYC Pension Costs Over the Last Decade Studied the impact on the municipal budget of the City’s five

retirement systems: the NYC Employees’ Retirement System (NYCERS), the NYC Teachers’ Retirement System-Qualified Pension Plan (TRS), the NYC Board of Education Retirement System-Qualified Pension Plan (BERS), the NYC Police Pension Fund (POLICE), and the NYC Fire Department Pension Fund (FIRE).

Over the past decade, the annual employer contributions to the pension funds have risen more than 500 percent, from $1.2 billion in Fiscal Year 2001 to $7.7 billion in Fiscal Year 2010.

Pension costs currently represent 11 percent of the City’s expenses, up from a low of 3 percent in FY ‘01.

Poor market performance accounted for 48 percent of the growth in costs

Source: http://www.comptroller.nyc.gov/rsnyc/reports.asp?f=1

NYC Pension Contributions

Lawsuits Filed in NYS Courts by TARP recipient Financial Institutions

213480204238

Yearly TotalsYearly TotalsYearly Totals

3115517086SunTrust Banks

0000Regions Financial

53991258190M&T Bank

625561CIT Group

72282915Citigroup

4882614AIG

7596131239012383Wells Fargo

1001US Bancorp

239526208PNC Financial

10514Morgan Stanley

62095360165JP Morgan

5221Goldman Sachs

37710819970Capital One Financial

0000Boston Private

100524608373Bank of New York Mellon

29442931987664Bank of America

5635344763American Express

Bank Totals2008 Cases2009 Cases2010 CasesCompany

Source: NYS Unified Court System

Home Repossession Rates NYS and Nationwide – an interesting trend

Source: NYTimes

Wall Street’s Repeat Offenders

Source: http://www.nytimes.com/interactive/2011/11/08/business/Wall-Streets-Repeat-Violations-Despite-PromisesStsssss.html?ref=business

An analysis of Securities and Exchange Commission documents by The New York Times found that since 1996, there have been at least 51 repeat violations by many large Wall Street firms.

Wall Street’s Repeat Offenders pt. 2

Supreme Court Weighs in on Securities Fraud In 5-4 Vote, Supreme Court Limits Securities Fraud Suits - NYTimes Janus Capital Group v. First Derivative Traders, No. 09-525:

plaintiffs contend that Janus Capital Group’s Janus Investment Fund (managed by Janus Capital Management) falsely indicated that the adviser would put in place policies to curb strategies in trading that would be based on delays in fund valuations.

The court ruled that a mutual fund’s investment adviser cannot be sued for securities fraud over fund prospectus misstatements

Only the fund itself could be held liable for violating Securities and Exchange Commission rules relating to “any person, directly or indirectly” making “any untrue statement of material fact” in connection with selling or buying securities

(NY Times, June 13th 2011, http://www.nytimes.com/2011/06/14/business/14bizcourt.html)

Public Opinion on Financial Reform & Unfair Practices

Siena College Research Institute – August 22-31, 2011 (805 NYS Residents); MOE +/- 3.5%

Who supports this bill?

Unions: NYS AFL-CIO, NYC Municipal Labor Committee, NYS Laborers, United Federation of Teachers, NYS United Teachers, NYS Public Employee Conference, Local 237 Teamsters, Uniformed Fire Officers Association, IBT, DC 37, AFSCME New York, Public Employees Federation, 1199 SEIU, SEIU 32BJ, CWA Local 1180

Elected Officials: NYC Comptroller Liu (2011), NYS Comptroller DiNapoli (2011)

The Causes of the Collapse New Yorkers for Lawsuit Reform AIG Securities Industry & Financial Markets

Association (SIFMA) New York City Partnership NY Bankers Association The Business Council PHRMA NYS Society of CPAs

Federal Securities Law

Private right of action: Yes Statute of limitations: lesser of 2 years from

discovery of fraud or 5 years from the date of the fraud

Potential defendants: Primary violators only Scienter Requirement: heightened standard of

pleading and proving scienter under private Securities Litigation Reform Act and Fed. R. Civ. P. 9(b)

Federal Securities Law cont.

Legislation passed by Congress sharply curbed and “federalized” securities class actions

o Private Securities Litigation Reform Act of 1995 (PSLRA)

o Securities Litigation Uniform Standards Act of 1998 (SLUSA)

o Class Action Fairness Act of 2005 (CAFA)

State Common Law Causes of Action

Breach of Fiduciary Duty Common Law FraudElements of common law fraud:o a representation of an existing facto its materialityo its falsityo the speaker’s knowledge of its falsityo the speaker’s intent that it shall be acted upon by the plaintiffo plaintiff’s ignorance of its falsityo plaintiff’s reliance on the truth of the representationo plaintiff’s right to rely upon ito consequent damages suffered by plaintiff

Help Pass A6060-A / S4497-AFinancially support a proposed web-based campaign to contact elected officials (dedicated website and social media)

Help Pass A6060-A/S4497-A

Send letter/email to elected officials asking them to support A6060-A/S4497-A

Help build the coalition in support by reaching out to unions, benefit funds, university endowments, and attorneys that are representing these institutions in attempts to win compensatory damages