How do you feel about letting off these white-collar criminals on Wall Street, with whom their only remedy against them—some of these cases now pending, incidentally-are treble damages?

Mr. DUBESTER. From our perspective, Congressman, we don't view the situation in the way you seemed to have characterized it. Again, in terms of our involvement in the quest for a legislative solution that was both substantively acceptable, if you will, and politically feasible, we're just so convinced that there's a need to curb the current misuse of the statute that we think it's acceptable if you get at some of the problems that are encouraging its misuse. I guess in that respect we would tend, respectfully, to disagree slightly with the chairman's perception about the extent to which both the existence of the treble damage provision, along with the awarding of cost and fees, as well as the potentially stigmatizing effect that the term "racketeer" has on the inducement that private entities have for bringing these kind of suits.

Aside from just our very serious concerns about the way in which carefully crafted Federal schemes in labor relations are subverted, and the extent to which we have to engage in the litigating and defending in some cases as well in moving these suits, which I would view are improper uses of the statute, part of the problem is the extortive nature that induces settlements.

I think that particularly for a lot of our affiliated labor organizations, whose treasuries, contrary, perhaps, to some popular perceptions, are rather fragile, the notion of being subjected to treble damage awards and the additional notion of being unfairly labeled because in this case we're talking about those situations, I won't use the term "garden variety," but I'll use the term that fairly clear labor-management disputes that are subject to resolution through existing laws-the notion on top of that being labeled by a private entity with self-interest of being a racketeer, I think is a serious inducement that warrants settlements unfairly.

So our view is more judgment that on balance in terms of trying to craft a compromise that is substantively meritorious in our view and also accomplishes what we think is a politically doable mission, we're satisfied to support this legislation and think it would accomplish a sensible step.

Having said that, I think it's also important to add, both in response to the chairman's questions as well as some of the other comments that were made by other members of the subcommittee, that we have supported other changes. We have been part of the effort several years ago to enact legislation that would have contained provisions requiring prior criminal conviction, because we thought that was-as Mr. Lacovara said, most analytically sound and also in keeping with the purpose the Congress originally had in enacting the statute.

We've also suggested-in fact, I would point out to the chairman and attached to our testimony is a letter that was drafted back in 1985, in fact, to Congressman Conyers, who was then Chair of the Criminal Justice Subcommittee, in which we made several suggested changes in the substantive aspects of the RICO statute, particularly, again, changes that would tighten up the definition of pattern of racketeering activity, which is the conceptual center of the statute, as well as certain changes that we felt were meritorious in

terms of distinguishing definitions of persons or individuals in enterprises.

So we have supported other substantive changes. But, again, to just repeat what I said, we think that eliminating what we think is really the central inducement, the feature that gives the statute its extortive force in inappropriate ways, we think eliminating the treble damages along with the cost and fees would be a very sensible first step.

Mr. CONYERS. You are representing the labor movement. You probably had to work your way into your professional status, maybe been a union member once or twice in your life.

What about these big white-collar criminals, the inside traders, the merger mania people, the Wall Street crowd, that are ripping us off nationally up into the billions.

As a representative of the labor movement, doesn't that have some bearing on the restrictions that would be imposed upon this law that you here, sitting here representing literally the largest collection of working people in the collective bargaining movement in the United States of America? Don't they have some kind of concern about the restrictions that as you seek fairness for the local unions, we might be letting some of these guys walk out the door? And then to make sure they get away, we say, let's make it retroactive to all the cases pending, whether they are guilty or innocent, let's just clear the dockets for all time?

Does this not have some bearing on your representation here today?

Mr. DUBESTER. It does have a very serious bearing, and I think your question, though, suggests what I would say would be part of our considered judgment on this issue as one representing the labor movement; we neither condone; and to the contrary, encourage the appropriate use of the criminal law be it within the labor movement in terms of weeding out those individuals, given human nature, who misuse their position, just as we would condemn acts by others-people that you characterize as white-collar criminals. But I think that goes back to the point that I made at the outset of my testimony, which is that we would distinguish-and make a very important distinction-between the uses of criminal RICO, and particularly those cases that are brought by the proper governmental or law enforcement authorities who have the responsibility for fair and effective law enforcement to bring those kind of actions on an appropriate basis-

Mr. CONYERS. I seem to remember the head of the AFL-CIO making a lot more specific comment about this question than you are making today. I seem to remember that. I may be wrong. Maybe it isn't a concern of yours and maybe you're here in a very narrow capacity as counsel, and you've got your own kettle of fish to fry. But I just seem to have remembered the AFL-CIO saying something about the swindles, the ripoffs, the so-called white-collar crime that brings us to the Floor today. They say $150 billion; I've got a GAO comment that says $305 billion over 33 years-a lot of which is activity that would be caught by this law.

Mr. DUBESTER. If I could comment on that again.

Mr. CONYERS. Please do.

Mr. DUBESTER. Not to be repetitive, Congressman, but-

Mr. CONYERS. If you are just going to repeat yourself, you don't have to repeat yourself. If you've got something new to say, say it, but I'd like to go on to another question because the chairman is pressing me pretty hard.

Let me ask you about it from the other end, attorney DuBester. What about the little guys? And I'd like to bring this to your attention. In a series of cases that have come to my attention, and I know you're representing the labor movement on a wide range of areas, but what about the little people; the retirees; the ex-union members; the people that can't retain counsel, that have been ripped off, and have only had their buns saved by civil RICO cases filed in their behalf; the retirees in retirement homes that were ripped off, right across the States?

Do you know what some of the fancy witnesses told me? They said, they can go to each State court and sue them; hey, what's the problem?

What about the little guys that are in the AFL-CIO, as I was once, who don't have any remedy to get to the Boeskys and the Levines and the Milkens? What about their remedy that might be cut off if we get too vigorous in supporting these representative groups who are the affected ones in treble damages?

Mr. DUBESTER. I would answer that in two ways. First, I would just say to the extent that we're concerned about the so-called everyday working man and woman, and the extent to which they are subject to-

Mr. CONYERS. They're not so-called, they're actually working men and women.

Mr. DUBESTER. That's correct. That's correct, Congressman.

Mr. CONYERS. Right.

Mr. HUGHES. The gentleman can respond and then we're going to

move on.

Mr. DUBESTER. We have supported-and this may be the context in which you recall, sir, in statements made by either our president, Lane Kirkland, or whatever-we have supported and have testified in support of increasing the criminal penalties, if you will, labor-racketeering provisions, because we think it's in our institutional interest to do so, both before the House as well as before the other body; including we have encouraged the most stringent type of penalties for disbarment from office for union officials who would misuse their office in that regard.

Beyond that, in terms of our concerns generally about this statutory scheme, I would say that, again, we are very sensitive to the the use of privately brought or initiated civil RICO as distinct from the existence of the criminal laws in appropriate circumstances that can be supplemented by civil remedies, but again, brought by governmental authorities with proper discretion.

So that's where we would place our confidence in terms of rectifying those kinds of unlawful activities.

Mr. HUGHES. The gentleman's time has expired.

Mr. CONYERS. Thank you very much.

Mr. HUGHES. I might say that we may disagree on some of these matters before this subcommittee, and on this matter in particular, but nobody from the AFL-CIO ever has to persuade me that they are not out on the cutting edge of a whole host of issues that are

important to the little guy, the disadvantaged, the handicapped, and, frankly, we appreciate the social conscience of the labor movement.

The gentleman from Kentucky.

Mr. MAZZOLI. Mr. Chairman, I have no questions.

Mr. HUGHES. The gentleman from Virginia.

Mr. BOUCHER. Mr. Chairman, I have only one comment, and that is to respond to the concerns raised by the gentleman from Michigan. He suggested that in the case of insider trading the legislation ought to provide multiple damage remedies.

I would say to him that that is precisely what it does. In the event that there is a violation of the insider laws and someone is injured because of that, that injured party may get treble damages under this statute. So I think we have addressed that concern entirely.

He also has referred to the standing of little guys, and by that I take it he means consumers. We have a very precise provision in this legislation that says that if any person is injured by racketeering activity in association with a purchase for personal or household use, or investment, then that person may get up to treble damages at the discretion of the court and the jury. So we have provided a multiple damage remedy for those very little guys.

I think that very thoroughly responds to the concerns raised by the gentleman.

Thank you, Mr. Chairman.

Mr. HUGHES. Thank you.

I just want to say for the record that I didn't mean to create the impression that I don't think treble damages is one of the incentives for bringing civil RICO suits. I didn't mean to suggest that. I just would not rank that as the first priority. It's certainly a major consideration but I, frankly, think it's the use of that bludgeon "racketeering" label that extorts settlements. That is one of the major motivating factors.

Thank you very much. We really appreciate your many contributions. We took a long time with this panel but it's an important subject, and you've made significant contributions, both in your statements and in your oral testimony. We appreciate that.

The next panel consists of Theodore Focht, who is president and general counsel for the Securities Investor Protection Corp. Mr. Focht, if you will come forward. Mr. Focht's previous employment includes special counsel to the Interstate and Foreign Commerce Committee in the House of Representatives; legal assistant to an SEC Commissioner; and an attorney in the Office of the General Counsel of the SEC.

Mr. Focht has also taught law at the University of Connecticut, the Columbia School of Law, and American University.

We welcome you here today.

Our second panelist is William Lerach, who is testifying on behalf of the National Association of Securities and Commercial Law Attorneys. Mr. Lerach is in the private practice of law in the firm of Milberg, Weiss, Bershad, Specthrie & Lerach in San Diego, CA; and for the last 18 years has concentrated primarily in the field of complex commercial and security litigation.

Mr. Lerach has authored articles on class action and derivative suits and taught various courses and seminars in these respective

areas.

Our third panelist is Pam Gilbert, who is the consumer program director for the U.S. Public Interest Group, which is a national lobbying office for comparable State affiliates across the country. PIRG consists of nonprofit, nonpartisan consumer advocacy organi

zations.

Ms. Gilbert has been with the U.S. PIRG's since 1984 and has also worked with the national lobbying office of the ACLU and the National Citizens Committee for Broadcasting.

Our final panelist on this second panel is Mr. Michael Waldman, the legislative director for Public Citizen's Congress Watch. Congress Watch monitors legislation and lobbies for consumer and environmental protection and governmental and corporate accountability.

Prior to his present position, he was the Research Director of the Democracy Project, a public policy institute.

I welcome you today to our Subcommittee on Crime. We have your prepared statements, which are very comprehensive, excellent statements, and without objection, they will be made a part of the record. We hope you can summarize for us.

We will begin with you, Mr. Focht. Welcome.

STATEMENT OF THEODORE H. FOCHT, PRESIDENT AND GENERAL COUNSEL, SECURITIES INVESTOR PROTECTION CORP. Mr. FOCHT. Thank you, Mr. Chairman and members of the subcommittee. I appreciate the opportunity on behalf of the Securities Investor Protection Corp. to meet with you today and express our concern about a matter that is of importance to us.

The Securities Investor Protection Corp., which is known by the acronym SIPC, was established in 1970 by the Congress as a nonprofit membership corporation, which would work within the existing regulatory and self-regulatory structure in the securities industry to protect the public in their investments in our Nation's securities markets in the event that the securities broker-dealer with whom they were doing business failed and was placed into liquidation.

When viewed by the mission that was given to us by Congress, SIPC is like the Federal Deposit Insurance Corporation for banks and the Federal Savings and Loan Insurance Corporation for S&L's.

As set forth in detail in my statement, Mr. Chairman, SIPC and its trustees have made judicious use over the years of the remedies available to them under RICO to recoup financial losses to the SIPC fund and to the broker-dealers' customers and creditors.

I would note, however, that H.R. 1046, does make provision for Government entities to continue to have the remedies available through RICO, including the provision for treble damages. Included in Government entities would be, of course, the FDIC and the FSLIC.

Since the law that establishes SIPC states that it is not an agency of the U.S. Government, I would assume that it does not