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Jewish World Review Feb. 14, 2003 / 12 Adar I, 5763

Dick Morris

Dick Morris
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Corzine throws down gauntlet on Wall St. fraud | The new swing voters in America - this year's equivalent of the Soccer Moms of the '90s - are the small investors whose life savings hang in the balance as the stock market tanks. President Bush hopes to appeal to them through his dividend tax cut, which Democrats stupidly oppose. But now the Democrats are unveiling a strategy of their own to lure these key voters.

The strategy became apparent when Sen. Jon Corzine (D-N.J.), of all people, closely questioned William Donaldson, Bush's nominee to head the Securities and Exchange Commission (SEC). Corzine, a former Wall Street investment banker, demanded to know what Donaldson planned to do to reform the stacked arbitration process to which small investors must appeal to get their life savings back after Wall Street fraud has taken it away.

Noting that, according to the General Accounting Office, 64 percent of arbitration awards in securities cases go unpaid, Corzine asked what Donaldson was planning to do to restore the confidence of small investors who have been swindled by Wall Street con artists. The New Jersey senator signaled future Democratic focus on the arbitrators who sit in judgment when small investors try to get their money back.

" Have you considered," he asked Donaldson, " the issue of securities arbitration where representatives from the exchanges and generally lawyers that are close to the industry are basically the arbitrators, where the proceedings are secret, whether there is the kind of fair review of individual investor's response ?"

Donaldson pledged to review the arbitration process, but, unless he changes it, the issue is likely to grow and bite Bush and the GOP. As securities lawyer Robert Weiss puts it, "Investors have no chance before arbitration panels. The process is filled with industry lawyers and arbitrators with conflicts of interest."

Until now, investors who lost their retirement money because of overestimates of earnings and phony profit statements, have not come face-to-face with the arbitration process that will adjudicate the fate of their savings. It's likely that most expect their day in court. Imagine their surprise when they find that they have signed away their right to impartial jury trials and, instead, must seek redress in a biased forum without benefit of discovery, subpoena power, or right of appeal.

So far, Bush has preserved his reputation for fairness in dealing with securities fraud issues. But as the number of aggrieved investors who are demanding their money back reaches into the high six figures - and maybe into the millions - he must propose reform to keep his credibility with those who are part of his normal white male capitalist constituency.

For Corzine, his willingness to use his inside knowledge of Wall Street for the public's benefit should send a chilling message to industry insiders. Perhaps Corzine will become a latter-day Joseph P. Kennedy, the first SEC chairman, by using his information about where the bones are buried in the public's interest. He's off to an impressive start.

This year will be a Republican year. Dominated by the likely military action looming in Iraq, focused on the need to facedown North Korea without panicking the dictator whose finger is probably on the nuclear button, and obsessed with the need to protect our homeland, the American public will back Bush fully and completely. But when 2004 comes, Bush may lose the traction that international crisis is giving him. He may run out of countries.

Then, issues like the fair treatment of small investors whose 401k(s) are depleted through fraud and deceit, may again become important. Recognizing this issue, Bush wisely aimed his tax cut squarely at this community of aggrieved investors. But will the SEC and the securities arbitration process cost him the votes his tax cut seeks to garner?

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JWR contributor Dick Morris is the author of, among others, "Power Plays: Top 20 Winning and Losing Strategies of History's Great Political Leaders" Comment by clicking here.


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12/31/02: Hey, Hillary: Want to appear like a stateswomyn? Stay silent
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11/25/02: The U.N. over a barrel
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11/15/02 One-party control is an illusion
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10/11/02: Why multilateralism doesn't work
10/09/02: Hey, Dems: Believe NYTimes polling at your own risk
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07/23/02: Election 2002: Advantage Dems
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07/17/02: The investor strike
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06/10/02: Sanctions are a potent weapon
06/04/02: Al Qaeda's more dangerous new front
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12/11/01: "Open Sesame": Feinstein's proposed bill allows 100,000 non-immigrant students from anti-American countries to our shores
12/07/01: The non-partisan president
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11/21/01: Go for the jugular!
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11/14/01: Clinton's failure to mobilize America to confront foreign terror after the 1993 attack led directly to 9-11 disaster
11/12/01: To the generals: Don't worry about losing support
11/08/01: The death of the white liberal
11/07/01: Our leaders are being transformed in a way unprecedented in post-World War II history

© 2002, Dick Morris