Richard Bryan

Mr. BRYAN

Mr. BRYAN. I object.

Mr. BRYAN

Mr. BRYAN. Mr. President, the Senate has just confirmed the nomination of Patrick A. Mulloy for Assistant Secretary of Commerce for market access and compliance. I strongly support his nomination and believe the country will be well served by his appointment. When I first came to the Senate, I was given a seat on the Senate Banking Committee where Pat was a senior staff member. Pat's knowledge of the rules and procedures of the Senate was invaluable to me. Many a Senator has drawn upon Pat's expertise and institutional memory, and he is widely respected on both sides of the aisle. Pat is recognized as one of the Senate's leading experts in international trade and finance matters. He has spent countless hours working on international trade agreements that are helping open up foreign markets to the U.S. financial services industry. Few people have fought as hard for our interests as has Pat. The Senate will sorely miss him. The Commerce Department will benefit from Pat's enthusiasm, intelligence and personal warmth. The country is fortunate to have some with Pat's commitment to public service. I wish him the best of luck in his new endeavor and look forward to continuing to work with him on important issues facing the country.

Mr. BRYAN

Mr. BRYAN. Parliamentary inquiry, who has the floor?

Mr. BRYAN. Mr. President, parliamentary inquiry, who has the floor? As I understand the rules, no Senator can yield to another Senator.

Mr. BRYAN. Mr. President, I ask unanimous consent that upon my yielding the floor--it is my understanding the junior Senator from Texas requests 10 minutes, and I request that she be recognized. Following that, the junior Senator from Illinois? I propound that in the form of a unanimous consent request.

Mr. BRYAN. I thank the Chair for his courtesy, as well as his parliamentary ruling. Mr. President, as we debate this historic tobacco legislation today, 3,000 children across the country will try smoking for the first time. Of those 3,000 children, one-third, or 1,000, will become addicted is the only way to describe it, addicted to nicotine and will face a future of diminished health. The health consequences of the use of tobacco products is our country's most preventable public health problem, and our goal in this legislation is to stop underage smoking. Our debate on this tobacco legislation is, indeed, a historic event. Less than a year ago, with the announcement of the June 1997 settlement reached between the States' attorneys general and the tobacco industry, few would have foreseen that we would have comprehensive legislation to address the national problem of underage use of tobacco products on the floor of the U.S. Senate. I give particular commendation to the Nation's attorneys general who deserve much credit for putting this issue in the forefront of public debate. A year ago, the conventional wisdom may very well have been that the Senate would be incapable of debating comprehensive tobacco legislation. It was then said the tobacco industry was too strong, its grip upon the Congress too powerful. Mr. President, a different force arose. The sustained efforts of the public health community, and in particular the former Surgeon General of the United States, Dr. C. Everett Koop, and the former FDA Commissioner, Dr. David Kessler, these two, as well as other public health advocates, have kept the focus on a common goal: a major reduction and hopefully the eventual elimination of underage smoking. This legislation may not be perfect, but it does represent an extraordinary accomplishment. The initial Commerce Committee bill offered by Senator McCain was a crucial step in ensuring that the tobacco industry would not be allowed to stop the effort to protect our Nation's children. After the Commerce Committee reported out its bill-- and I am proud to say as a member of that committee I joined with a great majority of my colleagues in voting to report that bill out of committee--the tobacco industry walked away from the legislative process and then began an orchestration by the industry to end our efforts to protect our children. The tobacco industry badly miscalculated again. Instead, our resolve to protect our children's future has been strengthened. This effort is of vital importance for the children of our Nation and for their future health. In the 11 months since the proposed 1997 settlement, 990,000 underage children have become smokers. One-third, or approximately 330,000, of those children will eventually die prematurely because of tobacco-related illnesses. This is a tragic statistic. This undermining of our children's future health must end. If a child begins smoking before he or she reaches the age of their 18th birthday, there is an 80 percent likelihood that child will continue to smoke into adulthood. For these young children, the decision to try smoking has ramifications far beyond their understanding at such a tender age. These young people view themselves as I suppose all generations of young people have--as being indestructible. They do not realize, nor fully comprehend, the significance of their decision. That is a condemnation to a possible future of lifetime addiction to tobacco and a possible lifetime threatening health condition. I keep using that word ``addiction'' because that is what we are talking about, Mr. President, addiction. How urgent our efforts are to reinforce these efforts have been highlighted by the recent report from the Centers for Disease Control, a report which indicates that the increase of tobacco usage by underage youth has increased by alarming proportions. Just 7 years ago, 27.5 percent of all high school students in America smoked. In 1997, that number had risen to 36.4 percent. At the same time, the number of adult smoking was declining. Young African- Americans historically have been able to resist the tobacco industry's advertising reach and had relatively low levels of underage tobacco use. Unfortunately, that is no longer the case. Smoking by African- American students has almost doubled in the past 7 years, the fastest growth rate of any youth group over the past 6 years. White youth smoking has increased by 28 percent, and Hispanics have increased by 34 percent over the same time period. Overall, 5.5 million of our Nation's 15 million high-school-age children are smokers. This report's findings are most distressing. Rather than gaining, we are losing ground in our effort to protect our children's health. The decision to smoke or not to smoke is, we are told, an adult choice, and I share that perspective. But we have learned that the tobacco industry has systematically focused its marketing strategies on underage smokers and then lied about it. They lied to the American people. They lied to the Congress. To get middle-school-age children--these are youngsters who are not yet in high school--to try smoking and then to get them hooked on nicotine is the key to the tobacco industry's future markets and profits. To hook these children at this early age means these young people will have been smoking for 3 to 5 years before they have reached the legal age to make that decision, the age of majority or adulthood at 18. What the tobacco industry has done is tantamount to a crime. Let me be clear I strongly believe underage children also bear responsibility when they attempt to use, purchase or possess tobacco products, and they need to be held accountable for their illegal activity. I am pleased that at my request this legislation includes provisions to require States to have penalties so that underage youth who do try to purchase a tobacco product will know it is illegal and that it carries consequences. These penalties can include community service, fines and suspension of driver's license privileges. But holding young people responsible for illegal smoking or possessing tobacco products in no way excuses the tobacco industry for its shameless efforts to encourage underage smoking. Our underage children have been the premeditated focus of the tobacco industry's effort to ensure there is a future, and I use their terminology, ``replacement market'' for their products. This industry has for years strategized as to the methodology to entice our youngest children to identify tobacco product brands with the sole purpose of getting them to try smoking as early as possible. This industry knew the earlier a child tries smoking, the greater the likelihood will be that child will continue to smoke and become addicted to nicotine. Once addicted to nicotine, that child will very likely continue smoking into adulthood, and then the industry will have accomplished its goal: the creation of a future replacement market for its products. In the tobacco industry documents recently made public, this is manifestly clear. An R.J. Reynolds document states: This young adult market, the 14 to 24 group. . . represent[s] tomorrow's cigarette business. As this 14 to 24 age group matures, they will account for a key share of the total cigarette volume--for at least the next 25 years. Yesterday, Mr. President, I was privileged to attend the White House Campaign for Tobacco-Free Kids. I was impressed with the more than 1,400 youngsters who gathered, representing America's youth, who made a determination not to be fooled by the tobacco industry. These young people have already made a choice, and that choice is to say ``no'' to the tobacco industry's attempt to take their future health away from them. The tobacco industry has tried to manipulate the legislative process by intimidation. But the industry's saber rattling about its ability to win trials has been seriously undermined by its own actions. The tobacco industry, among other criticisms of this bill, has consistently maintained that any legislation not limited to the $386.5 billion originally negotiated amount by the attorneys general and the tobacco industry in their June 1997 settlement would result in the bankruptcy of the industry. The legislation we debate today is estimated to cost over $516 billion over 25 years, and the tobacco industry is asserting that such an amount would result in their bankruptcy. However, I think it is noteworthy to point out that during the course of the congressional deliberations on the attorneys general-industry settlement, the tobacco industry itself has settled that it has voluntarily entered into an agreement with the State of Mississippi for $3.4 billion, the State of Florida for $11.3 billion, the State of Texas for $15.3 billion, and, most recently, the State of Minnesota for $6.6 billion. Now, the tobacco industry's willingness to pay these multibillion- dollar judgments in just 4 of the 41 States makes two very important points. First, the industry's contention with respect to bankruptcy has been proven to be specious. These four settlements extrapolated to the remaining State lawsuits would cost the industry approximately $500 billion, nearly the same amount as the cost of the McCain legislation. A further note. This industry was prepared, as a consequence of the June 1997 settlement that it voluntarily entered into, to decrease youth smoking by approximately 40 percent. The industry did not seem too concerned in June of 1997 that a loss of 40 percent of their market would bring about bankruptcy. And it does seem logical to believe that the industry would not have voluntarily negotiated a settlement if they believed that settlement would put them out of business. A second point, if I may, Mr. President. The magnitude of these settlements only served to verify the industry's determination not to allow any lawsuit to go to a jury because they are fearful of the outcome--just what a jury might do once a jury fully understands the egregious misconduct of this industry and the impact it has had upon our Nation's children. So the tobacco industry has also pulled out another old scare tactic, that this legislation creates a monster, convoluted, massive new bureaucracy. Quite to the contrary, this legislation does not. All administrative efforts need to assure that the proper implementation of this historic legislation will be done by currently existing agencies. This legislation does provide for a very strong Food and Drug Administration role in the efforts to stop underage tobacco use and to assure the public of our Nation that its safety and the safety of our young people will be its paramount concern. Now, I have consistently supported the FDA's efforts to reduce underage smoking. I am pleased that this bill will reinforce and, indeed, strengthen the ability of the FDA to continue to protect the public health of our citizens. The legitimate concerns raised by convenience store retailers who had feared they could, as a retail group or class, be prevented from selling tobacco products under the proposed FDA regulations have been addressed. These retailers have now expressed their support for the proposed State licensing of business entities selling tobacco products as a means of further controlling access of these products to underage children. Under the revised FDA regulation section, the FDA will be able to revoke a retailer's license, on an individual basis, to control those retailers who do not abide by sale restrictions. This will protect those responsible retailers who are committed to preventing underage access to tobacco products, and to punish those who irresponsibly do not do all they can to prevent young people from illegally purchasing tobacco products. Mr. President, equally ridiculous to the bureaucracy ``scare'' is the assertion that a massive black market will emerge. On the floor, we have heard over and over again the black-market warnings of Jim Pasco, the executive director of the Fraternal Order of Police. What tobacco supporters fail to tell us is that this same gentleman is on the payroll of Philip Morris, this country's largest tobacco company. So I conclude, Mr. President, by observing that the arguments made by the opponents of this legislation are pure smokescreens. The issue is really simple: Will Congress have the courage to vote on the side of America's youngsters and to protect our youngsters from the possible lifetime health-crippling afflictions that are attributed to the use of tobacco that cause the premature death of hundreds of thousands of people each year or will it support the tobacco industry? I hope my colleagues will take the courageous and historic step to vote for this legislation and to protect the young people in America. I thank the Chair and yield the floor.

Mr. BRYAN

Mr. BRYAN. Mr. President, I rise today to recognize the achievements of the Pau-Wa-Lu Middle School in Gardnerville, Nevada. Each year for the last four years, Pau-Wa-Lu Middle School has been involved in a major service project within its community. In 1995/96, the school sponsored a cleanup project during which 250 students and adults cleared years of accumulated trash from green belts within their community. In 1997, when a major flood devastated the homes and businesses of many of Northern Nevada's citizens, over 600 students and adults donated more than 4,000 man hours to helping flood victims recover their lives and property. And in 1998, over 300 students and adults from Pau-Wa-Lu and Carson Valley Middle Schools have planted trees in Autumn Hills, an area that has been devastated by forest fire. I am pleased to recognize Pau-Wa-Lu Middle School for its commitment to community and instilling this same spirit in its students.

Mr. BRYAN

Mr. BRYAN. Will the Senator yield for a question?

Mr. BRYAN. The question I have is with reference to the Senator's observation about standard for reckless misconduct. As I understand, we have actual knowledge, we can have simple or ordinary negligence, we can have gross negligence, and then we can have a standard of reckless conduct which is an utter disregard of the facts. Is the Senator saying that the legislation that we are processing today does not clarify in the findings of this committee that we want to reaffirm that reckless misconduct ought to be a cause of action for those who are defrauded by investors?

Mr. BRYAN. We are talking about, if I understand, conduct that is more egregious even than gross negligence. We are talking about an utter disregard of the facts and the consequences that flow from that?

Mr. BRYAN. So if I understand the Senator's position, if S. 1260 is passed, we preempt State class actions so that small investors would not have the advantage of a longer statute of limitations that a number of States--I believe 33 out of the 50--provide to investors suing at the State level class actions. We would deprive the small investor of his or her opportunity to go against the accomplices, the lawyers, the accountants, and others who conspired with the primary perpetrator of fraud. That protection is taken away. And we also eliminate the ability to move and to obtain a joint and several liability judgment against those offenders. They are all things which I understand currently exist to the benefit of small investors as class actions at the State level in most States, if I am not mistaken.

Mr. BRYAN. Is the Senator also suggesting that a remedy available at the State court level against an accomplice, whether it be a lawyer or an accountant, that would be available to the investor under State law, if removed under the process of the Federal court, which the Senator has just described, would preclude that small investor from a recovery against an accomplice who had participated in the fraud that resulted in the investor's loss?

Mr. BRYAN. Will the Senator yield? I don't want to interrupt his presentation. I am always happy to wait, but we are talking of the reckless standard. If I might inquire of the Senator, the SEC, as I understand it, has sent over a definition of ``reckless.'' If that could be included in the findings of fact as opposed to the report language, I think it would strengthen what we all seek to do, and that is to retain the reckless standard, which I know is the objective of the Senator from Connecticut. As the Senator knows far better than I, report language is fairly thin gruel compared to the findings of fact which are included or other issues which the sponsors of the legislation--I wonder if the Senator would consider including that definition.

Mr. BRYAN. Reserving my right to object.

Mr. BRYAN. I certainly do not want in any way to interfere with the presentation of the amendment of the Senator from Wisconsin, but we are in a time limit where we have an hour on each side and I want to make sure that I do not lose my----

Mr. BRYAN. I am happy to do that. Can we include one proviso in the proposed unanimous consent that after the Senator from Texas is allowed the time as requested by my friend, the distinguished chairman, and after the Senator from Wisconsin is recognized for purposes of an amendment, will the Senator from Nevada then be next recognized, if that would be agreeable?

Mr. BRYAN. I thank the Presiding Officer. Just to be clear, in terms of the status, the 22 minutes that are reserved to the Senators in opposition is not affected by the colloquy between my two friends from New York and Wisconsin?

Mr. BRYAN. Madam President, this legislation that we are debating today, as I have said on previous occasions, is somewhat arcane and esoteric. It is not the sort of thing where, for people who are at home watching this debate, it causes them to move to the edge of their chairs and to hang on every word. It is, however, terribly important for the tens of millions of small investors who, in recent years, have invested in the future of America, and for their confidence in the market system that we have created, because they are the small investors, they are the ones who will be impacted by this legislation. The large investors, the large institutions, will still have options that heretofore the small investors have had but the small investors will be deprived of as a result of this legislation. So it is the view of the Senator from Nevada that this legislation plunges a dagger into the heart of every small investor in America. What we are talking about is not whether a case can be brought in State court or Federal court. We are talking about a system, which currently exists, that allows a private small investor to be part of a class action, and other small investors who have been defrauded as a result of the misconduct of others, to come together and file an action in State court and to avail themselves of statutes of limitations that are longer than are available to those of us who file in Federal court to provide, for joint and several liability, the ability to recover from accomplices--particularly important if the primary offender has bankrupted himself or herself or itself or has taken leave--and to avail himself or herself of triple damages under RICO. So this has a very practical impact. Actions that would be available to small investors at the State court level will no longer--no longer-- be available to those small investors, as a practical matter. So we continue a process which alarmed my good friend, the distinguished ranking member of this committee, the distinguished Senator from Maryland, that began with the Private Securities Litigation Reform Act of 1995 and, in our view, simply goes too far. Those of us who express strong reservations about this bill find no comfort with those who are filing strike suits, those who are involved in litigiousness for the sake of litigiousness. I believe it would be possible to craft a narrow provision that addresses the ostensible concerns that have been raised and yet not deprive small investors in this country of their rights under the law. The system for private enforcement of remedies has existed now for more than six decades. It is a dual system involving the State courts and the Federal courts. It has worked exceptionally well. The SEC has repeatedly testified as to the importance of private rights of actions as being absolutely essential to augment their own enforcement efforts. Indeed, they have said they have not the ability nor the resources to deal with the vast panoply of investor fraud, and they view the private cause of action as essential. Indeed, States were the first to enact these protections against fraud in the early 1900s, and when, in the mid-1930s, the statutes that essentially provided the framework for Federal securities regulation were put in place, it was expressly intended to supplement, not to supersede, to complement, not to wipe out, and the language of this legislation today specifically preempts the State cause of action for class actions. These State remedies are vitally important, and States have responded in a number of different ways by providing protections. I am going to talk about three primarily. The statute of limitations. Why is that important? Those who perpetrate fraud on small investors don't do so openly and nakedly; they try to conceal it to protect that activity. So the unfortunate decision of the court in the Lampf decision, which limits at the Federal level the right of an investor who has been defrauded 1 year from the point of discovery of the fraud, 3 years even though the investor never becomes aware of that fraud, is viewed by the Securities Commission as unreasonable because it takes them, with all of their resources, a minimum of 3\1/2\ years. The statute of limitation is not just an arcane debate about how long one should have, it is the ability of a small investor who has been defrauded without his knowledge and, never having learned of it within the 3-year period of time, is now precluded. Thirty-three States in this country, including my own in Nevada, provide for a longer statute of limitation. Some provide 2 years from the time of discovery of fraud, or 5 or 6 or even 10 years, and some provide no bar at all. In the vast majority of States in America, small investors filing class actions who do not discover the fraud until after 3 years are currently, under existing law, protected in at least 33 States. This legislation cuts off that right, and even though we all agree or, as the lawyers say, stipulate to the merit of the claim, it is barred-- barred--by the 3 years even though the small investor never became aware of the fraud. That is what we are talking about. Forty-nine of the 50 States provide liability for the accomplices-- those who conspired with the primary perpetrator of the fraud, whether they be lawyers, whether they be accountants, whether they be other investment advisers--to provide a cause of action--49 out of 50. Unfortunately, at the Federal level, there is no remedy for plaintiffs against aiders and abetters. So that means that if the primary offender, the perpetrator, becomes bankrupt, leaves the country, or is otherwise unable to respond in damages, historically at the State court level, the class-action plaintiffs could recover against those who conspired and aided in that fraud. The action that we take with S. 1260 deprives small investors filing class actions from this recovery. So now, if we pass this legislation, they are precluded from moving against those who conspired and actively participated in the fraud. Moreover, States, as a matter of providing protection to their own citizens, have provided in a number of jurisdictions for joint and several liability. That means if five or six are guilty of the fraud and only one has the ability to respond in damages, States have made the determination that as between the innocent investor, utterly blameless, that the innocent investor ought to be satisfied against the perpetrator of that fraud, even though there may have been several involved. That is wiped out. We have, in effect, a piece of legislation before us that dramatically limits the right of a small investor to pursue a class action in State court and to avail himself or herself of a whole host of remedies which States have provided on their own. I must say, the irony of this course of action by a Republican Congress that has proclaimed its devotion to State rights and has raged against preemption by a Congress at the Federal level of essentially State rights does not go unnoticed by this Senator. Why are class actions important? Again, it is pretty esoteric. Think for a moment. Tens of millions of small investors who may have been victimized by a fraud don't have the ability to hire a lawyer on their own to fight against entrenched special interests who have the ability to provide legal defenses and delays and delays. That is practically no remedy at all. It is only by binding together with other investors, small investors who are similarly situated, as the law says, that those costs can be spread and a recovery can be possible. When we say, as proponents of this legislation, ``Well, the small investor can still file in State court,'' that is true, but it is a hollow and transparent remedy because, as a practical matter, small investors simply do not have the ability to pay for the lawyer's fees and the costs that are involved in processing these kind of cases. That was the situation that 23,000 senior citizens who joined in a class action against Charlie Keating and Lincoln Savings and Loan found themselves in a few years ago. It was a class action, and they were ultimately able to recover 65 cents on the dollar of their losses. Had those plaintiffs been involved today with a shorter cause of action at the Federal level, with the cause of action unavailable at the State level for class actions, those plaintiffs would have not been able to recover that kind of money. The examples of these kinds of groups are not just small individuals, but they include school districts, municipalities, special improvement districts, pension funds at the State and municipal level. All of these are going to be affected by this legislation. As a practical matter, a class action provides the only realistic hope of recovery. As I pointed out, the SEC, with all its resources, says it takes them up to 3 years to compile the data to bring these securities fraud suits. So in effect, what we are doing now is we are providing for two classes of investors: Those who have been defrauded who are people of means, of wealth, so they can hire their own lawyers, they can still file at the State court level and take advantage of the longer statute of limitations, can take advantage of the provisions that provide liability against accomplices, can take advantage against the joint and several liability protections available at the State level. But if you are a small investor--and that is what most of those who are defrauded are, small investors--that remedy is no longer available to you. So the question arises: Why are we doing this? What is the problem? Well, frankly, to the great credit of our regulatory framework, we have the safest and the most efficient securities markets in the world. In 1990, there were 158 IPOs, totaling $4.6 billion. In 1997, 7 years later, there were 619 IPOs, totaling $39 billion. The stock market has recently set record highs. The Dow is over 9,000. And individuals confident in these markets are pouring in $40 billion a month in mutual funds. In 1980, 1 in every 18 households in America invested in the stock market. Less than 20 years later, it is more than one in three. That is a great tribute to the security and safety of this market. Why are we reducing the investor protections at a time when the stock market is surging and consumer confidence is growing? Investor confidence is crucial, and it is threatened by increasing fraud. I believe it was President Kennedy who made the observation, that, ``A rising tide''--referring to the economy--``raises all boats.'' And I think that is true. But it is equally true it also hides the shoals. Newsweek, in its October 6, 1997, edition: ``Scam Scuttling: The Bull Market is Drawing Con Artists. SEC Chairman Levitt summarized, ``In a market like this, parasites crowd in to feast on the bull's success.'' Business Week, December 15: ``Ripoff! Secret World of Chop Stocks-- And How Small Investors--[and that is what we are talking about] Are Getting Fleeced.'' The article focuses on small-cap equities manipulated to enrich promotors and defraud thousands of small investors--a $10 billion-a-year business that regulators and law enforcement have barely dented. The New York Times of November 26 of last year: ``Lessons of Boesky and Milken Go Unheeded in Fraud Case.'' In one case, 1,600 investors were swindled out of $95 million. Yet Federal and State enforcement resources are shrinking as these fraudulent schemes are perpetrated upon the innocent small investors. Now is not the time, I would respectfully argue, to in effect rip from the investor his or her opportunity to recover that which has been lost as a result of being victimized by fraud. Our securities markets run on trust, Madam President--on trust--not money. There will be much less trust, I fear, if this legislation occurs. Look what has happened in countries around the world: ``Albania tries to regain control [of the Ponzi scheme].'' That can't happen in America with the system that we have created. ``Shanghai Stock Market Cited for Scandal.'' ``10,000 Stampede as Russian Stock [Market] Collapses.'' ``Scandal Besets Chinese Markets.'' My point being that we have devised a system to protect investors. And I fear, by reason of overly broad legislation, we are depriving small investors of the very opportunity to recover that which has provided the confidence in the market that has encouraged such a massive investment by small investors. Why? We are led to believe there is a massive influx of cases that must be preempted because everybody is going to the State court to bypass the provisions of the 1995 law. Price Waterhouse, in January of 1998, made a report, an evaluation. Forty-four State cases--44--were filed in all of 1997, a one-third decrease since 1996--I want to emphasize that, a decrease--when 66 were filed, and less than in the 3 years before the 1995 legislation. A followup Price Waterhouse study, in February, tells us 39 cases were filed. My point being, whether it is 39 or 44, I would not argue that with my colleagues, but that is, out of 15 million cases, civil cases--not criminal, not traffic, not domestic relations--we are talking about 44 cases or 39 cases out of 15 million filed. That is a very, very small number. And although there are some problems, as has been pointed out by the proponents, none of the problems justifies the sweeping emasculation of investor protections that this legislation provides for. Now, what are the problems specifically in the act itself? If one believes that uniform standards are an essential public policy in the country--and, I must say, I have not been persuaded--then I think we would agree that a uniform standard that provides strong investor protections ought to be a part of that uniform standard. Unfortunately, what we have done, in each and every case, is opted for the lowest common denominator of protection. If the statute of limitations is longer at the State level, we have preempted it and limited the statute of limitations. If the State provides for liability against those who are accomplices, we take that cause of action away from the small investor. If the State allows for joint and several recovery against each and every one of those involved in the fraud, we take that away from the small investor. So it is my view that this is part of an ongoing process in which we have, in my judgment, left the small investor high and dry in many cases if this legislation passes. I must say that when you look at the trend line following the 1995 legislative enactments, you can see that pattern unfold. The Lampf decision, which shocked the SEC and others, limited the statute of limitations to 1 year from the time of discovery of the fraud to 3 years. The SEC recognized that that is an unreasonable period of time. And those who argued several years ago for comprehensive reforms said, ``Look, we'll address the statute of limitations at that point.'' We tried, Madam President, in 1995 to address the statute of limitations, but we were rebuffed. Now this legislation takes the longer statute of limitations, available in 33 out of 50 States, away from those small investors. The Supreme Court, in the Central Bank case, held that there is no ability to hold accomplices liable. We tried to provide for aider and abetter coverage. The SEC strongly supports that. We were told that when we redid the Federal securities laws that that would be included. My colleague from Maryland and I tried, and we were rebuffed in that effort. Joint and several liability, eliminated in the 1995 act. Civil RICO, eliminated. Discovery provisions, limited. In 1996, we made a determination to divide some of the regulatory responsibility between State and Federal authorities. In 1998, we are here with S. 1260, which I think is the coup de grace in terms of small investor protection. So I must say that I am greatly disturbed by this threat. I believe that small investors ultimately will pay the price. It is often said that those of us who oppose this legislation must be working for those nefarious trial lawyers. Let's take a look at the groups who support the position that the senior Senator from Maryland and I take. The American Association of Retired Persons. When I attend one of their meetings, I haven't seen a single retired lawyer in attendance. The AFL-CIO, the American Federation of State County and Municipal Workers, Consumer Federation of America, Consumers Union, and many, many others, as you can see, particularly those involved with the State retirement associations, including the Public Employees Retirement System, the League of Cities, the National Association of Counties and Municipal Treasuries. Let me read a paragraph from a letter that the able Senator from Maryland introduced, coming from the Government Finance Officers Association, the Municipal Treasurers'Association, National Association of Counties, National Association of County Treasurers, National Association of State Retirement Administrators, National Conference on Public Employee Retirement System, National League of Cities, U.S. Conference of Mayors. They raise many of the same objections that I have outlined today, as has my colleague from Maryland. Here is their comment: The Private Securities Litigation Reform Act was opposed by state and local governments because the legislation did not strike an appropriate balance, and this legislation extends that mistake to state courts. As both users of debt and investors of public funds, state and local governments seek to not only reduce frivolous lawsuits but to protect state and local government investors who are defrauded in securities transactions. . . . The above organizations believe that States must be able to protect State and local government funds. We are talking about taxpayer dollars. We are not talking about litigious plaintiffs. We are talking about pension funds, municipal State funds in which those entities have been defrauded and now will be provided much less protection to recover tax dollars--dollars belonging to each and every citizen who is a part of that group. Let me address one final point here as we conclude this discussion. One of the concerns that has been expressed is that there is no adequate assurance that liability will continue to exist against those who are reckless in their conduct. Now, that is a standard more egregious than simple negligence, more egregious than gross negligence. We are talking about conduct that is reckless in nature. Prior to 1995, when the Private Securities Litigation Reform Act was enacted, 11 of 13 circuits in this country had addressed the issue and had concluded that there was a cause of action for those who are guilty of reckless misconduct. The 1995 legislation, because it talked about a specific pleading standard, has created some confusion. Following the 1995 enactment, several district courts have concluded that no longer is there liability for reckless misconduct. Now, the proponents of this legislation say that they do not intend that as a consequence. And I accept their representation. However, we have tried to get into this bill a provision crafted by the SEC defining ``reckless'' to make it absolutely sure that ``reckless'' is protected. Their response? If the courts strike down ``reckless'' we will remedy it. I never impugn anyone's good faith, but I am a product of the experience that I have had in this legislation. We were told back in the 1990s that we would address the statute of limitation problem when we looked at comprehensive legislation to correct that. It did not occur. We were told after the Central Bank case that we will address the problem in which aiders and accomplices are no longer liable under the law. We were rejected in that effort. So I must say I find my comfort level not very high if the courts intend that. It seems to me if we are in earnest in wanting to protect that ``reckless'' standard, it is terribly important we use a definition which the SEC has provided. Let's make it part of this legislation. I am not unmindful of the fact that this bill is a train that is leaving the station. It will pass and it will be signed into law. But it would be a tragic mistake not to make absolutely sure that ``reckless'' is included. I believe a fair reading of the 1995 legislation should not give rise to an inference that ``reckless'' has somehow been changed. I don't believe that was the intent. The authors of this legislation say it is not true, but even when we try to get it moved into the findings of the legislation, we get resistance, so I have concern. Let me conclude by saying this is a piece of legislation which is a solution in search of a problem, overly broad and dangerous to millions of small investors in America. I yield the floor and reserve whatever time remains. (Mr. FAIRCLOTH assumed the chair.)

Mr. BRYAN. Mr. President, will the Senator from Maryland yield for a question?

Mr. BRYAN. Is the Senator indicating that an investor who files in a State court in a timely fashion after having consulted with legal counsel that said, yes, this is a timely action--and we shall assume for the sake of the discussion meritorious--can have his action, in effect, dismissed by having it removed to the Federal court and the shorter statute of limitations of 1 to 3 years as is required under Federal law?

Mr. BRYAN. It will wipe them out.

Mr. BRYAN. So the perpetrator of the fraud, if I understand what the Senator from Maryland is saying, has the ability to wipe out the small investor by removing the cause of action to the Federal court, even though that case was filed timely under State law and even though the small investor says, Look, I want to have this action continued at the State level. So the Senator is saying, if I understand the Senator from Maryland correctly, that the power to wipe out this cause of action, to wipe out any possibility for relief, are now providing that to the perpetrator of the fraud?

Mr. BRYAN. The perpetrator of the fraud is allowed to do that under this?

Mr. BRYAN. Mr. President, I commend the Senator from Maine for her, I think, most illuminating statement in terms of the problem that we face with the shorter statute of limitations. She is absolutely correct. Her State--and my own--apparently, if I understood the distinguished Senator, has a 1- and 5-year statute; 5 years is the outside. That is what we have in Nevada as well. The testimony beyond refutation is that a 3-year statute is simply too short. The Securities and Exchange Commission, which has all of the resources available to the Federal Government, much more so than any individual investor, tells us that on average it takes more than 3 years to do the investigation, to bring the cause of action. Certainly the small investor is seriously disadvantaged here, so I thank her for her comment and her leadership. Let me just make a couple of comments. I know we have talked about this in the context of the debate on the bill, but the unfairness of this legislation to the small consumer can best be described: Heads the perpetrator of the fraud wins; tails the small investor loses. This is a ``no win'' proposition for the small investor. The thrust of this legislation is to say that the traditional class action lawsuit should no longer be available at the State court level. And, by ``traditional class actions'' we mean individual plaintiffs who are bound together by a common lawyer who files on behalf of a lot of people who have been victimized by the identical fraud. That is really what a class action traditionally has been. Our friends on the other side say there have been some abuses. I acknowledge that there may have been some abuses there. I would be willing to work with them in dealing with the abuses. But here is the ingenious and unfair part of this. The proponents say, ``The individual has a right to file an action at the State court level, would have all the rights currently available under State law--the longer statute of limitations, the accomplice liability, the joint and several, the RICO provisions.'' OK, that sounds somewhat fair, although as we have pointed out, most small investors simply don't have the resources to bring such a case. But let's suppose that your teachers' pension fund, or what we have in Nevada, the public employee retirement system-- suppose they bring an action at the State level: One plaintiff, one lawyer, and, lo and behold, they have discovered 4 years after the fact of fraud that the public employee retirement system fund has been ripped off by a monstrous fraud. They file suit in State court. Surely you would think it would be possible for that one plaintiff to pursue a remedy under State law. But here is how the bill is crafted. Without the permission or consent of that public employee retirement system, if there are 49 other plaintiffs who file against the perpetrator of the fraud, then involuntarily, without the permission of the public employee retirement system, they can be forcibly removed from the State court and those rights that exist under State law are effectively divested from them. So in the hypothetical that I cite, a monstrous fraud, which may have cost the public employee retirement system literally millions and millions of dollars, discovered sometime after 3 years for the first time and filed timely under the law--it would be possible for the perpetrator of the fraud to actually get other plaintiffs to file to build up a number of 50, thereby removing the case from State jurisdiction. And once it gets to the Federal court, lo and behold, what happens: the hammer falls because at the Federal level, because of the Lampf decision, the statute of limitations is 3 years, the outside bar. So here you can have literally tens of thousands of public employees or teacher retirement funds or an Orange County type of investment in which you may have a million or more taxpayers who are unable to recover simply because the perpetrator of the fraud is allowed to remove the single case from State court jurisdiction. What is the fairness of that? The able and distinguished chairman of the committee says the SEC can bring the action. That is true. But we have been told on many, many occasions that the SEC simply does not have the resources; that both the current chairman and previous chairman, in the time I served with the distinguished chairman of the committee and my colleague and good friend from Connecticut, have repeatedly told us that the SEC simply does not have the resources to pursue all of the fraud out there, and therefore the private cause of action is an absolutely essential and critical part of the regulatory structure, the structure that has created the safest and most efficient market in the world. Why are we making these changes? Because we are told that we must worship at the shrine of uniformity, that there is a rush to the courthouse door; 44 cases out of 15 million is a rush to the courthouse door? Many, many States have had no cause of action filed at all, at all. I think in my own State of Nevada there has been one. A rush? I must say, I do not think that makes the argument. If uniformity is an end to itself, isn't it a fairly persuasive argument to say 49 of the 50 States have laws that hold aiders and abettors liable? These are the accomplices, these are the lawyers, the accountants, the investment advisers who participated with the primary individual involved in the fraud to create the loss to the innocent investor--49 out of 50 States say those people ought to be liable, too. They are not, under the 1995 legislation. So if uniformity is to be the standard by which this debate is to be judged, what is wrong with that uniformity? What we have here, and I regret to say this, it is a systematic attempt to close the courtroom door to innocent investors, small investors in this particular instance that we are debating here. We are talking about an institutional investor who could be taken involuntarily to the Federal court. I don't understand the public policy argument that says that is somehow meritorious. I concede that maybe you could argue preemption if you develop a broader statute of limitations at the Federal level to protect them. Maybe that is a possibility. Maybe we could reach a compromise there. Then maybe you could argue preemption. But the proponents of this measure--with due respect to my colleague from Connecticut, he does support a longer statute of limitation--but the primary thrust of getting this legislation, the folks who have opposed and resist this, have resisted the longer statute of limitations. So, in effect, we take two weapons away from the small investor: The right at the Federal level to a longer statute of limitations--Lampf took that weapon away from the small investor--and now we are going to go one step further and take it away from that small investor who is filing at the State level, not as part of a class action but as an individual. And I must say I think the unfairness of that is --all of this is being done in the name of, whether it is 39 cases or 44 cases out of 15 million, filed annually. I come from a part of the country where we understand what ``rush'' is. The gold rush. There was an exodus of people coming out West. But 44 people? I wouldn't call that a gold rush. That would be a trickle. So I must say, this is a terribly, terribly important investor protection. My colleague from Maryland and I, we know how to count the votes. We know this legislation is going to pass. But even if you are for this legislation, please, please, I implore you to consider what you do to the small investor who is filing in State court. He or she gets involuntarily wiped out by the perpetrator of fraud by removing that case to the Federal court system where the shorter statute of limitations prevails. I yield the floor.

Mr. BRYAN. I don't want to prolong this debate unnecessarily. I realize several of my colleagues have time constraints. Let me say I think the Senator from Maryland has crafted an amendment that is eminently fair. He is using the definition of the Federal Rules of Civil Procedure. The notion that we get involved in describing what is a class action based upon an arbitrary number of individual plaintiffs--some of whom could be private citizens, some could be pension funds, and could be State agencies--makes no sense to me. So I believe, in trying to provide some sense of balance and fairness--so we do not get a situation where we have discussed throughout a good part of the afternoon that an individual who files an action by himself or herself with his or her lawyer alone, no other coplaintiffs involved, immediately after the discovery of a fraud, that would be 3 to 3 years and 2 months after the fraud occurred--should be allowed to pursue that cause of action and not be involuntarily sucked up into Federal court because 49 other people may have filed similar action, and to give to the errant defendant, the perpetrator of the fraud, the ability to manipulate the process so that the perpetrator of the fraud can file some phony plaintiff's actions, getting up to the threshold of 50, and then have the case removed, the individual plaintiff, the individual pension fund, the individual retirement fund, then having been effectively deprived of pursuing a cause of action that may be meritorious without question. I certainly urge my colleagues to thoughtfully reflect. This is the Federal Rules of Civil Procedure. They have been around since 1939. Why should we craft some kind of a special rule as to what constitutes a class action, the effect of which deprives individuals--not people filing on behalf of a similarly situated class, but individuals--their opportunity to recover on a fraud perpetrated upon them. I yield the floor.