Sen. Anderson charges: CA profits on backs of Madoff victims

SACRAMENTO — Bernie Madoff may be in prison, but he’s still ripping people off — this time aided by the government of the state of California. So charged state Sen. Joel Anderson, R-San Diego, at a press conference and committee hearing Wednesday morning.

He said the phony “profits” the Ponzi-scheme master promised vanished into thin air. But before that, the “profits” were taxed by California, which now refuses to return the tax assessments to state victims.

Anderson proposed Senate Bill 797, which would align California law with federal income tax law. The IRS lets theft losses from Ponzi schemes and con artists be counted against past and future income, something California currently does not allow for state income taxes.

This would be an alternative to immediately giving the tax money back to the Ponzi victims.

“The state of California kicked you while you were down, and hit you with a tax bill on money you never received,” Anderson explained about the victims.

Madoff’s scheme, the most notorious in U.S. financial history, unraveled in 2007. It cost 16,000 investors $64.8 billion in paper wealth, and at least $17.5 billion in cash losses, according to the New York Times

Victims vs. criminals

While well known victims included Steven Spielberg, Kevin Bacon, Ringo Starr and Elie Wiesel, most victims were common people.

Anderson lamented of his reform that there was “no stomach for it in the Legislature.”

“My goal is to punish criminals, not victims, and many of these innocent victims were not wealthy,” he said. “They were teachers, welders and small business owners, saving every penny they could toward their retirement. And it’s not fair the state is taxing them on this fictitious money that was stolen from them.

“We need to protect these victims whose finances and futures have been destroyed by scam artists. Together, with the passage of SB797, we can ensure the state doesn’t re-victimize these innocent Californians. The state should not profit from criminal activity perpetuated against law-abiding citizens.”

Two investment scheme victims phoned in and told their stories of devastating financial loss, and of wrestling with the Franchise Tax Board over the phantom investment gains.

Bernice Tingle, 68, was defrauded of $1 million by a criminal swindler, but she has not yet paid taxes on the phantom investment proceeds. The Franchise Tax Board claims she now owes the state $135,000 after penalties were assessed on her original $84,000 tax bill.

Tingle intended to appear in person, but was rushed to the hospital on her way from Oakland to Sacramento. “The federal government went back and forgave 85 percent of my tax bill,” Tingle said via phone. “I’ve worked too hard to be out on the streets.”

Velma (no last name given), 70, was driving with Tingle to the hearing, and went to the hospital to give Tingle support. By phone, Velma said she lost everything, including all of her retirement money, to another con artist. “I’m in a financial situation right now,” Velma said. “I had to pay taxes on that money.”

Velma said the IRS was finally able to refund her tax money. Yet when she shared the same documents with California’s Franchise Tax Board, it refused to refund her $28,250. “I had to pay the tax bill,” she said.

SB797

Immediately following the press conference, Anderson presented SB797 in the Senate Governance and Finance Committee. But it was evident from the outset several committee members were not on board with him.

Anderson said the Franchise Tax Board’s attitude is, “If you are taxed on phantom profits from a Ponzi scheme, we won’t return the money or forgive the tax bill.”

He added, “Bernice lost $1 million. Now she has to worry about wolves at her door.” Anderson said the state tax board should not keep the “blood money.”

Anderson said other states return Ponzi-scheme tax money. “I went for neutral ground,” he explained, knowing two similar bills addressing the same problem had failed in the Senate Governance Committee – one bill in 2010 by former Sen. Dean Flores, D-Shafter, and the other bill by Anderson in 2011.

You’re on your own

Committee Chairwoman Sen. Lois Wolk, D-Davis, said the issue has come before her committee before, and they’ve never passed the bills. “It’s really offensive to sit up here and hear words like ‘blood money,’ when people make investments that fail,” said Wolk. “There were many people affected by this.”

Wolk added, “It’s not the role of the state Treasurer” to solve the investors’ problems. Wolk recommended a “no” vote by all of the committee members.

Anderson was not dissuaded. “Just say, ‘I am a money-grubbing legislator and I don’t want to give the money back,'” Anderson mocked. “They didn’t lose their money to poor investments; they were scammed. Money was stolen. They are crime victims.”

Anderson asked of the legislators, “Do you feel good at night knowing someone has to fend wolves at the door? We are sending out people from the state to do asset reviews,” meaning they’re preparing the seize the people’s property. “This is about victims. This is the second time I’ve brought this before your committee; it’s the righteous thing to do.”

The bill failed on a 4-2 vote. Reconsideration was granted, and SB797 will be heard again and voted on Wednesday, Jan. 15 in the same committee.

6 comments

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  1. a frequent reader
    a frequent reader 9 January, 2014, 12:00

    Committee Chairwoman Sen. Lois Wolk, D-Davis, said the issue has come before her committee before, and they’ve never passed the bills. “It’s really offensive to sit up here and hear words like ‘blood money,’ when people make investments that fail,” said Wolk. “There were many people affected by this.”
    Wolk added, “It’s not the role of the state Treasurer” to solve the investors’ problems. Wolk recommended a “no” vote by all of the committee members.
    – See more at: http://calwatchdog.com/2014/01/09/sen-anderson-charges-ca-profits-on-backs-of-madoff-victims/#sthash.8bCKEz1K.dpuf
    ————————–

    So people are basically fools when being scammed on fraudulent investments when being assured of it being legitimate investment and asking for their tax assessment back?

    Yet never ever question the need to curtail jobless benefits or at least pay for them or whittle down any entitlement program that could potentially change the loyalty to their party.

    It’s OK to be jobless, but not stupid. What a heartless comment from a supposed bleeding heart.

    Reply this comment
  2. LetitCollapse
    LetitCollapse 9 January, 2014, 12:26

    Boy, they love to use Bernie Madoff as the whipping boy, don’t they? lol.

    Madoff was a very small fish in the pond on Wall Street. He just enjoyed the crumbs that the Too Big To Fail bankers tossed his way. Madoff didn’t cause the economic meltdown. He only profited from the corruption and financial fraud that was made possible by Wall Street and our complicit government.

    Madoff’s mistake was that he screwed some very influential people who had hundreds of millions or billions in net worth. That’s the reason he got a life sentence. Bernie was a fall guy. Had he just screwed Main Streeters he would have gotten away with it! lol. Look at all the others who got away with it! lol. Most of them screwed Main Streeters and got rewarded! Bernie got life!!! lol. And if you think that’s untrue you’re living in Fantasyland.

    But no one talks about obvious. But boy, do they ever hammer on Bernie!!! lol.

    Reply this comment
  3. LetitCollapse
    LetitCollapse 9 January, 2014, 12:59

    “The state should not profit from criminal activity perpetuated against law-abiding citizens.”

    Sure, Joel. Now pull my other thumb too!!! LOL!

    Reply this comment
  4. Rex the Wonder Dog!
    Rex the Wonder Dog! 9 January, 2014, 13:02

    Madoff should be executed for the harm he did.

    Reply this comment
    • LetitCollapse
      LetitCollapse 9 January, 2014, 13:43

      What about the hundreds of others on Wall Street who did immensely more financial damage to the nation and to the world than Madoff? By your logic I assume you believe they should be exectuted too?

      Madoff was a piker compared to the rest. A minnow. The only reason Madoff went down was because he hurt some very rich and influential clients.

      Reply this comment
  5. LetitCollapse
    LetitCollapse 9 January, 2014, 13:36

    I never ever thought that I would ever agree with Lois Wolk on anything in this lifetime. Wonders never cease.

    Everyone who lost money in the stock market as a result of the 2008 crash was a victim of ‘theft loss’. Anyone who has seriously studied the origins and causes of the 2008 meltdown understands this. The world was a victim of a Continuing Criminal Enterprise that destroyed trillions in consumer wealth. Millions lost jobs, their homes, their net worths. It was not a cyclical correction. It was a flat-out ponzi scam created by Wall Street and supported by those in our highest government agencies that finally burned down the fuse and blew up. It was outright financial fraud. So it wasn’t just the Madoff people who got hurt. It was an entire nation of people.

    If you put your money into the investment markets you take the chance of losing it all. Every last penny. Risk is inherent in the markets. If you don’t like risk, put your money under your mattress. But don’t ask me to subsidize your losses in form of tax credits when your bet goes bad. Eat your own losses like the rest of us do.

    Just like when you go to Vegas and your blackjack bet goes bad. Don’t come to the people to mitigate your losses. You slapped the chips down on the table. Be an adult and own your losses.

    The stock market is no different from Las Vegas. No guarantees. If you don’t like risk – don’t bet your money.

    The Madoff people loved those double-digit returns even if they didn’t make much sense from a financial analysis perspective. But, OMG, when the bet went bad many ran to lawyers and politicians for bailouts!!! lol.

    Oh, and what about all those secured account holders who lost over a billion dollars at MF Global headed by CEO Jon Corzine? How did Corzine slip through the cracks? I wonder if being one of the biggest campaign fundraisers for Barack Obama had anything to do with it??? lol.

    Why didn’t Joel include the MF Global victims in his Bill?

    Reply this comment

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