WASHINGTON, DC—U.S. Senators Thad Cochran and Roger Wicker (R-Miss.) today announced that they have cosponsored bipartisan legislation that would provide tax relief to victims of ponzi schemes, allowing small investors to recoup some of their losses from financial scams.  The measure would assist victims of frauds such as that run by disgraced financier Alan Stanford, who took advantage of hundreds of Mississippians.

“The financial future of many investors, including families in Mississippi, has been threatened because of those who perpetrated vast illegal ponzi schemes.  This bipartisan legislation is meant to offer small investors a chance to recoup some of the investment losses they experienced at the hands of ruthless swindlers,” Cochran said.

“The Stanford hoax paid returns to investors from the money of other investors rather than from any actual profit earned.  Eventually, this pyramid scheme collapsed and the fraud has financially ruined thousands of innocent victims, including hundreds of Mississippians.  Many of these victims lost their life savings and have little legal recourse to recoup any of their losses.  This bipartisan bill extends the rights of victimized retirement investors by allowing them to claim the loss as a theft loss for income tax purposes,” Wicker said.

Many of the victims of Stanford’s scams were retired senior citizens living off of retirement savings and investments.  The new legislation (S.3166) would extend to smaller investors certain benefits that are already available to larger investors.  It would allow victims to take a deduction for funds lost from their IRA accounts, permit accelerated and increased contributions to tax-free retirement accounts to make up for losses, and allow for penalty-free early withdrawals from retirement accounts for investors in dire need of cash.  The proposals in the “Ponzi Victims Tax Bill of Rights” are designed to help both direct and indirect investors.
 
The legislation would raise the amount a victimized investor can carry back on his income taxes; allow victims who lost money within an IRA to recoup some of the losses for the first time by allowing a theft loss for their basis in the account, or half their total losses; raise the limit on tax-free contributions to retirement accounts so investors can replenish losses quicker; and waive penalties for withdrawing from retirement accounts to increase daily cash flow.
 
The legislation announced Thursday was praised by the leading organizations that represent ponzi scheme victims.  All provisions in the bill will only apply to qualified fraudulent investment losses discovered in calendar years 2008 or 2009.

The legislation was introduced by Senator Charles Schumer (D-N.Y.) and Jon Kyl (R-Ariz.) and is also co-sponsored by Senators Cochran, Wicker, Robert Menendez (D-N.J.), John Kerry (D-Mass.), Mary Landrieu (D-La.), Richard Burr (R-N.C.), Kirsten Gillibrand (D-N.Y.), Kit Bond (R-Mo.), Bill Nelson (D-Fla.), George LeMieux (R-Fla.), Blanche Lincoln (D-Ark.), Arlen Specter (D-Pa.), Joe Lieberman (I/D-C), Christopher Dodd (D-Conn.), and Maria Cantwell (D-Wash.).
 
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