News Release
SIPC: 23,000 CUSTOMERS GET CLAIM PACKAGES AFTER
$2 MILLION THEFT AT ST. LOUIS BROKERAGE FIRM
WASHINGTON, D.C. November 30, 2001 - The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund authorized by Congress to help investors at bankrupt brokerage firms, announced today that the trustee handling the case is sending claim notices to 23,000 individual investors who may have been affected in some way by the theft of at least $2 million at the St. Louis brokerage firm Eisner Securities, Inc.
Joseph E. Erwin, former manager at the Columbus branch of Eisner Securities, was found guilty in August of mail and wire fraud in the theft of more than $2 million from eleven Eisner Securities customers. On October 31, 2001, Harry O. Moline of the St. Louis based law firm Moline, Shostak & Mehan, LLC, was appointed to serve as trustee for the liquidation of the business of Eisner Securities.
Trustee Moline said: "Today, roughly 23,000 customer claim packages are going out to provide eligible investors the maximum relief of up to the $500,000 allowed under the Securities Investor Protection Act. We intend to process investor claims as quickly as possible and, as such, encourage all parties who receive the packages to turn them around as quickly as possible.”
SIPC President Michael Don said: “While this type of fraud is relatively rare, it is important for investors to know that SIPC is here as a safety net when they need us. The Eisner case is an excellent example of why Congress chartered SIPC to help out investors in their time of greatest need.”
SIPC estimates that as much as $3 million in funds may be required from its reserves in order to satisfy investor claims related to the Eisner Securities, Inc. proceeding.
The Eisner case comes on the heels of a record-setting case handled by SIPC. On October 2, 2001, SIPC announced a record payment of $177 million to restore stocks and cash to 175,000 investors due to a default by MJK Clearing, Inc. MJK Clearing, Inc., is the parent company of Miller Johnson Steichen Kinnard, Inc., a full-service brokerage firm headquartered in Minneapolis, Minnesota with 400 investment executives in eight states.
ABOUT SIPC
From its creation by Congress in 1970 through December 2000, SIPC advanced $391 million in order to make possible the recovery of $3.8 billion in assets for an estimated 443,000 investors. SIPC estimates that more than 99 percent of eligible investors have been made whole in the failed brokerage firm cases that it has handled to date.
SIPC is an important part of the overall system of investor protection in the United States. While a number of federal, self-regulatory and state securities agencies deal with cases of investment fraud, SIPC's focus is both different and narrow: Restoring funds to investors with assets in the hands of bankrupt and otherwise financially troubled brokerage firms. The Securities Investor Protection Corporation was not chartered by Congress to combat fraud.
SIPC either acts as trustee or works with an independent court-appointed trustee in a fraud case to recover funds. The statute that created SIPC rules provides that customers of a failed brokerage firm receive all non-negotiable securities that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash.
Recovered funds are used to pay investors whose claims exceed SIPC's protection limit of $500,000. SIPC often draws down its reserve to aid investors. Recovered funds also are used to replenish SIPC’s reserve in the event that the reserve is tapped in the early stages of a liquidation proceeding.
FOR MORE INFORMATION, CONTACT:
Ailis Aaron, The Hastings Group,
(703) 276-1116 or
aaaron@hastingsgroup.com
Back to News Releases Page