LETTERS ON CURRENT ISSUES
[Text only of letters sent from the Commerce Committee Democrats]

December 12, 1997

The Honorable Janet Reno
Attorney General
Department of Justice
Constitution Ave. and 10th Street, N.W.
Washington, D.C. 20530

The Honorable Arthur Levitt, Jr.
Chairman
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Ms. Mary Schapiro
President
NASD Regulation, Inc.
1735 K Street, N.W.
. Washington, D.C. 20006

Mr. Mark J. Griffin
President
North American Securities
Administrators Association, Inc
One Massachusetts Ave., N.W., Suite 310
Washington, D.C. 20001

Dear Attorney General Reno, Chairman Levitt, Ms. Schapiro, and Mr. Griffin:

I am writing with reference to press reports, "Ripoff! The secret world of chop stocks -- and how small investors are getting fleeced," Business Week (December 15, 1997) at 112, on the results of a six-month investigation into rampant fraud in micro-cap stocks. Vast, interlocking networks of rogue brokers, stock promoters, and mobsters obtain shares in companies at dirt-cheap prices and then unload them on an unsuspecting public at massive, undisclosed markups. The reputable firms in the industry (which are an overwhelming majority) and federal and state regulators appear to be unable to prevent these illegal and dangerous practices. Notes Business Week: "What emerges is a shocking picture of a problem that has spun out of control."

Please provide me with a report by the close of business on Friday, January 23, 1997, on the extent of this problem and what you have done and what you plan to do in the future to address it. I am enclosing a copy of my letter to the U.S. General Accounting Office asking them to conduct certain audits and to submit a report on this matter. Your cooperation with that request would be appreciated also.

Swift and strong actions are necessary to restore the integrity of these markets and to protect investors. I look forward to receiving your analyses and ideas.

Sincerely,

JOHN D. DINGELL
RANKING MEMBER

Enclosures (Enclosure A* and Enclosure B)

cc: The Honorable Tom Bliley
The Honorable Michael Oxley
The Honorable Thomas J. Manton

*Note: Adobe Acrobat Reader is needed to view enclosure A to Congressman Dingell's letter, which is in PDF format. If this format does not provide adequate access, please contact our office at 202-225-3641.



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