tract purchasers at the bankruptcy hearing at which time we fought the people from Baltimore who were trying to elect one trustee and we were able to tie-I guess you are familiar with bankruptcy proceedings we were able to throw out enough claims

Senator WILLIAMS. Fortunately so far I am not. I don't know how long that good fortune will last.

Mr. MOYLE. We had a disinterested trustee and right now the whole thing hinges on the legal determination of who has title. We are presently working with the trustee and I feel confident that we are going to come out of this thing whole. I submit to you the reason we are going to come out of it whole is because of the activity of the board in this proceeding.

Not only this, just last week I was down in a place where there is a 200-lot trailer subdivision. We were successful in going into court the day before we had just received the information and we admit we have an inadequate staff, but I think everybody has that problem in government-but we went in the day before the judicial sale was to take place in the mortgage foreclosure, and after the final decree had already been entered and we were able to obtain an injunction that stopped the judicial sale. We are preserving the interests of 59 contract purchasers.

Now this is an isolated example, but we have been active in working in Florida outside of Florida. There have also been other States that have been active and trying to do something about adequate regulation. We keep talking about 20 percent or one-fifth, of the States having laws on this subject but the situs State is the important one and a lot of States like Nebraska or Idaho they don't have promotional subdivisions located there. They are not situs States, they are investor States. That is why there has been no legislative activity there.

Now this doesn't say they don't need it, but they are protected largely by the activities that take place in Florida, or the situs State. We are just as interested in citizens from all States and when we talk about 2,600 purchasers that we were helping or trying to help in Rocket City, more than half of these are from the Northeast, Senator. They are not from Florida.

Senator WILLIAMS. Do you feel they are being protected in Florida? Mr. MOYLE. Yes. I think the purchasers of Florida land all over the United States are.

Senator MONDALE. Do you think you have a sound law?

Mr. MOYLE. No, sir, I think it has a loophole.

Senator MONDALE. Do you think a board three-fifths of which is composed by those being regulated is a sound way to regulate an industry?

Mr. MOYLE. I do not.

Senator MONDALE. That is true?

Mr. MOYLE. Yes.

Senator MONDALE. And one of the other lawyers has a history of representing these concerns?

Mr. MOYLE. That is correct.

Senator MONDALE. Do you think a bill which exempts a recorded deed and has a loophole is an adequate law?

Mr. MOYLE. I said it was a loophole that has to be plugged. We will work to plug it and we will.

Senator MONDALE. You tried to plug it?

Mr. MOYLE. Yes.

Senator MONDALE. Do you think that a bill or a board which sees something as outrageous as the Golden Palm and has known about it for several months, and has yet been unable to do anything, is the kind of organization that is going to protect the public?

Mr. BERTOCH. Senator Mondale, I would like to answer that question if I might, and I don't think your question is proper, because we haven't had 2 months of work on this matter and the board hasn't dealt with it.

Senator MONDALE. How much time have you had?

Mr. BERTOCH. Since May 12, when we got the transcript, I think that is the date of acknowledgement.

Senator MONDALE. What has happened thus far to protect the public?

Mr. BERTOCH. This is our first step, Senator, in our investigative process. I submit to you the SEC couldn't work as fast. I submit to you possibly some of the action should come from the State of New Jersey where these rascals are, you will pardon me, Senator, but we are interested, we are darned interested

Senator MONDALE. Answer my question, what has happened to protect the public thus far?

Mr. MOYLE. In that particular case, nothing has happened, and that is one example.

Senator MONDALE. As a matter of fact, the law passed by the State of Florida prohibits you from either talking about what you found out until you finally issued an order.

Mr. MOYLE. I don't understand the question.

Senator MONDALE. You cited the statute prohibiting any public disclosure of any sort of anything that you learn until there has been a final order of a board dominated by the industry being controlled. And you are satisfied with that sort of thing unless we pass a law that preempts everything any State can do in this field. Don't you think there is a halfway house here? Don't you think that public disclosure would help?

Mr. BERTOCH. We submit, sir, that purchasers are getting disclosure. People that register with our board are getting disclosure. I submit to you the record of this industry dominated board has been excellent, sir. They move in areas. They have authorized us to institute proceedings and issue orders and we do issue orders. We are involved in and have referred matters for criminal prosecutions. We are involved in civil cases.

We are very much concerned in this matter and one of the problems and perhaps the reason that we possibly are getting carried away with energy at this time is because this is very close to us. We work daily with this. We worked trying to save $5 million for these people in Rocket City and we spent endless hours and days working with these people. This is with the complete support of the Board and their authority to proceed to do whatever should be done.

Senator WILLIAMS. Do we have a copy of the draft of your proposed uniform law?

Mr. MOYLE. Yes, sir.

Senator WILLIAMS. I think we all ought to review that very carefully.

Mr. PRICE. We adopted some of their language in the committee print that is now before us.

Senator WILLIAMS. It is quite obvious that you fellows have your heart and soul in the work you are doing. I appreciate your very candid reply to Senator Mondale's questions in regard to the makeup of the regulatory Board, with five members, Land Sales Board has five members. I didn't realize this. We have been in and out because of votes and one thing and another, but evidently three members of the Board are

Senator MONDALE. State laws require that three be from the industry being regulated.

Mr. BERTOCH. This is not completely unusual in the regulation of industries and trades. Doctors regulate doctors, and accountants regulate accountants. The industry does and can bring tremendous insight into some of the problems because they are knowledgeable about these areas, but there are problems with industry representation on the Board. There is no doubt about it, that other people in the industry are regulated by industry members and know that he is a competitor. But this is a philosophical problem and a legislative determination, not the function of the Board to pass on it.

Senator WILLIAMS. The logic cuts both ways. You want someone with experience and yet you want to beware of the individual who has a bias. So there has to be some kind of balance. But do you think three out of five industry oriented is a good and proper balance?

Mr. MOYLE. As long as this is understood to be my personal opinion. Senator WILLIAMS. I wouldn't think it would be the Board's opinion.

Mr. MOYLE. Senator Williams, may I address Senator Mondale to say that you refer to these inadequacies in our law. We freely admit it. We always have. Never did I state or Mr. Bertoch state that we were satisfied. I think our activity indicates that we haven't been satisfied.

We have been trying to correct it. We are trying to offer constructive criticism to this Federal legislation and we share with you one purpose that of protecting the purchasing public.

Senator MONDALE. That is right, but your proposal, as I understand it, is that unless we are willing to adopt a measure of the most sweeping proportions, which not only has disclosure, but controls the licensing and registration of agents, controls the developments to assure that the commitments made will be fulfilled, and present State regulation, unless we go that far, you feel no Federal legislation should be adopted because it would not be adequate and it would discourage State legislation.

Mr. MOYLE. Yes, sir.

Senator WILLIAMS. Now I can see why you didn't make out at Tallahassee because we, day in and day out, as long as we are in a legislative body, know that the whole loaf is seldom baked. Is that the way to put it?

Senator MONDALE. I can't imagine this, Senator, the States agreeing to a bill that in effect takes over completely and totally Federal control

of real estate at the local level, provided it is being sold in interstate commerce, invests all that authority in some Federal body.

Senator WILLIAMS. I can't either, but not only that, as a practical matter it would never happen. It would never happen.

Mr. BERTOCH. If I might make a brief comment on that. I think when we talk about this, we then have to go back to the determination about the need for Federal law, because certainly the question of preemption of the States' authority to act in this area is a very important question. You must have a great need, and the existence of a clear and present danger. Maybe the thing to do is look at this situation and analyze what the States have been doing and the size of the problem today in the light of the history of State action from 1963 to the present.

I submit to you that some things have not gone well. I submit to you also that some things have gone very well in the way of generally providing greater protection. I think this should be considered in your determination as to whether or not the bill in this form should be revised, amended, or changed in any way.

I can tell you as a State administrator, the so-called long-arm statute that Mr. Wenig proposed, I think, is a fine thing. It would do a great deal to help us in the State of Florida.

I submit to you that the

Senator WILLIAMS. That is the Federal jurisdiction, legal court jurisdiction between the States.

Mr. BERTOCH. We would like to move in the district court and stop somebody from violating our State laws.

Senator WILLIAMS. There is California that probably has right now a model of effective legislation for the State of California, but again, it doesn't reach beyond the borders.

Mr. BERTOCH. I think we should look at the California situation and recognize that their law is for out-of-State people, and they are treating themselves primarily as a market State.

Their fair, just, and equitable standards do not apply to intrastate sales. It applies only to out-of-State offerings that are made to their residents.

In the State of Florida we are regulating right at the heart of the problem. We are a situs State, and therefore we have to look a little bit more with caution and walk with trepidation before we talk about a fair, just and equitable procedure in the situs State.

I don't think the State of New Jersey wants any regulatory authority passing upon the value of the property of the land inside the State, because valuation of property is such an indefinite nature. But, for California's problem, the problem they had before, they have taken an approach which has solved it and they are pleased and this is fine. I think it is nice they have a solution to their problem. But I don't. think this is one that every other State wants.

In a way. Senator, you may feel I am contradicting myself

Senator MONDALE. Do you think there is a need for Federal legislation?

Mr. BERTOCH. In certain areas, particularly a strong arm, a long

arm statute.

Senator MONDALE. Beyond that do you think there is a need for it?

Mr. BERTOCH. I would like to have you review the record of what has transpired from 1963 to the present and determine if the bill that you are presently considering is going to do the job.

Senator MONDALE. That isn't responsive to my question. I asked you, assuming that we adopt Mr. Wenig's suggestion, in fact incorporate State law and make it punishable by Federal law, do you think any further Federal legislation is needed?

Mr. BERTOCH. This is a most diflicult question to answer. I think with that additional tool in the State of Florida, before we can eliminate completely and entirely every possible transaction of the Golden Palm Acres type, we have to change our law.

I think you may very well have to consider some form of Federal regulation, but it should be suitable to the problem with which we are dealing. I feel that there is an approach in the present bill that is not consistent with the type of industry that is to be regulated by this proposal. It is not a securities business. If it is a securities business, well, then, it should be under the SEC right from the very beginning.

There is no doubt about that.

If the offering itself constitutes an investment contract basis, then the SEC does have present jurisdiction. But because we had this contractual commitment, this long term obligation as opposed to the instantaneous offering of an issue of securities, I think you would have to consider the legislation in the light of the industry to be regulated rather than grabbing a section of the law

Senator MONDALE. Don't you think it would have been helpful in the Golden Palms case if they had been first required to clear a prospectus with the Securities and Exchange Commission?

Mr. BERTOCH. Senator, I don't know the principals of this offering, but I submit to you they very well may be of the type to violate any law that is on the book. They violated apparently the securities law because they lost a registration. There are fast buck operators in just about every walk and trade and occupation.

I think this is something we have to

Senator WILLIAMS. We are trying to reduce the number.
Mr. BERTOCH. And this is what we are trying to do, sir.

Senator WILLIAMS. We hope to eliminate the fast buck operators from the economic society. We haven't got those tools now, because right now, at the national level, we have nothing. At the State level you can't even reach a constituent of mine of New Jersey who is palming off acres in Florida. I hope he didn't vote for me.

Senator MONDALE. You won't have to worry about him again. Senator WILLIAMS. I think you are making the case for us by telling us the inadequacies of what we are presently faced with State by State, and the laws we have.

Mr. BERTOCH. We wanted to give you the benefit of our thinking on the subject and our opinions and the facts as we know them, sir. Senator MONDALE. Do you think if Golden Palms had gone to the SEC they would have permitted them to? Do you think it would have helped?

Mr. BERTOCH. It possibly could have.

Senator MONDALE. So can we conclude from the Golden Palms example, can we conclude that there would have been some benefit to the public had this law or this bill as proposed been in fact?