Madoff ransacks future for Upstate construction workers

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Madoff ransacks future for Upstate construction workers
by Charley Hannagan, Mike McAndrew and John O'Brien / The Post-Standard
Sunday March 01, 2009, 1:45 AM


Joe Blum / The Post-Standard
Tom Tarbox (on left) of Frankfort threw a retirement party Friday for Ron Humphrey of Utica (right). When their roofers union was victimized by the Madoff scandal, it meant workers like Tarbox would have to pay more each week to ensure the pensions of retirees like Humphrey.
Thanks to Bernard Madoff, there will be more 60-year-old roofers climbing on Upstate's slanted roofs.

Retired union carpenters will have to get by without the $1,000 monthly annuity checks that paid their bills.

Bulldozer drivers' health insurance won't cover their children's trips to the dentist anymore.

Which union funds got hammered: Check the list of 36 accounts, including 34 union funds, exposed to Madoff investments.
Unions representing construction workers throughout Upstate New York had at least $354 million invested in funds Madoff defrauded in his $50 billion pyramid scheme, government records indicate.

It's unclear how many millions Madoff stole from the retirement and health plans that thousands of union workers, retirees and widows depend upon.

But Madoff's theft is already altering the dreams of the workers who built Carousel Center, Oswego's nuclear plants and the Carrier Dome.

"Am I worried?" said Rob Benedict, 50, a union laborer. "Yeah. We're all worried. I don't want to have to work until I'm 80."

John P. Jeanneret, a Syracuse financial adviser who directed at least 34 construction union accounts to invest in Madoff funds, said the unions have little chance of recouping their stolen assets without a government bailout.

Some unions might collect a maximum of $500,000 from a federal fund to help victims of securities fraud.

That's little comfort to the 846 workers and retirees of the Plumbers & Steamfitters Local 73 in Oswego, who thought they had $51 million invested in funds that Madoff raided, according to the union's 2007 federal disclosure.

Nearly half of Local 73's pension and annuity assets are at risk, the records indicate.

A U.S. Bankruptcy Court official has recovered $946 million from Madoff$946 million. Eventually, the court will distribute the money, pennies on the dollar, to the victims.

U.S. Rep. Dan Maffei, elected in November with the backing of nearly every union, said he will push for federal aid -- grants, subsidized bridge loans and a temporary relaxing of federal rules on pension-fund balances.

"I don't know yet how severe it is. I don't know how many millions," said Maffei, who met Feb. 20 in Syracuse with dozens of representatives of the victimized unions. "We have a feeling it's very severe."

He said Congress should help the unions because the federal Securities and Exchange Commission for years ignored allegations that Madoff, a securities broker, ran a pyramid scheme.

But with the national recession and hundreds of billions committed to other bailouts, "Clearly, the odds are against the government making these pension funds whole," Maffei said.

Union officials said they aren't optimistic.

"You have to assume it's a total loss," said Patrick Carroll, business manager for plumbers Local 73 of Oswego.

The theft of their future angers the workers who lay the bricks and wire the buildings.

Roofer Paul Desimone sums it up, calling Madoff "the filthy, rotten bastard who's living in that penthouse."

Scandal hits home

Madoff's fraud will force Tom Tarbox, 53, to spend seven extra years on the roof.

Tarbox, a roofer for 23 years, was planning to retire in two years, when he would be 55 and could collect two-thirds of his pension. But the early retirement option is out. That was one of the changes made last month by the Roofers Local 195.

Seven more years of back-breaking work will be physically punishing for middle-aged roofers, said Tarbox, a Utica-area resident who broke his back 20 years ago when scaffolding collapsed beneath him.

Starting next week, the roofers also will be forced to contribute an extra $3 from their $24-an-hour wages to the pension fund so current retirees don't go without.

That's $120 out of each paycheck for every 40-hour week for at least a year.

The pain is widespread. Those New York union pension, annuity and health plans facing Madoff losses include nearly 60,000 workers, retirees and survivors.

Some members are in more than one plan but the number shows the impact on middle-class families of a scandal that widely has been viewed as a problem for the rich and famous.

Workers take up the burden

Shortly after Dec. 11, when Madoff was arrested in New York City, retirees from Carpenters Local 747 received a letter from the Empire State Carpenters Fringe Benefit Funds, which oversees the benefits for Upstate carpenters.

Because of the Madoff scandal, the fund was suspending its monthly annuity checks.

David Davis, a carpenter from Meridian who retired to Florida, said he counts on that check to make his mortgage payment.

Retirees who worked in the union for 35 years received monthly annuity payments of $1,000 to $1,300, he said. The annuity payments come from a fund that the workers contributed to every week for years, he said, not from employers' contributions.

On Feb. 2, a joint fund to benefit members of five operating engineers' locals -- including Local 545 in Syracuse -- notified its members it was suspending many of their health benefits.

The union halted payments for dental treatment, hearing aids, substance abuse treatment, and death and dismemberment, including those benefits for surviving spouses, according to the letter.

Some union officials said they don't yet know the impact.

More than 400 retirees or survivors receiving pension benefits from plumbers Local 73 in Oswego won't see a change in their benefits, said Carroll, the union's business manager.

Instead, employing the strength of a union's numbers, more than 300 plumbers will pick up the burden of paying into the pension funds.

"It's going to affect future benefits. Guys aren't going to be able to retire (at the same age). There's no question something will have to change," he said.

Greg Lancette, business manager of plumbers' Local 267 in Syracuse, said his union knows its pension plan will fall into "critical" status.

The Department of Labor labels a pension plan as critical when it doesn't have enough to pay benefits to current or future retirees. If that happens, the union must submit a plan to beef up the fund. It can require workers to increase their contributions or cut benefits.

Local 267 hired a Delaware law firm that specializes in securities litigation and class action suits to try to recapture its funds.

Many unions officials were unwilling this week to comment on the amount their local lost or how workers and retirees will be affected.

Davis and other carpenters say they've had trouble getting information from Carpenters Council.

"This is the frustrating part," said Doug Cleary, a retired carpenter in North Syracuse. "When you try to ask how much did we lose, and how much did I lose personally, you can't get an answer."

The financial adviser

Jeanneret (pronounced jen-er-RAY), the Syracuse financial adviser, does not take blame for his clients' losses.

Union funds paid Jeanneret $4.4 million in one year to manage their investments, according to the latest federal records. Some unions had hired his firm for decades.

In recent months, Jeanneret has declined in-depth, in-person interviews but has answered a few questions in phone calls. He would not provide a specific figure on the unions' exposure.

Without being specific, Jeanneret said his firm made background checks on Madoff and attempted to verify his trades.

"I met Madoff a lot of times," he said, declining to elaborate. "We visited in person or spoke in telephone conference calls."

Jeanneret steered the unions' money into Master Income Plus fund, an investment fund his firm created and managed. He invested about 38 percent of the fund's assets in Madoff's hedge fund, Jeanneret said.

Jeanneret also persuaded clients to invest in two Beacon Associates hedge funds. About 74 percent of Beacon's assets were with Madoff, according to a suit filed by other Madoff victims.

Accountants at two firms working for the unions confirmed some of the unions' investment in Master Income Trust and Beacon Associates was safe because the hedge funds invested in securities other than Madoff's.

Jeanneret said he was so confident in the Master Income fund that he put nearly all of his company's $2 million pension plan in it.

Like the unions, Jeanneret and his staff have lost 38 percent of their investment in Master Income, he said.

"Do you think if I thought it was a scam I would have invested 100 percent in that fund?" Jeanneret said.

Reach Mike McAndrew at mmcandrew@syracuse.com or 470-3016. Reach Charley Hannagan at channagan@syracuse.com or 470-2161.