US Agency Seizes $2 Million Pension Fund Tied To Madoff Losses
US Agency Seizes $2 Million Pension Fund Tied To Madoff Losses
Wednesday March 11st, 2009 / 17h10
By Darrell A. Hughes Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The U.S. pension insurer agency took over roughly $2 million in pensions owed to former employees of a building-service provider that lost 100% of its assets in the alleged Bernard Madoff scandal, according to the agency.
The Pension Benefit Guaranty Corp., or PBGC, announced the pension seizure Tuesday after it became apparent New York-based East River Management Corp. was unable to pay benefits owed to 61 of 88 retired workers. PBGC began paying benefits to the 88 former East River workers on an emergency basis after learning of the fund's problems in December.
PBGC spokesman Marc Hopkins said the agency isn't aware of any other pensions that are badly damaged as a result of the alleged Madoff scandal. "To date, this is the only plan with this issue," Hopkins said. He added the terminated fund's $2 million value will not impact PBGC's financial position severely.
Madoff is accused of running a Ponzi scheme or paying returns to certain investors out of the cash he received from other investors. Madoff is expected to plead guilty on Thursday to 11 felony charges stemming from the Ponzi scheme.
The PBGC identified itself about two months ago as a creditor in the liquidation of Madoff's firm, suggesting it is preparing for bankruptcies by companies in the wake of the alleged $50 billion Ponzi scheme.
"The PBGC insures almost 30,000 pension plans," PBGC spokesman Jeff Speicher told the Wall Street Journal in January. "One or more of those plans may be exposed to losses as a result of the Madoff investment scandal."
Public and private pension funds have experienced asset declines across the board, with most losses being estimated by pension watchdogs to be relatively small.
Still, pensions distressed by the alleged Ponzi scheme that have to be assumed by the PBGC have ill-timing, as the agency works to shrink its fiscal 2008 $11.15 billion deficit, down $2.9 billion from its $14 billion shortfall last year.
-By Darrell A. Hughes, Dow Jones Newswires; 202-862-6684; darrell.hughes@dowjones.com
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