In the fall of 2008, when the stock market crashed and the economy seemed to melt overnight, Americans lost trillions in their investments; and for the average American, their investments were their hard-earned retirement savings. Most workers and retirees lost about a third of what they had put away for their golden years. On top of that, the significant depreciation in the housing market struck a major blow to another component of household wealth. And adding insult to injury, many Americans were laid off from their jobs. They found themselves with not only less in their investment portfolios and less equity in their homes from which they could borrow, but with no job to make ends meet and provide for their families.
In the midst of this time of economic distress, it came to light that a major investment firm in New York City had been nothing but a giant Ponzi scheme. For decades, they had been taking money from investors and operating as a sham. Bernard L. Madoff Investment Securities, run by the eponymous and erstwhile respected Bernie Madoff, had literally lost billions of dollars for its clients.
Madoff had been the non-executive chairman of the NASDAQ stock market, and an associate and friend to many in high society who entrusted him with their money. So, it might have seemed at first glance that the losses suffered by his fraud impacted only the very connected and wealthiest.
However, what would be uncovered is that Madoff’s scheme touched, among others, thousands of Americans whose hard-earned money had been invested with his firm through their pension plans, 401(k)s, IRAs and even health insurance plans. Unions and small businesses were impacted, too. Plumbers, electricians, carpenters, bricklayers, iron workers, laborers as well as doctors – they’re just some of the hard working Americans and retirees who lost enormous amounts of money. Other victims included charitable foundations and institutions of higher education.
I am very proud to report that my agency, the Employee Benefits Security Administration, working closely with private plaintiffs’ counsel and the New York attorney general’s office, recently achieved a settlement to recover nearly $220 million for victims of Bernie Madoff. Additionally, working in cooperation with the FBI, we supported the Department of Justice’s successful prosecution of Irwin Lipkin, Madoff’s first employee and one of his chief co-conspirators. Regrettably, it has been a long road for those impacted by our nation’s most notorious Ponzi scheme; but piece by piece, money is making its way back to where it belongs – in the hands of those who earned it.
EBSA has worked closely with the U.S. Attorney’s Office for the Southern District of New York and other law enforcement agencies in obtaining criminal convictions for Madoff and others involved in the scheme. It may surprise you to learn that those who bore responsibility for the Madoff losses weren’t only Madoff and those in his firm. Outside companies and individuals who were entrusted with investing and safeguarding hundreds of millions in retirement and healthcare benefits for workers in New York and elsewhere were also involved.
These firms and individuals often represented that they were knowledgeable and experienced asset managers and investment advisors, the very people that should have known that Madoff’s promises were too good to be true, and in some cases, they did know. These are companies and individuals who are bound by law to act with the utmost care for their clients’ money. And where the Employee Retirement Income Security Act is concerned, they were bound to act with prudence and loyalty toward the participants and beneficiaries of those employee benefit plan funds.
Major cases like this illustrate the work that EBSA employees do every day to protect the retirement, healthcare and other benefits of workers nationwide. When those entrusted with safeguarding workers’ hard-earned benefits fail to do their job, we use the authority we have under the law to recover lost money, and if necessary, work with other law enforcement agencies and private parties to hold perpetrators accountable.
For every high-dollar recovery we achieve and case we win, there are hundreds of smaller recoveries being made. Each and every settlement we reach or case we win, regardless of the amount, is significant to those whose benefits are at risk. It means benefit plans and workers are getting back the money that belongs to them and that should have been handled with the utmost care by those entrusted with its security.
Workers make short-term sacrifices for their long-term security when they choose to participate in employer-sponsored healthcare and retirement plans, or invest in IRAs. And they trust that the people in charge of investing and managing their assets in these plans are working in their best interest.
We have a great mission here at the Department of Labor, to ensure workers get the hard-earned money they deserve, and that their retirement savings will be kept safe and secure. Under the leadership of Secretary Solis, EBSA will continue steadfast and committed in that purpose.
Phyllis C. Borzi is the Assistant Secretary of Labor for Employee Benefits Security