Compliance December 19, 2008

Minneapolis Profit-Sharing Plan Also Victim of Ponzi Scheme

The list of retirement plan victims of a huge Ponzi scheme authorities claim was run by Bernard Madoff continues to grow.

Reported by

Fred Schneyer

The entire profit-sharing plan run by suburban Minneapolis drugmaker Upsher-Smith Laboratories was placed with Madoff’s firm.

A news report in the Minneapolis Star Tribune said Joel Green, general counsel and vice president of legal affairs at Upsher-Smith, declined to estimate how much money might be lost and how many past and current Upsher-Smith employees are affected.

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But the newspaper said that because federal regulators froze assets in Bernard L. Madoff Investment Securities LLC as part of their probe of Madoff, Upsher-Smith’s employees can’t access their account balances. The firm has about 550 workers.

Former employees told reporters that most Upsher-Smith workers qualified for the profit-sharing plan and that some had built up more than $100,000 in their accounts. Employees were told that their assets were frozen and they would get further information.

The company may also suffer because members of the Evenstad family, who own a majority of Upsher-Smith’s stock, also invested with Madoff, the newspaper said. Employees speculated that those family losses could affect the company’s drug development plans.

According to the Star Tribune, Upsher-Smith said it wants to have four new drugs on the market by 2017, including a drug that helps treat the symptoms of Parkinson’s disease.

See also: “401(k) Plan Invested with Madoff’

Compliance December 19, 2008

401(k) Plan Invested with Madoff

The wealthy and large institutional investors were not the only victims of the $50-billion Ponzi scheme orchestrated by Wall Street trader Bernard Madoff.

Reported by

Fred Schneyer

A St. Louis real estate firm reports its employees are also affected by the Ponzi scheme. About 100 employees at Sterling Properties in St. Louis had the option of investing with Madoff through their 401(k) plans, and dozens did so, a company official told the St. Louis Post-Dispatch. Investing with Madoff was one of several options in Sterling Properties’ 401(k) plan, and employees also had the option of investing with Madoff outside their 401(k) accounts.

According to the Post-Dispatch, the company had no hint of trouble until Madoff, a former chairman of the NASDAQ stock exchange, was arrested last week and charged with running a gigantic Ponzi scheme, in which money from new investors was used to pay off existing investors who wanted to cash out.

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Employees are hoping to recover part of their investment through the bankruptcy courts and from the Securities Investor Protection Corp., which insures investors against fraud, the news report said.

Most of Madoff’s victims include wealthy families, hedge funds, money management firms, and large international banks. According to the Post-Dispatch, employees of the Robert I. Lappin Charitable Foundation in Massachusetts lost both their jobs and perhaps much of their retirement savings, as both the foundation’s money and its 401(k) plan were invested through Madoff’s firm. The foundation has closed its doors.

The town of Fairfield, Connecticut’s pension fund is another victim. It had $42 million invested with Madoff (see “CT Town Pension Claims $42M Madoff Fund Loss’).