AUSWR
The Association of U S West Retirees
 

 

 

PBGC Stakes Claim in Bankruptcy Case
By Amir Efrati and Jeffrey McCracken
The Wall Street Journal
Wednesday, January 14, 2009

The Pension Benefit Guaranty Corp., a federal agency that insures private pensions, identified itself as a creditor in the liquidation of Bernard Madoff's firm, suggesting it is preparing for bankruptcies by companies in the wake of an alleged $50 billion Ponzi scheme.

The agency, which protects the pensions of nearly 44 million U.S. workers and retirees, on Tuesday joined a Manhattan bankruptcy-court proceeding involving the Madoff firm, which is being liquidated by a court-appointed trustee.

"The agency has a responsibility to carry out its mission to protect pension plans in the event of a bankruptcy," said Jeff Speicher, a spokesman for the agency.  He added:  "The PBGC insures almost 30,000 pension plans.  One or more of those plans may be exposed to losses as a result of the Madoff investment scandal."

The agency said it is preparing to take over a pension plan sponsored by a small company that manages residential buildings in Manhattan and whose employees include doormen.  It is also looking into pension plans of charities whose endowments were invested with Mr. Madoff.

"Our preliminary review has given us serious concern that those pensions may also have been fully invested in Madoff," said Charles Millard, the agency's director.  "We are also concerned with several dozen union pension plans in upstate New York" that reportedly have exposure to the Madoff firm, he said.

The agency was created in 1974 to provide support to people whose pension plans are terminated "without sufficient funds to pay all benefits," such as when businesses go out of business, according to its Web site.  The agency is funded through its own investments as well as insurance premiums paid by companies whose plans it protects, among other things.

Any spillover effect for pensions from the Madoff scandal would come at inopportune time for the PBGC.  The agency announced in November an $11.15 billion deficit for fiscal year 2008, down $2.9 billion from its $14 billion shortfall last year.

Write to Amir Efrati at amir.efrati@wsj.com and Jeffrey McCracken at jeff.mccracken@wsj.com

http://online.wsj.com/article/SB123188273492678629.html