A representative of a Minnesota pharmaceutical company that lost about $8 million in company contributions to its profit-sharing retirement plan to Bernie Madoff's giant Ponzi scheme testified in Washington, D.C., on Wednesday in favor of legislation that would expand current federal investment protections to cover the losses of individuals.
Joel Green, general counsel and vice president of legal affairs at Upsher-Smith Laboratories Inc. in Maple Grove, which has about 550 employees, testified before the House Financial Services Committee, urging support for protection to cover individual participants in pension plans, profit-sharing plans and other qualified plans.
Even though the company was later able to restore the funds to employees' accounts on its own, Green said the change is important to protect workers elsewhere who were hit by the Madoff scandal and others who may fall victim to such schemes in the future.
"The legislation would protect these employees and their retirement security, and that of countless working men and women throughout America who rely on their retirement benefits for a secure and dignified retirement," he said.
Currently the Securities Investor Protection Corp. (SIPC), an industry-funded nonprofit created by Congress to protect investors when a brokerage firm fails, can provide as much as $500,000 for each "customer." But the SIPC maintains that the customer in this case is the fund itself, not the individual participants.
The change, which would be part of the Investor Protection Act, would allow individual members of, for instance, a pension plan, to recoup investment losses.
"If you have several thousand people in that plan, [the $500,000] is not going to go very far," said Rep. Keith Ellison, D-Minn., who is urging the committee to make the change. "So we wanted to redefine what 'customer' meant so more people can participate. The problem is that there's just not enough money to go around."
Indeed, Ellison and other sponsors of the legislation don't have a price tag associated with the change.