Area Doctor Calls on SEC to Refund his Practice
HEARING
Norwalk Hour
Tait Militana
Boston University Washington News Service
1/27/09
WASHINGTON – A Fairfield doctor lashed out against the Securities and Exchange Commission Tuesday, saying that his practice lost more than $11 million in pension funds in the Bernard Madoff scandal.
Dr. Henry Backe of the Orthopaedic Specialty Group testified as a witness in front of Sen. Chris Dodd (D-Conn.) and the rest of the Senate Banking, Housing and Urban Affairs Committee at a hearing on why regulators were unable to detect Madoff’s alleged fraud. Backe said the regulators did not do a good enough job preventing the scam.
“They [his practice’s employees] are regular working-class Americans,” Backe said. “They were let down by Madoff, the regulators, the SEC and FINRA [the securities industry’s self-regulatory Financial Industry Regulatory Authority].”
Backe’s practice first invested in Madoff’s investment fund in 1992, he said. Since then the investments were used to fund pension plans for more than 140 employees, including doctors, nurses and office personnel. Last month, Madoff was arrested for allegedly perpetrating more than $50 billion in investor fraud in what has been called the largest Ponzi scheme in history. The practice’s employees, including a partner who had 30 years worth of investments with Madoff, lost all of their savings, Backe said.
According to Backe, the scandal has cast a shadow over the workplace. Many employees do not know when they will be able to retire and may have to sell personal assets to make up for their losses, he said.
“Our employees are scared, worried and angry,” Backe said.
Backe, who was in Washington seeking a way to get more of his firm’s investments back, said officials told him because the employees’ investments were pooled as a 401 (k) retirement plan, whatever they recover from settlement of the Madoff affair will be treated as a single investment and thus limited to no more than $500,000.
Backe said his employees have lost faith in the government.
“We don’t know where to turn, and that’s one of the reasons I’m here,” he said.
According to Backe, the group’s pension plan was audited by the U.S. Department of Labor in 2005 and by an independent Connecticut firm in 2008. In both cases, no concerns were raised.
During the three hour hearing, Dodd, the committee chairman, grilled regulatory officials on why they were unable to detect what Madoff was up to and protect victims such as Backe. He said that what he described as Madoff’s deception was allowed to continue for so long was unacceptable.
“Obviously a number of signals and warning were given,” Dodd said. “It is inexcusable, in my opinion, that this matter went on as long as it did. There were enough red flags being raised.”
Though Dodd said no immediate legislation is pending to overhaul financial regulation, he called on the SEC and the Financial Industry Regulatory Authority to report to the committee every three months on measures being taken to improve oversight and fraud prevention.
Backe said he felt obligated to fight for his employees because they worked hard to save money and do not need more distraction from patient care.
“I told them I would go to the end for them,” Backe said. “I wasn’t getting clear answers from all the sources I was looking at, so I thought the best thing to do would be to ask them myself.”
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