Town Pension's Madoff Hit Prompts Additional $500K Contribution

January 5, 2009 ( - A Connecticut town's pension fund that lost about $17 million in a Bernard Madoff-related investment will force officials to add an additional pension contribution of approximately $500,000 to their already budgeted $900,000.

A news report in the Connecticut Post said the actuary advising the Town of Fairfield’s pension fund had already recommended a $900,000 payment to be included in the town’s next budget to make up for market-related losses.

The newspaper quoted Fairfield First Selectman Kenneth Flatto as saying that the latest estimate is that the additional taxpayer contribution would be necessary assuming the town ends up losing everything it placed with Madoff’s investment company (see CT Town Pension Claims $42M Madoff Fund Loss ). Madoff, the former chairman of Nasdaq, has been accused of orchestrating a $50-billion Ponzi scheme that authorities say claimed victims around the world, including a number of pension funds and other institutional investors.

“In the big picture, that’s a relatively small impact on a $250 million budget,” Flatto said, according to the newspaper. “It’s still not good news.”

According to the report, Fairfield had trimmed its Madoff-holdings from the original $22 million in 1997 to the $17 million level in several increments since 2002.

Flatto said from about 1987 to 1997, taxpayers contributed about $20 million to the pension fund, while employees contributed about $1 million a year. The town hasn’t contributed to the funds through the municipal budget in about 10 years, while employees continue to contribute about $1 million annually, the Post quoted Flatto as saying.

The Post report also said a representative of the town's pension consultant issued an apology to Flatto and other officials after he was quoted as saying in a published report that he recommended Fairfield reduce its investments in a feeder fund linked to disgraced investor Bernard Madoff.

In an e-mail to Flatto, Fiscal Officer Paul Hiller and John Starr, chairman of the joint pension board, Douglas Moseley, of the Cambridge, Massachusetts-based New England Pension Consultants, apologized "for the way that the discussion at the (Town of) Greenwich Retirement Board was portrayed" in a December 19 newspaper story.

That story quoted Moseley as saying in his discussions with Greenwich officials, "We made multiple recommendations that [Fairfield officials] reduce the concentration."

However, Flatto complained that the consultant should never be discussing its specific work with Fairfield without prior permission from the town.