Madoff Investors Find Accounts Offer No Protection

Tucked among the hedge funds and the famous names on Bernard Madoff's client roster is an unlikely group of about 800 people — strangers to one another, yet all listed at the same anonymous Denver address.

Now, they are discovering a painful common bond, shared with at least two previous groups of stung investors. For at least the third time in as many years, the company behind Denver P.O. Box 173859 has turned up as a go-between in a collapsed Ponzi scheme.

The address belongs to Fiserv Inc., which served as middleman for Madoff and scores of regular Joe-and-Jill investors: dentists and doctors, insurance salesmen and builders who trusted Madoff to manage specialized individual retirement accounts.

Their losses with Madoff, together with earlier cases, raise questions about Fiserv and the risks inherent in what are known as self-directed IRAs. These financial products are an increasingly popular way of letting people invest in real estate or small businesses and other less-traditional investments.

Fiserv was the conduit for investors who trusted their retirement savings to Madoff, the money manager who told authorities in December he was behind a $50 billion scam. Authorities and experts now believe the actual number, while enormous, may turn out to be far less.

Fiserv's role was to send investors their balance statements and dispense checks to them. In return, Fiserv charged the investors a fee.

Much of the money trusted to Madoff through Fiserv reflects decades-long relationships. Some investors say they opened self-directed IRAs as far back as the 1970s with a Florida company, Retirement Accounts Inc. Over time Fiserv acquired Retirement Accounts and several of its competitors, merging them in 2004. Today the merged business manages about 135,000 IRA accounts.

The company has not been implicated in any wrongdoing related to Madoff. But twice before investors have blamed Fiserv and its subsidiaries for failing to protect them.

In a California class-action lawsuit settled last year, a Fiserv subsidiary paid $8.5 million to elderly victims of a long-running Ponzi scheme that made investments through self-directed IRAs administered by the Denver company. The investors lost about $100 million. A separate lawsuit against Fiserv, brought by about 40 investors in the same scam, is ongoing.