Life after Madoff

SAN FRANCISCO (MarketWatch) -- Jeannene Langford is ready to move on, eager to mark the end of a year of misery that Bernard Madoff brought her.

That's one reason why the 55-year-old product-design specialist traveled to Washington earlier this month from her home in San Rafael, Calif., carrying a blunt message for Congress about the handling of Madoff victims' claims.

"The money I had invested with Madoff represented my life savings," Langford told House Financial Services subcommittee members. "This was my retirement, a down payment for a house, investment for the business I was starting, and it was money for my daughter's education. In short, it was the foundation for my future."

Langford is one of some 11,000 investors who became mired in the Madoff mess through investment pools known as "feeder" funds. These family-run funds, hedge funds and other entities were conduits to Madoff, funneling billions of dollars into his brokerage firm. The feeder funds are distinct from the 4,600 or so people who invested directly with Madoff. Account holders like Langford had no idea that Madoff, the perpetrator of the most staggering financial scam ever, controlled their money.

The Securities Investor Protection Corp. provides up to $500,000 per investor in cases where brokerages fail. But in the long line of almost 16,000 claimants hoping to recover at least something from Madoff's elaborate Ponzi scheme, Langford can't even take a number. Unlike individuals with accounts at Madoff's firm, Langford and others whose money came to Madoff indirectly are not entitled to SIPC compensation for their loss.

"This financially devastating scandal destroyed my life," Langford testified. "It has shattered my trust in my government's ability to serve and protect us. My hope is that Congress will choose to recognize and protect all indirect investors such as myself who were victimized by this scandal. We need your help now." See related story on how regulators missed Madoff's con.

Fateful phone call

Going public with her financial situation and pleading with politicians isn't in Langford's nature. But little in her life has been natural since that day in December 2008 when the telephone rang at the small one-bedroom apartment she rents in San Rafael.

Jeannene Langford lost most of her savings in Bernard Madoff's Ponzi scheme.

It was her money manager. Two years before, Langford was looking for a place to park the several hundred thousand dollars she'd made from selling a house in nearby Sebastopol. A friend recommended a local investor who was doing well for himself and his family and friends. Langford spoke with him and came away convinced that his strategy was stable and suitable.

"I had just sold my house at the top of the market," Langford said in a recent interview with MarketWatch. "It was not a great time to buy so I wanted to invest the money and had three sets of criteria: Safe, liquid, and diversified. My friend said hands down this was the safest place I could put my money."

Now the manager was calling with news about Langford's account, and it wasn't good.

"Our money was with Madoff," he told her. "It's all gone."

"I pretty much fell apart," Langford said. "I remember sitting down and crying on the phone to him. But there was not much to say, other than to explain that it was all a fraud."

Many people believe that Madoff's victims got what they deserved. They say Madoff's investors were rich and greedy and should have known better -- should have known that pocketing positive returns month after month is simply too good to be true.

Countless times over the past 12 months, Langford has asked herself whether she could have seen through the façade. Her portfolio delivered about 7% a year over the two years she was invested, she said; by comparison U.S. government bonds averaged 3% in the same period, while the Standard & Poor's 500-stock index /quotes/comstock/21z!i1:in\x (SPX 1,115, -11.32, -1.00%) registered an 18% annualized loss.