IOC Says No More Losses from Madoff Scandal

The IOC says its losses to the Madoff scandal should be under $5 million. (ATR)The head of the IOC Finance Commission tells Around the Rings that a "very thorough combing" of the IOC investment portfolio shows no more than $4.8 million is at risk in the massive Ponzi scheme allegedly hatched by Wall Street financier Bernard Madoff.

Finance Commission chair Richard Carrión tells Around the Rings that the IOC had money in a fund in Luxembourg that had invested with Madoff, plus it had an indirect investment because of another fund tied into Madoff funds.

"I think we will be assuming the worst when we close the books this year," says Carrión, IOC member in Puerto Rico.

"There'll be months before the dust settles."

The IOC has about $400 million in reserve, so the potential loss is a little more than 1 percent.

The U.S. Olympic Committee did not have any investments with Madoff, spokesman Darryl Seibel tells ATR. "It appears the same is true for the U.S. Olympic Foundation," he says.

Carrión says IOC treasurer Philippe Augsburger sent an e-mail as soon as the Madoff story broke to say he had found a problem. The IOC had been invested in the Luxembourg fund for some time, Carrión says.

The Wall Street Journal first reported the IOC's investment with Madoff. According to the newspaper's extensive list, the IOC has one of the relatively smaller investments. Nine banks, funds or investment firms are looking at potential losses of $1 billion or more. In all, $50 billion may have been lost by individuals and firms that invested in funds controlled by Madoff.

"This is very sick, this is very harmful for the whole environment," Carrión says, himself a prominent banker.

"It's the very harmful for the reputation of the U.S. financial markets. You have some major charities and non-profits that were hurt by this; you have some people who had everything they owned invested in there."

Carrión says the IOC maintains policies to keep a low-risk profile through diversified investments.

"You don't normally plan for a fraud in these things, much less a fraud of this magnitude, which has shocked everybody," he says. "Nonetheless, if you have you the policies that protect you from too much exposure anywhere, you get through these things."

The IOC calls its reserve fund the Foundation portfolio, and Carrión compares it to a university endowment. It would be used if there were a cycle where the Games were cancelled. The IOC will have a little more than $400 million in the portfolio by the end of the year.

"The idea is to be able to pay all the expenses for a four-year period," Carrion says. "What we'd like to have eventually is an amount that helps the IOC cover its expenses just on the return of that money, but that's a longer-term view."

Some of the money is in fairly liquid instruments. The IOC does not own stocks directly, only through funds. It also invests in commodity and real estate funds.

The IOC also has strict currency diversification rules. It must maintain 35-45 percent of its investments in dollars, 35-45 percent in Euros, no less than 10 percent and no more IOC Finance Commission chair Richard Carrión explains the IOC's diversified investments. (ATR)than 20 percent in Swiss francs and no more than 10 percent in other currencies such as the Japanese yen.

"So you keep a fairly balanced risk profile," Carrión says. "I've been in this business for a long time, and nobody really knows how currency moves. If somebody tells you different, run the other way."

The IOC also receives advances on broadcast contracts and keeps that money in a separate portfolio. It invests in very liquid instruments to time with the Games, just in case the Olympics are cancelled and the IOC has to refund the money. "That's money that does not belong to us until the Games take place," Carrion says.

IOC spokeswoman Emmanuelle Moreau says that the IOC's financial foundation is solid due to "a conservative budgeting and investment strategy."

She says the IOC has already reached agreements with nine partners through 2012 and that TOP VII (2010-2012) is already more substantial than TOP VI (2006-2008).

"Broadcast rights have been secured for the vast majority of territories for Games in 2010 and 2012," Moreau says. "We have received assurances from all organizing committees (Vancouver 2010, London 2012 and Sochi 2014) that they will meet their obligations and are taking appropriate steps to manage any financial risks."

Written by

Karen Rosen

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