The Blood-and-Guts of Mutual Fund Losses: A Lost Nest egg

White Plains, NYIf one were to devise a poster boy—or better yet a "Wanted…" poster that relates to the failing mutual fund industry and mutual fund losses, it would be none another then Bernard L. Madoff, the financial guru accused of defrauding thousands of investors out of billions by promoting what is alleged to be a glorified Ponzi scheme, and spinning it as legitimate.

The pain associated with Madoff's sensational arrest and the salacious allegations surrounding his once-revered company is best exemplified by the tragic death of one of Madoff's investors three days before Christmas. The investor, who is thought to have died by his own hand, had entrusted more than a billion dollars of client's funds with Madoff.

But then there are Edith and Thomas Liccardi of White Plains, New York. The retired couple now in their 80s typifies the sense of loss and bewilderment experienced by any investor having taken a hit thanks to a less-than-trustworthy fund manager, or an advisor who makes bone-headed investment decision that benefits his own cause, rather than that of his client.

As profiled recently in the New York Times, Liccardi is a retired accountant who gave up his practice years ago, but still dabbles in the industry by preparing a few tax returns per year. True to form with most bean counters, Liccardi was very careful with his money—never sinking his savings into something that appeared too good to be true.

He advised his clients likewise, and smelled a rat when a client of Bernard Madoff was filing returns that reflected a return on investment (ROI) of 25 percent year over year. Indeed, way too good to be true, Liccardi thought.

That is, until Mr. Liccardi went to pay a call to Madoff in his headquarters and was blown away at what he saw—computers everywhere, and people running around. Madoff impressed. "I thought this had to be legitimate because you couldn't employ that kind of staff without money," Liccardi told a New York Times reporter.

So impressed was Liccardi that he invested his entire life savings of $400,000 with Madoff and his firm. When the Liccardis sold their home, the couple entrusted the proceeds of the real estate sale—another $400,000—to Madoff as well.

It wouldn't be long before Liccardi, 86 and his 84-year-old wife began receiving statements that showed his nearly 10-year-old investment had more than tripled in value to $2.7 million. The Liccardis were now millionaires. But they were also well into their 80s and in need of assisted living, so the Liccardis moved to Fountains at RiverVue, accommodations that all in cost them $130,000 per year. With cash on hand together with bonds Edith Liccardi had inherited, they have about $100,000 in the bank and had been depending on the Madoff investments to look after the remainder of the year, and beyond.

Now, it is all gone. Like many of Madoff's 8000 investors, they don't expect to get that money back. The problem, is how do you replace it? And where will the Liccardis live now? The best-case scenario would have Medicaid footing the bill for their home health aides (provided a doctor supports the additional care as medically necessary).

But where will they live? What will they do? These are the questions facing any elderly investor who has entrusted funds to mutual fund managers, only to lose it all (or at the very least a good chunk) when the money is not invested wisely, prudently, or with the investor's best interests at heart.

It all makes for sensational headlines, and names in the news represent real people and real hardships. But this reality, this hit taken by Edith and Thomas Liccardi, goes beyond the headlines. Rather, it rests in the moment. And at this moment Thomas Liccardi is 86, has survived two heart attacks and a serious stroke, and can't work any more even if he wanted to. His wife Edith, 84, recently suffered a minor stroke and is getting around with the aid of a walker.

They don't know, now, where they will live. Nor do they know how they will fund their day-to-day living without that $2.7 million nest egg. A nest egg, like so many others, having allegedly vanished into the thin air surrounding the thin hair and even thinner supports of Bernard L. Madoff's investment firm.

What can you say to a couple like Edith and Thomas Liccardi, who work hard all their lives for this? For $800,000 in real dollars that ballooned to $2.7 million, the latter seeming just as real as the former, until the day it vanished.

What do you say to someone incurring these kind of financial losses?

Call a lawyer. Somewhere, there's an insurance policy, or a corporation in need of taking responsibility.