NEW YORK (JTA) — The securities fraud of Bernard Madoff has rocked the Jewish nonprofit world — and the worst may be yet to come.
Madoff, the founder of Bernard L. Madoff Investment Securities LLC, was arrested Dec. 11 after admitting to his board that a hedge fund he ran was essentially a $50 billion Ponzi scheme.
At least two foundations have been forced to close because they had invested their funds with Madoff.
The Robert I. Lappin Foundation in Salem, Mass., announced Dec. 12 that it would shut down after losing $8 million — all of its money. And the Chais Family Foundation, which gives out some $12.5 million each year to Jewish causes in Israel, the former Soviet Union and Eastern Europe, announced its closing Dec. 14.
At least one nonprofit is calling out for help in the wake of Madoff’s collapse. The Gift of Life Foundation, a Jewish bone marrow registry that relied heavily on Madoff as a benefactor, announced on its Web site Sunday that it would immediately need to raise $1.8 million to make up for recent losses.
Sources close to Yeshiva University, where Madoff served as treasurer of the board of trustees and board chairman of the university’s Sy Syms School of Business until he resigned last week, said the school lost $110 million.
Similarly, the Hadassah women’s Zionist organization announced Wednesday it had lost $90 million.
Just as the reverberations of the subprime mortgage collapse are still seen as contributing to the nation’s wider economic meltdown, philanthropic insiders say the fallout from Madoff’s scheme could be even greater. The insiders note that Madoff and others heavily invested in his fraudulent fund were major supporters of a plethora of nonprofit organizations, served on their boards, or advised those organizations on how to invest their money — in some cases placing large sums of the groups’ capital in Madoff’s hands.
Reflecting this sense that the full extent of the damage is still unclear, the executive vice president and CEO of the UJA-Federation of New York said that even though its endowments were not exposed, the organization still could be hurt if donors lost money in the scheme.
“We do not yet know the full extent of the losses that supporters of UJA-Federation and other Jewish institutions have had,” John Ruskay said. “But we have already heard that many major institutions had substantial funds invested, as did foundations. Already in the context of a very challenging economic environment this will present another significant difficulty. We don’t know yet the extent of the wreckage.”
Reports are trickling out in the national media about prominent businessmen from across the country who lost money in Madoff’s scheme.
New York Mets owner Fred Wilpon, GMAC Financial Services chairman J. Ezra Merkin, and former Philadelphia Eagles owner Norman Braman all were reported to have taken significant hits due to their dealings with Madoff, who reportedly would not accept any investment in his fund below $10 million.
Reports have surfaced also that media magnate Mortimer Zuckerman was significantly hurt by investing with Madoff.
In Los Angeles, the Jewish Community Foundation’s $238 million Common Investment Pool lost $18 million it had invested with Madoff, according to a letter sent out by the foundation.
Keith Krivitsky, the Jewish Federation of Greater Seattle’s vice president of the Center for Jewih Philanthropy, said he was certain that local organizations were not directly affected by the scheme.
Among other Jewish institutions and foundations believed to be hit by the Madoff scandal: The American Jewish Congress, the Technion-Israel Institute of Technology, Steven Spielberg’s Wunderkinder Foundation, Elie Wiesel’s Foundation for Humanity and Carl Shapiro’s charitable foundation.
An official at one major Jewish foundation told JTA that it had been advised to invest with Madoff, but decided against it after concluding that his return-on-investment forecasts seemed too good to be true.
Certainly the extent of the damage to the philanthropic world could become clearer as details emerge in coming days and weeks of just who was invested with Madoff.
One philanthropic official said there is a lesson to be learned here for the philanthropy world, where Jewish businessmen and philanthropists directed their own private funds and the funds of institutions that they help oversee toward Madoff.
“What really emerges out of this,” said Jeffrey Solomon, the president of the Andrea and Charles Bronfman Philanthropies, is that “people sometimes forget to conduct the due diligence when dealing with others with social prominence — and especially in the hedge-fund area where people think you have to be really smart to be in hedge funds.”
Yeshiva University issued a statement via e-mail to JTA on Sunday.
“We are shocked at this revelation,” the university said. “Bernard Madoff has tendered his resignation from all positions affiliated with the university and involvement with the university. Our lawyers and accountants are investigating all aspects of his relationship to Yeshiva University. We reserve our comments until we complete our investigation.”