December 17, 2008 | Read Time: 5 minutes
Charities continued to assess their potential losses in the alleged fraud perpetrated by Bernard L. Madoff on Tuesday, amid fears that the one-two punch of a brutal economy and the giant Ponzi scheme could force sharp retrenchments or even closures at some organizations.
Mr. Madoff was arrested last week for allegedly running a Ponzi scheme that may have cost investors as much as $50-billion.
Some charities, like Yeshiva University and MorseLife, a nonprofit center for the elderly in West Palm Beach, Fla., were direct investors in Mr. Madoff’s funds. But a far greater number of charities received support from foundations and individuals that have seen their wealth wiped out or greatly reduced by investing with Mr. Madoff.
“The impact of this, on top of the market downtown, certainly has the attention of the head of every nonprofit,” said Rebecca W. Rimel, president of the Pew Charitable Trusts. “A lot of people are thinking about what kind of contingency planning is appropriate.”
Pew’s own project, Make Voting Work, which seeks to improve the accuracy and efficiency of the election system, suffered a more than $3-million hit on Monday, when Pew’s partner, the JEHT Foundation, announced that it would immediately cease grant making due to Madoff losses.
JEHT has paid $1-million of a $4.15-million pledge that the foundation announced last Tuesday, just two days before Mr. Madoff was arrested. The grant was to be used to evaluate early voting and other alternatives to traditional precinct-place voting. Ms. Rimel said that Pew has invested a total of $14-million in Make Voting Work, compared with paid grants of just $2.5-million for JEHT.
She said Pew remained committed to the two-year-old project, although she noted that Make Voting Work would move more slowly with its research agenda, and look for other supporters.
“This work helps ensure that elections are fair and transparent, and that people are able to exercise their right to vote,” Ms. Rimel said. “It is going to be a very important part of our portfolio going forward.”
Charities in Florida Hit Hard
Some of the charities likely to be hardest hit by the Madoff fraud are in Palm Beach County, Fla. Mr. Madoff belonged to the Palm Beach Country Club and many of its members invested with him.
MorseLife acknowledged in an open letter on Monday that it had invested with Mr. Madoff. The MorseLife Foundation’s tax form for the year ending in May 2007 shows $59.1-million in assets, three-quarters of which were invested in “managed equity funds.” A MorseLife spokesman declined to say what percentage of the foundation’s assets were invested with Mr. Madoff.
The New York Post, citing unidentified sources, said on Tuesday that MorseLife was “in peril of closing.”
In its open letter, MorseLife sought to dispel those concerns. “We want to assure you that MorseLife was diversified in its investments and we remain financially secure,” wrote Keith Myers, its president, and Bea W. Bloch, its board chairman.
Nationwide, at least four foundations, including the JEHT Foundation and Arthur I. and Sydelle F. Meyer Charitable Foundation, in West Palm Beach, Fla., are closing as a result of being almost entirely invested in Madoff funds. The Meyer Foundation, with assets of $3.7-million as of year-end 2006, supported local arts groups, among other causes. (The other grant makers that have shut are the Chaise Family Foundation and the Robert I. Lappin Charitable Foundation.)
The Raymond F. Kravis Center for the Performing Arts, in West Palm Beach, received $115,000 from the Meyer foundation in 2006. The nonprofit center, which has restricted funds of $10.2-million, has not yet received any calls from donors indicating that they would not be able to meet their pledges, according to Brian Bixler, a spokesman for the center.
But Mr. Bixler said the Madoff fraud “makes an already challenging year even more challenging,” and he said the center would consider canceling some programs that are not expected to be well attended.
“We’re not looking at a slash-and-burn policy at this point, but we will continue to monitor the situation,” he said.
Gift of Life, a Jewish bone-marrow registry and cord blood bank based in Boca Raton, Fla., has already received calls from donors withdrawing $2-million worth of pledges, according to Jay Feinberg, the charity’s founder and executive director. That accounts for the entire recruitment budget for 2009. The charity has 130,000 donors on its registry and hopes to get to 300,000; the more donors it has, the more likely it can find a match for someone suffering from a blood-related disease . Mr. Madoff was a major donor to the charity and had chaired a gala fund-raising event.
“He seemed likable enough, he seemed to be a real mensch,” Mr. Feinberg says. “We’re all in shock and living in this surreal world right now.”
Donors Lost Money
The Jewish Federation of Palm Beach County had none of its endowment, worth $128-million in June, with Mr. Madoff, according to Bill Orlove, a spokesman for the federation. But many of its supporters are believed to have lost money in the debacle. Mr. Orlove said the federation’s leaders were coming up with a strategy to cope with expected declines in giving, though no firm decisions have been made. “There are some discussions taking place,” he said.
Many of the charities and foundations that have suffered direct losses from investments with Mr. Madoff have vowed to fight to reclaim as much of their money as possible. Jack B. Siegel, a lawyer in Chicago who advises charities, says he fears that little will ultimately be reclaimed.
“There are going to be lot of lawyers who make a lot of money unscrambling this thing,” Mr. Siegel says. “Unfortunately, I think at the end of the day, people are going to come up short.”
