December 15, 2008 | Read Time: 5 minutes
The giant Ponzi scheme allegedly perpetrated by Bernard Madoff is rippling through Jewish philanthropy and charities, forcing the closure of at least three foundations and major losses at foundations established by the likes of Steven Spielberg, Elie Wiesel, and New Jersey Sen. Frank R. Lautenberg.
The tens of millions lost to nonprofit causes comes at a time when many charities and foundations have already been forced to pull back because of the recesssion.
Mr. Madoff was arrested last week after admitting that his scheme may have cost investors as much as $50-billion. Many of his investors were fellow members of the Palm Beach Country Club, in Florida, where major charitable contributions were a prerequisite to membership.
“Madoff traveled in the most-philanthropic circles one could travel in,” said Gary A. Tobin, Institute for Jewish and Community Research, in San Francisco. “The ripple effects of this are not going to be known for some time.”
The JEHT Foundation, which supports reform of the criminal-justice and juvenile-justice systems, and made grants worth $26.4-million in 2006, announced it would halt grant-making immediately and close in early 2009. Robert Crane, president of the New York foundation, said that Jeanne Levy-Church and Kenneth Levy-Church, who regularly gave away more than $20-million per year through the foundation, had used Mr. Madoff to manage their money.
“It’s sad and tragic for a lot of people,” Mr. Crane said. Twenty-four employees at the foundation will lose their jobs.
Mr. Crane said colleagues at other foundations that support some of JEHT’s grantees, including the Ford Foundation and Atlantic Philanthropies, have been in contact with those charities about meeting “specific needs” but it is unclear what that will mean for the charities. “It’s unlikely that all of the loss will be picked up,” Mr. Crane said.
The Chais Family Foundation, worth $178-million as of May 2007, closed on Sunday, according to JTA.org, a Jewish news organization. The foundation donated some $12.5-million annually to Jewish causes in Israel and Eastern Europe.
The Robert I. Lappin Charitable Foundation, based in Salem, Mass., which provides money to Jewish day schools and camps, announced Friday that it was shutting immediately. Virtually all of its assets, $7.1-million as of year-end 2006, were managed by Mr. Madoff, according to a release on the foundation’s Web site.
University Harmed
Yeshiva University, in New York, lost $100-million on its investments with Mr. Madoff, JTA.org said, citing sources at the university. The university has not revealed publicly how much it invested with Mr. Madoff. He been treasurer of the university’s board and chairman of the business school, but resigned from all positions at the university after the scandal broke.
“Our lawyers and accountants are investigating all aspects of his relationship to Yeshiva University,” said Hedy Shulman, a university spokeswoman, said in a statement. “We reserve our comments until we complete our investigation.”
Mr. Madoff has been a fixture on Wall Street for decades, and the steady returns provided by his investment fund attracted numerous investors. But he is now charged with merely taking money from new investors to pay returns to older investors, the classic ploy in a Ponzi scheme.
The Carl and Ruth Shapiro Foundation, worth $345-million in 2007, had nearly half of its assets with Mr. Madoff. In a statement, the foundation, which supported charities in greater Boston and Palm Beach County, Fla., said that it was assessing “all options” to recover funds invested with Mr. Madoff.
“The foundation plans to fulfill all of its current obligations,” the statement said. “We fully anticipate that the foundation will continue to grow and be a strong supporter of the region’s nonprofits.”
The Jewish Community Foundation of Los Angeles had $18-million, less than 5 percent of its assets, invested with Mr. Madoff, according to a public letter released by the community foundation on Monday. The loss affected the foundation’s common investment pool, which serves as a quasi-endowment. No donor-advised funds were affected.
“The loss, while unprecedented in the foundation’s 54-year history, does not threaten the foundation’s stability, its existing commitments, or its ability to maintain its leading role in the Los Angeles philanthropic community,” the letter said.
Nobel Prize Winner’s Fund at Risk
Elie Wiesel, the Holocaust survivor and winner of the Nobel Prize for Peace, appears to have had nearly all of the assets in the Elie Wiesel Foundation for Humanity invested with Mr. Madoff as of year-end 2006. The foundation, worth $4.9-million in 2006, organizes an ethics essay contest and runs centers in Israel help educate Ethiopian Jewish children. Officials at the foundation could not be reached.
Senator Lautenberg’s foundation, which had $13.9-million in assets as of year-end 2006, also had the bulk of its funds with Mr. Madoff, according to his lawyer, Michael Griffinger. The foundation made grants worth $765,500 in 2006, including $352,500 to the United Jewish Communities of MetroWest New Jersey.
The Wunderkinder Foundation, Mr. Spielberg’s foundation, was also an investor in Mr. Madoff’s fund. The foundation, which had assets of $12.6-million as of November 2006, received $339,000 in dividend income from Madoff during the 2006 fiscal year. Officials at the foundation did not immediately return phone calls.
Mortimer B. Zuckerman, the chairman of real-estate firm Boston Properties and owner of the New York Daily News and U.S. News & World Report, had about 11 percent of his charitable remainder trust in Madoff’s fund, according to The Wall Street Journal.
Adding to Recession Woes
Virtually all charities are feeling the impact from the recession, but Jewish charities may be hit harder than most. The Madoff scandal is only the latest blow.
The wealth of Sheldon Adelson, who was expected by many to become the most-generous donor ever to Jewish charities, has largely vanished. Just over a year ago, Mr. Adelson was the third-richest man in the United States, according to Forbes magazine, but he has lost more than $30-billion as the stock price of his company, Las Vegas Sands, has plummeted.
“What nonprofit organizations are going to be able to do is going to be diminished—there’s no question about that,” Mr. Tobin said.
Mr. Madoff’s own $19-million foundation, the Madoff Family Foundation, was a supporter of Gift of Life, a Jewish bone marrow registry and cord blood bank based in Boca Raton, Fla.
On Saturday, the charity put a notice on its Web site stating that it hoped to raise $1.8-million in “alternative support” to achieve its growth goals in 2009.
