Joshua Rednik, director of the Jewish Community Foundation of MetroWest, said “there is no way to know at this time” the total impact of the fraud.
December 18, 2008
In the days after New York financier Bernard Madoff’s arrest for allegedly masterminding a $50 billion investment swindle, leaders of New Jersey’s Jewish community reeled with mixed emotions.
After examining their organization’s portfolios, executives at local federations breathed sighs of relief that their endowments had not been put in Madoff’s hands.
At the same time, they regretted major losses hitting Jewish institutions across the country (see sidebar) and waited to see the impact on federation fund-raising.
Unlike Jewish federations in Los Angeles and Washington, DC, to name two philanthropies that had significant stakes in what turned out to be Madoff’s alleged giant Ponzi scheme, local federations had no funds invested with his firm.
“We weren’t touched by Madoff,” said Stanley Stone, executive vice president of the Jewish Federation of Central New Jersey. “We had nothing with him.”
But, Stone said, “we don’t know yet” whether the collapse of Madoff ’s investment empire would have a direct impact on any of the federation’s key donors.
“Nobody has spoken to us yet, and so far I don’t know anything. I am not looking to be nosy, but if there is an issue they will let me know,” said Stone.
Officials at the United Jewish Federation of Princeton Mercer Bucks, the Jewish Federation of Monmouth County, and the United Jewish Communities of Metrowest NJ and their endowment arms said they had no funds invested with Madoff and no direct exposure to fallout of his alleged fraud.
"Nothing has directly affected us,” said Howard Gases, executive director of the Monmouth federation. “We're still trying to ascertain if the Madoff situation has impacted anyone in the community.”
In a press release issued Dec. 15, UJC MetroWest NJ and its Jewish Community Foundation said they had “no direct exposure” to Madoff’s alleged scheme.
“We have not been directly affected by Madoff’s activities,” said the statement, signed by the two entities’ top professional and lay leaders. “We have performed our due diligence and spoken with all of our investment managers. The result is that UJC and JCF have no direct exposure.”
Among Madoff’s alleged victims, however, is the family foundation of Sen. Frank Lautenberg (D-NJ).
“Sen. Lautenberg was an investor in Bernard Madoff’s investment fund, primarily in the form of his family’s charitable foundation,” said Scott Mulhauser, press spokesperson for Lautenberg, in an e-mail to NJ Jewish News.
At the end of 2005, the foundation had $11.7 million of its $13.1 million invested with Madoff, according to federal tax filings from 2006 — the most recent year available
“The senator is obviously very distressed about the likely loss of the foundation funds in the hands of Madoff,” said Lautenberg’s attorney, Michael Griffinger. “The foundation will not be able to make contributions to the many charities it has served so well over the years.”
It is not known, however, what the impact the foundation’s losses will have, if any, on any individual gift.
According to tax filings, the Lautenberg family foundation made $765,509 in contributions in 2006.
Among the foundation’s gifts that year to 27 different institutions, 15 were affiliated with the Jewish community, including $11,500 to the American Jewish Committee and $35,000 to Temple Sharey Tefilo-Israel in South Orange.
The largest single gift — $352,500 — went to UJC MetroWest.
The Newark-based Griffinger, in an e-mail to NJJN, said he believes “many foundations, in addition to Sen. Lautenberg’s, together with many individual philanthropists who have supported Jewish charities, have been severely hurt by Madoff’s conduct.”
Joshua Rednik, executive director of the Jewish Community Foundation of MetroWest, UJC MetroWest’s planned giving and endowment arm, was assessing the fallout from the Madoff scandal.
He said there are “major concerns as to how this will directly affect the people who support us and support all Jewish institutions. A lot of people have sustained significant losses.”
Rednik said the foundation “is getting a lot of questions, mostly about whether we are exposed.”
Relieved to say that MetroWest is not exposed, Rednik said he, like other fund-raisers and endowment professionals, are bracing for what could be a long series of repercussions for investors and philanthropists.
“We have done due diligence on our own investments and I am curious to see how it may impact us, but there is no way to know that right now,” he said. “All we can do is sit back and wait to see how it unfolds.”
Another foundation touched by the scandal was the Gift of Life Bone Marrow Foundation, founded by West Orange native Jay Feinberg.
According to The Wall Street Journal, the Florida-based Gift of Life did not have any money invested with the Madoff firm.
But Feinberg, its executive director, said some one-third of the funds it spent on donor recruitment came from the Madoff Family Foundation.
It was announced on the Gift of Life website Sunday that the foundation would immediately need to raise $1.8 million to make up for recent losses.
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.
They 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.
Of particular interest to the Jewish community is GMAC Financial Services chair J. Ezra Merkin, who last week told investors in his hedge fund, Ascot Partners, that all of their money had been defrauded by Madoff. Merkin has philanthropic ties to a number of Jewish organizations and institutions, serving as a volunteer investment adviser for many of them, including Yeshiva University. Among other causes with which he is said to be connected are the SAR Academy, a Jewish day school in the Bronx, as well as State of Israel Bonds, The Jewish Campus Life Fund, Elaine Kaufman Cultural Center, the Ramaz School, Manhattan’s Congregation Kehilath Jeshurun, and the Fifth Avenue Synagogue.
Sources say that several of these entities had money in Ascot, which they now stand to lose because of Merkin’s decision to invest so heavily in Madoff’s fund. According to Orthodox communal insiders, Ramaz and SAR lost millions between them.
A woman who answered the phone Sunday at one of Merkin’s listed numbers suggested that he could be reached in the office Monday.
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, 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.
“In many ways for all investments, something like this is tragic. But for nonprofits where boards have the fiduciary responsibility of acting with great prudence, it is even more tragic.”
JTA contributed to this article.
A financial hurricane sweeps Jewish world
MANY ORGANIZATIONS and individuals linked to the Jewish community seemed to have been exceptionally damaged by the collapse of Bernard Madoff’s allegedly fraudulent investment empire.
Two key foundations were compelled to close down operations after the disclosures.
The Chais Family Foundation, which donates approximately $12.5 million annually to Jewish causes in Israel, the former Soviet Union, and Eastern Europe, closed Dec. 14 because all its assets were invested with Madoff. The national United Jewish Communities and the American Jewish Joint Distribution Committee were among its main beneficiaries, according to JTA.
The Robert I. Lappin Foundation in Salem, Mass., announced on Dec. 12 that it would shut down after losing $8 million. It focused on providing programs to encourage young Jews to become involved in Jewish living and learning programs, such as Jewish day schools and Jewish overnight camping.
Among others affected by the Madoff scandal:
• The Jewish Community Foundation of Los Angeles, which made investments through Madoff valued at approximately $25.5 million — some 11 percent of its total assets, according to the Los Angeles Jewish Journal.
• The endowment fund of the Jewish Federation of Greater Washington, which had more than $10 million — about 8 percent of its endowment — invested with Madoff’s fund.
• The American Jewish Congress, where Madoff had served as treasurer of the board, is at risk of losing more than two-thirds of its endowment. JTA reported that AJCongress officials “are not commenting at this time.”
• The Elie Wiesel Foundation for Humanity, which had $37 million invested with Madoff.
• Film director Steven Spielberg’s Wunderkinder Foundation. According to The Wall Street Journal, an estimated 70 percent of its dividend income and interest was handled by Madoff in 2006. Wunderkinder’s recent grants included those to Cedars-Sinai Medical Center in Los Angeles and the American Museum of Natural History in New York. Spokesperson Marvin Levy told Reuters that the foundation “suffered some losses” from its investment with Madoff’s firm, but refused to elaborate.
• American Friends of Yad Sarah, an Israeli volunteer organization that provides services for the disabled and needy, had $1.5 million invested with Madoff, according to JTA.
• The JEHT Foundation, created by the assets of real estate mogul Norman Levy, gave away more than $75 million since 2002. It heavily financed such criminal justice causes as the Innocence Project and Human Rights Watch.
• The Robin Hood Foundation, which received $30,000 last year to aid its anti-poverty and educational reform programs in New York City. Robin Hood executive director David Saltzman declined to comment on the financial impact of Madoff’s arrest.
• Carl Shapiro, a 95-year-old Boston philanthropist and personal friend of Madoff’s for more than 50 years. According to The Boston Globe, more than $500 million of Shapiro’s assets are missing. Shapiro’s foundation has endowed such Boston-area institutions as Brandeis University, the Beth Israel Deaconess Medical Center, and the Carl J. and Ruth Shapiro Cardiovascular Center at Brigham and Women’s Hospital.
• Yeshiva University, whose endowment lost $107 million, or about 10 percent of its total value, after making investments with Madoff, according to The New York Times.
• Leonard Feinstein, cofounder of the Union-based Bed Bath & Beyond chain of stores. His losses are thus far reported undetermined.
• Publisher and real-estate magnate Mortimer Zuckerman, owner of the New York Daily News and U.S. News & World Report. He invested heavily in Ascot Partners, the Madoff hedge fund.
• Fred Wilpon, owner of the New York Mets and the Brooklyn Cyclones, was reported to have invested more than $300 million with Madoff.
• Norman Braman, a former owner of the Philadelphia Eagles football team. Braman is a former director of the Elie Wiesel Foundation for Humanity.
— ROBERT WIENER
JTA contributed to this report.