Just days after Bernard Madoff’s arrest, senior lay and professional leaders of Hadassah huddled here to determine the extent of their loss and to figure out how they ever invested with him in the first place.
The amount lost was staggering — $90 million. There was no way to sugar coat it. The group had already delayed release of the figure by a couple of days.
A big concern was how Hadassah’s 300,000 members would react. Most of them are senior citizens who, it was believed, would be less than sympathetic to the way their money was handled.
“You don’t want your donors to say you were stupid,” said those at the meeting, according to someone who was briefed on the discussion. “It doesn’t take a big excuse for donors to want to cop out. In bad times, people will find any reason not to give and now they can say we were stupid.”
But Hadassah’s investment professionals had repeatedly investigated Madoff’s fund over the years and always gave it a clean bill of health, those at the meeting were told.
Already, the organization had heard from donors who were unable to fulfill their pledges because of the economic downturn. Now, it was beginning to hear from those who had lost money in the Madoff scandal.
“Senior citizens are at the greatest risk of not being able to give because many of them give at the end of the year and they have only a set amount of money,” it was pointed out at the meeting.
And the Hadassah professional staff also warned about civil suits from those who had invested with Madoff but who had not withdrawn any of their profits.
“Those who took some of their money out over the years might now be liable for that money — we could become a target,” said the person briefed on the meeting.
That same concern is being voiced this week by other organizations and individuals. One woman who had made money with Madoff and had withdrawn it all after feeling uncomfortable with the investment, asked not to be named in this article for fear of being sued.
Several Jewish organizations said they became involved with Madoff through their donors. Hadassah, for instance, received a $7 million gift in 1988 from an overseas donor who said he had the money invested with Madoff and wished it to remain invested with Madoff. Over the years, Hadassah is believed to have added another $20 million while the investment grew and grew — in some years earning nearly 25 percent interest.
Hadassah officials would not comment on the unfolding Madoff scandal. A spokesman said, “No one’s talking.”
The American Technion Society, which raises money to support the Technion-Israel Institute of Technology, one of Israel’s premiere science and technology universities, said a donor had suggested Madoff’s fund, according to Kevin Hattori, the society’s spokesman.
“The donor knew Madoff and knew that he had strong, consistent returns,” he said. “We have an investment committee and they followed established procedures to vet the firm and found nothing amiss.”
The society invested $29 million with Madoff in 1995 and the money grew to $72 million before Madoff’s alleged Ponzi scheme abruptly ended with the loss of a reported $50 billion.
The society’s endowment fund is now at $202 million.
“Obviously this is a significant loss for any organization,” Hattori said, stressing that the organization’s actual loss was confined to its initial investment of $29 million.
“As serious as it is, it is not going to prevent us from conducting our activities for the Technion and honoring all our commitments,” he said. “We’re going to analyze and deal with all the implications of what has taken place. That could include changes in our investment policies and procedures. We intend to work carefully on this going forward.”
The JCC Association, the umbrella group for Jewish community centers in the U.S., reported that its loss was between $6 million and $7 million. A spokeswoman said she did not know what percentage of the group’s investments this represented.
There were reports last week that country clubs all across Long Island were receiving calls from members who had lost money with Madoff and now had to cancel their memberships.
There were also reports of Madoff’s investors having to put up their homes for sale.
Jay Feinberg, founder of the Gift of Life Bone Marrow Foundation, said several of his major donors had been Madoff investors and now could not fulfill their campaign pledges. As a result, he said, his budget is now short $1.8 million and he will not be able to recruit potential bone marrow donors next year.
“The money from fundraising goes to testing recruits to grow the size of our registry, and most of this testing is done through [participants in] Hillel and Birthright Israel,” he said.
“We have had people contact us to express concern about what has happened and to express interest in wanting to help, but nothing yet has happened,” Feinberg said. “What we really want people to do is to give what they can no matter how large or how small. And we’re interested in people introducing us to philanthropic organizations and individuals who can help us.”
For every $54,000 in donations, 1,000 potential donors can be tested and Feinberg said that translates into one transplant. He stressed that the inability to recruit new potential donors would not force the foundation to close. It would still work on managing the 130,000 donors currently in its registry. This year, he said, the group has been responsible for 100 transplants. Since it started in 1991, there have been nearly 2,000 transplants.
And in Boca Raton, Fla., in what is clearly a sign of the times, a woman was returning to the jewelry store from which she had bought a $65,000 diamond ring just a few weeks earlier. After she left, the jewelry store owner told another customer in the store that the woman had been a Madoff investor.
“She told the store owner that she had come to return it and asked him to buy it back from her,” said the customer in the store. “I don’t know what he gave her for it, but after she left he offered to sell it to me for $45,000.”