Just hours after the arrest last Thursday of legendary financier Bernard Madoff, the Gift of Life Bone Marrow Foundation in Boca Raton, Fla., began receiving calls from major donors who had lost huge sums in Madoff’s $50 billion fraud scheme.
“They said they now didn’t have the same resources they had had before and were cutting back,” said Jay Feinberg, the group’s founder. “They said they could not support us in the near future, and that if things got better they hoped to get involved again … They said they were simply overwhelmed by what had happened.”
There were several such calls, all from donors who had made pledges of significant sums of money.
When the calls stopped coming, Feinberg said he found that his 2009 budget was now $1.8 million short. That represents about one-third of the organization’s budget. Unless he can raise that money elsewhere, Feinberg said it would mean that hundreds of potential bone marrow donors would not be tested.
The Madoff scam was even more devastating for the California-based Chais Family Foundation. It closed its doors Sunday after revealing that all of its money had been invested with Madoff and that its millions were now all gone. It had given away $12.5 million annually to Jewish causes.
As a result, a program run by Hillel for college students in the former Soviet Union will have to raise $600,000 it expected to receive from Chais.
“It represented about 25 percent of the income for that program,” said Hillel spokesman Jeff Rubin.
“We’re going to have to make up the difference … but we can operate without it.”
Hillel also runs nine programs in Israel to which Chais was to have contributed $100,000. Rubin said Hillel will have to make up that loss as well.
He said Hillel itself had money invested with a fund that in turn had invested with Madoff.
“We found out after the fact,” Rubin said, adding that Hillel lost about $20,000. “I assume we will try to recover that money from the fund if we have a legal recourse to pursue it.”
Some major Jewish organizations have yet to announce their exposure to Madoff’s scam and how much they lost. It is believed to have cost the Jewish philanthropic community between $500 million and $1 billion.
“Most donors aren’t conscious enough to call all their charities and let them know they will not be a supporter anymore,” said Mark Charendoff, president of the Jewish Funders Network, which is dedicated to advancing the quality and growth of Jewish philanthropy.
“A lot of charities won’t know until 2009 that some of those who made pledges for three years are not going to be paying the money,” he said. “Meanwhile, the group has budgeted for the money and hired staff, and now they are not going to get it.”
Jeffrey Solomon, president of the Andrea and Charles Bronfman Philanthropies here, said that what is “happening now is like the Jewish telegram that reads, ‘Start worrying, details to follow.’
He said Madoff must have records of those who invested with him, but “that might not emerge for weeks.”
Solomon added that his organization did not invest with Madoff. He said his investment adviser had checked out Madoff’s funds and “he didn’t feel this was the kind of investment we would be comfortable with. He has a theory: When something looks too good to be true, it usually is.”
And as if to rub salt into an open wound, one private investor who said he had lost a “significant amount of money” with Madoff, said he received an eight-page statement from Madoff’s company this week detailing his portfolio and listing “transaction after transaction, the amount of the sales and the symbols.”
“It shows a nice profit for the month,” he said with a guffaw. “It’s impossible to believe because of the details and complexity of these statements that they could have been prepared without the help of tens of people.”
Madoff told authorities that he had acted alone.
Hadassah, the women’s Zionist organization, is believed to have lost a substantial amount of money. But a secretary to its president, Nancy Falchuk, said she would not be available until the end of the week.
A spokesman for the group had no immediate response when asked how much the organization had invested with Madoff. It is known that at one time Hadassah had more than $100 million invested with him, although that amount is said to have been significantly reduced over the years.
The American Jewish Congress said it had two separate endowment funds with Madoff but that the organization did not know how much was lost because it was unclear how much if any of that money had been invested in a fund that Madoff may have legitimately operated.
“We’re still sorting it out,” said Marc Stern, the group’s acting co-executive director. “We have not yet heard from the people going through Madoff’s accounts. All I know is that we took a loss that we would rather have not taken. It’s not trivial, but it’s not fatal. A lot of the funds were dedicated [for programs] in Israel. … Losing money has an impact on what you can do.”
Stern stressed that the organization’s operating funds were safely invested elsewhere.
The JCC Association said it experienced some loss of its endowment funds but that it was unable to say how much. The money would have been used for training and research studies but not for individual YM-YWHAs or Jewish Community Centers, which raise their own funds.
UJA-Federation in New York had no money invested with Madoff, but the Jewish Federation of Greater Los Angeles reported losing $6.4 million or about 11 percent of its endowment, and the Jewish Federation of Greater Washington said it lost more than $10 million or less than 6 percent of its total endowment.
The Robert I. Lappin Charitable Foundation, which had the bulk of its money invested with Madoff, lost it all and closed. It had spent money working to reverse the trend of assimilation and intermarriage.
The Elie Wiesel Foundation for Humanity also reportedly lost money, but a spokesman did not provide a figure of how much. The New York Times put the figure at $37 million. The Jewish Community Foundation of Los Angeles reported losing $25 million of its $238 million endowment.
Jewish day schools, including the Ramaz School here, the Maimonides School in Boston and SAR in Riverdale also reportedly lost money. Ramaz lost $6 million (Congregation Kehilath Jeshurun, which is connected to the school, lost another $3.5 million), and SAR lost $1.2 million, according to the Times.
“Clearly the immediate impact is devastating if the numbers people are talking about are accurate,” said Sandy Cardin, president of the Oklahoma-based Charles and Lynn Schusterman Family Foundation. “It’s devastating for lots of organizations and philanthropists.”
He said his organization lost no money and “will do what we can to help organizations that are adversely impacted” by the Madoff scandal.
Cardin said his foundation plans to maintain its level of funding and “stay in touch with organizations we have helped in the past to determine if there is something we need to do to help them” once the impact of the swindle is fully realized.
One investment adviser said most advisers suggest that people diversify and not put too much of their money in one fund. For those who lost a significant amount of money, he said, the question is why that advice was not heeded.
“It was always considered a high risk,” said one person familiar with one organization’s investments with Madoff. “But eventually you look at it not as a risk – you got suckered in because the returns were better than the market and if you wanted your money, you could always get out.”
“We had many chief financial officers and all did due diligence” regarding Madoff’s investments, said the person, who spoke on condition of anonymity because he was not authorized to speak. “They went to his office to see how he operated. They didn’t invest blindly. They got returns that were high and they got reports listing all of their activity. He said he sold massive amounts every month and people bought into it … These were not stupid people.”
One private investor here said he was still in disbelief that all of his money was gone after he had entrusted it to a man who “over the years was a pillar of the community.”
“The whole story is so bizarre that it surpasses understanding,” he said. “I have known him for 20 years. Our relationship was close enough that when he was raising money for a cause because a family member was ill, I made a contribution and he hugged and kissed me. Knowing that relationship, it is impossible he could do this to me and all the other organizations and people he did it to. … How a human being could turn that way on fellow human beings and charities and organizations that he respected and admired, I can’t fathom.”