Hadassah, the Women’s Zionist Organization of America, may have lost $90 million invested with Bernard Madoff, but over the last 20 years it withdrew $130 million from that account, The Jewish Week has learned.
“We had no idea how much we had pulled out until a few days ago,” said a source close to the organization.
The source said Hadassah “went back through its books, year by year, to check all the records” to learn how much was withdrawn after receiving many calls from members upset with the $90 million loss.
“There are a lot of angry people out there,” the source said. “When we checked, we found that we did quite well — $130 million was withdrawn” since 1987.
Nancy Falchuk, the president of
Hadassah, confirmed the $130 million figure in a phone interview late Wednesday morning as the paper was going to press. She stressed that the organization was still in need of money because over the past five years it has sent $91 million in cash each year to Hadassah’s projects in Israel. She said the organization is obligated to send another $91 million this year to pay, among other things, salaries at Hadassah Hospital in Jerusalem.
“Yes, we have money in the bank but a lot of it is restricted,” Falchuk said, adding that Hadassah is now erecting a new tower at Hadassah Hospital and is still housing children in its youth aliyah village in Israel. “We’re looking for an opportunity to recover [from the Madoff and stock market losses]. … Three hundred thousand women own this organization and we will come through this.”
Prior to the conversation with Falchuk, the Jewish Week source said Hadassah’s treasurer, Marci Natan, has acknowledged to donors that Hadassah withdrew $130 million over the years.
“They are not publishing it, but they are telling donors who call,” said the source. “The money went for all of our projects — a college and two hospital campuses and for the support of a number of youth aliyah programs.”
One of the callers to Natan, Stan Epstein of Santa Monica, Calif., expressed surprise when she told him of the $130 million. And he said she told him that Hadassah made another $50 million with Madoff that the organization reinvested with him.
“I object to the fact that they have never told the public that they made $180 million with Madoff while they are appealing to the public for money as though they lost $90 million,” Epstein said.
Madoff is accused of operating a Ponzi scheme that bilked investors out of $50 billion. Jewish philanthropies and institutions were particularly hard hit. The Elie Wiesel Foundation for Humanity reportedly lost about $15 million. Yeshiva University lost more than $100 million, and the Modern Orthodox day schools Ramaz and SAR, as well as Maimonides in Boston, also lost millions.
Avraham Infeld, president of the Chais Family Foundation, said the foundation withdrew $12.5 million a year in each of the last two years from the money it had invested with Madoff. He said he did not know how much was withdrawn in prior years, but all of its assets were invested with Madoff and the organization had distributed about $12 million annually to Jewish causes in Israel, the former Soviet Union and Eastern Europe.
The foundation closed last month after Madoff admitted that his $50 billion hedge fund was a fraud. The organization said it lost $178 million.
U.S. Bankruptcy Judge Burton Lifland ruled this week that the trustee overseeing the liquidation of Madoff’s investment fund could subpoena witnesses and gather documents to investigate the flow of money from Bernard L. Madoff Investment Securities. Meanwhile, he allowed Madoff to remain free on $10 million bail, provided he remains in his Park Avenue apartment.
Hadassah became involved with Madoff in 1988 when an overseas donor in France contributed $7 million and stipulated that the money be invested with Madoff, according to Falchuck, in her letter to The Jewish Week.
According to the source, the rate of return on that money and encouragement by Madoff to invest more led Hadassah to invest another $33 million.
“He asked for more money — he implied he needed more,” the source said of Madoff.
Falchuck wrote that Hadassah made no new investments after 1997.
Epstein, a commercial real estate transaction attorney who in the last 10 years has been a plaintiff’s class-action attorney, said it is his understanding from conversations with several bankruptcies lawyers that Hadassah may be forced by New York State law to return millions of dollars. (He said he is not representing anyone involved in the Madoff scandal.) He said the fact that Hadassah is a charitable organization does not exempt it from the law.
Asked how much Hadassah might be forced by the bankruptcy judge to give up, Epstein said it would be based upon the amount of money other investors withdrew from their Madoff account in the last six years.
He speculated that Hadassah might have to return as much as $42 million.
The source said Hadassah is clearly worried about the law but hopes that it would be exempt because it is a charitable, not-for-profit organization.
The Madoff scandal comes at a time when Hadassah’s other investments have taken a hit. A year ago, the organization had an investment portfolio that totaled about $750 million. Today, it totals about $450 million, according to the source.
As a result of that loss and a restructuring effort that has been several years in the planning, Hadassah was expected to announce significant staff layoffs this week. [On Wednesday afternoon, after this story went to press, the group said it was laying off 80 employees, a quarter of its workforce.] Falchuk confirmed that there would be staff cuts and said that this was part of a two-year restructuring plan. “The market accelerated it and this is an effort to try to do business better,” she said.