Prominent Jewish foundations shut down due to Madoff Wall Street affair
Alleged $50b fraud has also left Madoff-invested charities in Israel and U.S. clinging to life.
An alleged $50 billion fraud by Wall Street financier Bernard Madoff has caused deep ripples in the Jewish philanthropic world, forcing the closure of two prominent U.S.-based charities and threatening the financial lifeline of a slew of other groups.
The Chais Family Foundation, a California-based charity group invested entirely with Madoff, was forced to shut down operations on Sunday after years of donating some $12.5 million annually to Jewish causes in Israel and Eastern Europe, the JTA announced.
"I can confirm that the Chais foundation has closed," the JTA quoted Chais President Avraham Infeld as saying on Sunday. "All of its funds were exposed with Mr. Madoff. We have made a decision regrettably and with much pain to close down the foundation."
The Robert I. Lappin Charitable Foundation, a Massachusetts-based group which financed trips for Jewish youth to Israel, was also forced to close on Friday because the money that supported its programs was invested with the former Nasdaq chairman.
Madoff, who allegedly told his employees he was running a "giant Ponzi scheme," was arrested Thursday in New York hours after the collapse of Bernard L. Madoff Investment Securities LLC, and released on a $10 million bond. United States authorities accuse him of running a phony investment business that lost at least $50 billion.
In addition to the closures of the two foundations, the scandal has also caused some other organizations invested with Madoff to call out for donations of their own to supplant their losses.
The Gift of Life Foundation, a Jewish bone marrow registry that relied heavily on Madoff as a benefactor, announced on its Web site Sunday that it would immediately need to raise $1.8 million to make up for recent losses, according to The Forward.
The huge alleged fraud - possibly the largest in history - has reached Israel, too. Among those invested in Madoff's funds and Ponzi scheme are an impressive list of Israeli insurance companies: Harel, Clal and the Phoenix.
Estimates of the insurance firms exposure are NIS 40 million for Harel, tens of millions of shekels for the Phoenix and approximately NIS 12 million for Clal.
The Technion also has lost money from its own exposure to Madoff and his scheme. It invested funds it raised from donations with Madoff and may have lost NIS 25 million.
Madoff, 70, was the former chairman of the Nasdaq, and treasurer of the board of trustees at Yeshiva University and chairman of the university's business school; he managed investment funds with over $17 billion in assets
Federal regulators reached a deal Friday to freeze the company assets and appoint a receiver to manage the firm's financial affairs. "The money needed to fund the programs of the Lappin Foundation is gone," the Massachusetts-based foundation said on its Web site, adding all staff had been let go. "It is with a heavy heart that I make this announcement," Robert I. Lappin, the foundation's trustee, said in a statement.
Jewish philanthropy insiders are worried that the ramifications of Madoff's financial demise may extend to the many organizations he supported and the wealthy people, many from the Jewish community, he advised, The Forward reported Friday.
The paper said Madoff, 70, was close to a number of prominent Jewish donors and made charitable donations to several Jewish organizations, including UJA-Federation of New York, the 92nd Street Y and the Gift of Life.
Madoff has resigned from Yeshiva University, where he served as the chairman of the Syms School of Business and treasurer of the board of trustees, the paper reported.
In addition, two private Swiss banks have acknowledged having investments in funds managed by Madoff. Reichmuth & Co says it has 385 million Swiss francs ($327 million) at risk, and Banque Benedict Hentsch Fairfield Partners SA says its exposure is 56 million Swiss francs ($47.5 million) of client assets.
Many well-off Jewish families said late last week they lost large sums they had invested with Madoff. Although some said there had long been questions about Madoff's business practices, it appears the high profits may have kept them from looking into it too deeply.
Madoff didn't tell clients how he got money for them, even when the stock market was tanking. But they relied on his personal reputation and that of his company, which was ranked one of the 25 most successful Wall Street firms. The steady profits, generally between 10 percent and 13 percent, attracted many European investors in addition to the wealthy American investors who entrusted him with their money.