December 16, 2008
Charities Suffer Losses in Ponzi Scheme
Yesterday, we made reference to Bernard Madoff and his giant Ponzi scheme. Referring to the effects the scheme's collapse will most likely have on charities, we noted:
Many of [Madoff's] clients are also a main funding source for charities, acting as the key donors who provide large checks necessary to keep them running. Officials in the charity world said the effects would be felt for years, as donors curtail both current contributions and future commitments. "In the Jewish world, we've just taken a major, central player, and introduced fear and uncertainty all over the system. It's like finding out your brother is a murderer" said Gary Tobin, president of the Institute for Jewish and Community Research, which studies Jewish philanthropy. Dr. Tobin estimated the total amount of such giving in the U.S. to be as much as $5 billion annually. . . Two philanthropic trends over recent years made the fund-raising world -- both Jewish and non-Jewish -- particularly vulnerable to an investment scam. One is the rise in charitable endowments, as institutions moved away from the practice of distributing all the money they raised each year to beneficiaries and began to invest a portion of it. The second is the huge rise in family foundations, which typically have smaller advisory boards than larger charities and therefore may not get the same level of investing advice, philanthropic experts say.
The outlook for charities took a turn for the worse today as we discoverd that while some charities are bracing for reduced support from individuals and foundations that have seen their wealth wiped out or greatly reduced by Madoff's fraudulent acts, others -- like Yeshiva University and MorseLife Foundation, a nonprofit center for the elderly in West Palm Beach, Florida -- are actually counting their losses because they were themselves direct investors in Madoff's funds. In an open letter released on Monday, MorseLife acknowledged that it had invested with Madoff. According to a report in yesterday's Chronicle of Philantrophy, the MorseLife Foundation’s tax form for the year ending in May 2007 shows $59.1-million in assets, three-quarters of which were invested in “managed equity funds.” According to The Chronicle, a MorseLife spokesman has declined to say what percentage of the foundation’s assets were invested with Madoff. The Chronicle further reveals that nationwide, at least four foundations, including the JEHT Foundation and Arthur I. and Sydelle F. Meyer Charitable Foundation, in West Palm Beach, Florida, are closing as a result of being almost entirely invested in Madoff funds.
Only time will tell the true effects of the collapse of Madoff's Ponzi scheme.
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