NEW YORK – Many of the investors allegedly swindled by Wall Street money manager Bernard Madoff are, like him, Jewish, and for many of them, contributing to Jewish causes is a crucial part of their culture. The effect of their losses on the Jewish philanthropic world is being seen as nothing less than catastrophic.
“It’s the biggest scandal in philanthropic life in, well, as long as anyone can remember,” said Gary Tobin, a leading expert on Jewish philanthropy. “We don’t know yet how big it is. There are foundations that have lost major assets, donors that have lost their ability to give, and organizations whose investments have disappeared.”
“You add to that the psychological fallout, and it’s just devastating,” said Tobin, president of the Institute for Jewish and Community Research.
Shock has rippled through the philanthropic community since news broke that the well-liked and respected Madoff, once chairman of the Nasdaq Stock Market, was at the center of a $50 billion scheme to defraud investors.
The names of organizations and individuals allegedly affected read like a Who’s Who of the rich and famous: A charity of director Steven Spielberg. A trust tied to real estate magnate and New York Daily News owner Mortimer Zuckerman. Spielberg’s Dreamworks partner Jeffrey Katzenberg and the foundation of Nobel laureate Elie Wiesel also reportedly were hit.
Countless family foundations up and down the East coast, the lifeblood of so many Jewish causes, have been devastated – among them the Shapiro Family Foundation in Boston, said to have lost $145 million.
Many don’t even know yet if they were affected.
“I don’t think we’ll know the scope of this for a year,” said Mark Charendoff, president of the Jewish Funders Network, an umbrella body of family foundations.
“There were people who woke up and said, ‘Thank God, I wasn’t involved,’” Charendoff
noted. “And then they find out that somehow they were, through a secondary fund.”
The loss to Jewish philanthropy as a whole has been estimated between $600 million and $1 billion.
“I consider that, if anything, a conservative estimate,” said Jonathan Sarna of Brandeis University, one of the nation’s leading authorities on American Jewish history. “It is catastrophic – there’s no other word. The Jewish community will look different when this is all over.”
For all its global implications, the scandal has shone a spotlight on a single country club in Palm Beach, Florida.
Madoff was a member of the exclusive Palm Beach Country Club, and he recruited many investors from its ranks. One of the interesting things about the club is that members are required to not only have money, but to make hefty annual contributions to charity, perhaps even hundreds of thousands of dollars.
“There is, in fact, such a requirement,” a member who lost money to Madoff confirmed to The Associated Press in a telephone interview. The member spoke on condition of anonymity because he wasn’t ready to speak publicly about his losses. “It’s an unusual requirement.”
To Sarna, the Brandeis professor, that rule speaks volumes about the importance of charity in Jewish circles.
“It’s a statement that you’re a responsible member of the Jewish community,” Sarna said. “It’s very much in the value system.”
To be betrayed by one of their own in the very act of giving has been all the more devastating to these investors, Sarna noted. “What they were doing was intrinsically good, and then they see all of that good rewarded by wickedness,” he said.
It’s not hard to see what attracted investors – and their money managers – to the 70-year-old Madoff. His reputation was stellar, and he seemed to be offering steady annual returns of some 10 percent to 13 percent.
But on top of that, the scandal points out a key aspect of how Jewish philanthropy works – through close social ties, and very much based on word of mouth, said Tobin, of the Institute for Jewish and Community Research.
“It’s small, tight-knit, and familial in nature,” Tobin said of the philanthropic world. “Giving is often a family activity.”
Experts estimate that about 5 percent of all money donated by American Jews – and 20 percent donated particularly to Jewish causes – goes to Israel, where hospitals, universities, synagogues and other nonprofit organizations are highly dependent on American philanthropy.
While these institutions had been suffering from the economic downturn well before the Madoff scandal broke, his arrest and the collapse of his investment firm has hastened the end for some.
One foundation that contributes to many causes in Israel, the Chais Family Foundation, has had to shut down due to its losses with Madoff.
“We are now informing all those wonderful projects that there will be no more funds available,” said its president, Avraham Infeld, in Israel. “We are also closing our offices and I have the very difficult task of informing our staff that we can no longer employ them.”
In New York, Yeshiva University issued a statement expressing shock, and saying that Madoff had resigned from all involvement with the university.
“Our lawyers and accountants are investigating all aspects of his relationship to Yeshiva University. We reserve our comments until we complete our investigation,” said Hedy Shulman, a spokeswoman.
What’s in the immediate future for Jewish philanthropy? Not all Jewish philanthropic causes have been affected. Many were free of Madoff’s involvement. And even those who were not, like the Shapiro Foundation, say they are moving forward.
“The Foundation will honor all of its existing commitments,” said a statement from 95-year-old Carl Shapiro that was emailed to The AP. “My family and I are firmly committed to the ideals and mission of this foundation and fully expect that it will continue to grow over time.”
But many organizations, even those not affected directly, will be putting charitable projects on hold, not knowing whether funds due from other sources will ever materialize.
“As my father would say, the Jewish people have survived greater challenges,” Charendoff said. “If we work together, we’ll be able to minimize the pain. If we don’t, then we’ll be feeling it for a very, very long time.”
Associated Press – December 16, 2008
AP National Writer Jocelyn Noveck reported from New York.
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