At least $600 million in Jewish charitable funds have been wiped out by the collapse of Bernard Madoff’s Wall Street investment firm, a partial review by The Jerusalem Post revealed Monday.
Yet much is still hidden about what may amount to the most spectacular financial disaster to hit Jewish life since the Great Depression, with unconfirmed losses totaling up to $1.5 billion.
Furthermore, the Post’s figures do not include billions of dollars lost to individual and family investors, many of whom were the primary donors to Jewish schools, synagogues and communal charities.
The Madoff scandal erupted last Thursday when the 70-year-old financier was arrested on a single count of securities fraud at his Park Avenue home after being turned in by his sons.
Prosecutors contend that Madoff, who is free on a $10 million bond, told employees of Bernard L. Madoff Investment Securities that he had lost as much as $50 billion in investor funds and reportedly described his operation as "a giant Ponzi scheme."
For the worldwide Jewish community, the fact that the man at the heart of what may be Wall Street’s worst-ever fraud was an active member of the community could be the worst news yet in a bad recession period. Not only could Madoff’s alleged dishonesty increase anti-Semitic feeling in a time of worldwide economic downturn, said many Jewish leaders, but his close involvement with the Jewish community has exposed vast amounts of Jewish communal assets to his scheme.
Most of the Jewish leaders reached by the Post on Monday said they did not yet know the extent of the damage to their own organizations because they were still checking with their major donors and reviewing their investment portfolios to determine their exposure to Madoff’s scheme.
Some organizations, however, already know they have been hit, with many of them hit hard. Reports are surfacing that Yeshiva University has lost far more than a reported estimate of $100m. from its endowment fund, though the university declined to respond to an explicit query about the rumor.
The American Jewish Congress also declined to respond to a query about reports that a majority of its endowment has been lost, a loss that would threaten the organization’s survival.
The more than 30 organizations and individuals around the world identified so far as victims of the alleged deception are a diverse lot. But the disclosures by Southland Jewish organizations suggest a so-called affinity scam, in which members of a perpetrator’s ethnic or religious group are targeted.
The losses at the charitable organizations came to light as they began notifying their boards of directors, donors and recipients.
"In a word, it’s a catastrophe — by far the biggest Jewish story of the year," said Rob Eshman, editor in chief of the Los Angeles-based Jewish Journal.
The Jewish Federation of Greater Los Angeles said it lost $6.4 million — about 11% of its endowment — as a result of Madoff’s alleged fraud.
"People here are very sad, they’re very shocked. They’re trying to understand what exactly did happen," said John R. Fishel, the federation’s president.
Los Angeles real estate financier Richard Ziman, a member of the group’s board, called Madoff’s alleged crimes astounding.
"There is no greater shanda than stealing from friends, family and those who gave him such trust and confidence," Ziman said, using a Yiddish term for disgrace. "It makes this country look as though we have allowed the unregulated world of investment to take control."
The organization, which says it funds humanitarian, social service and Jewish educational programs in Southern California, Israel and other parts of the world, didn’t have a direct relationship with Madoff. Rather, it invested its $60-million endowment through the Jewish Community Foundation of Los Angeles, a nonprofit asset manager for local charities and philanthropists.
"No one I know knew Madoff," Fishel said.
Stanley P. Gold, the chairman of the federation’s board, was in London on Monday and couldn’t be reached for comment. Gold is chief executive of Shamrock Holdings Inc., a privately owned Burbank investment company.
The federation’s loss represented more than a third of the $18-million Madoff-related loss disclosed by the Jewish Community Foundation. The investment was held in a common portfolio of endowments of a number of charities and synagogues. As a result of the bear market and the Madoff debacle, that portfolio’s value has dwindled from $280 million at the beginning of the year to about $205 million, the foundation said. It added that the assets it managed on behalf of individual donors were not invested with Madoff.