Boston’s Maimonides School Devastated By Bernie Madoff

The Boston Globe reported Dec. 17:

The Maimonides School, the oldest and largest Jewish day school in Greater Boston, is warning parents that it has lost a steady source of income because a bequest that benefited the school lost 60 percent of its value in the fraud-driven collapse of Bernard L. Madoff Investment Securities.

The school’s board chairman, Timberland Co. president Jeffrey Swartz, on Monday night e-mailed the school’s parents to tell them of the loss. The school did not have money directly invested with Madoff, but a trust whose sole beneficiary is the school did. Swartz said in the e-mail that the Saval Trust had lost about $3 million with Madoff, which he said was about 60 percent of the trust’s value, and he said trust officials had thus far been unable to recover the balance of its funds, so the loss could be greater. He said income from the trust had in the past generated $8 million for the school, "funds that have helped pay our faculty and keep our school solvent."

"The consequence of this fraud is deeply felt," Swartz wrote. "As I reported to you, we have depended upon the annual earnings from the Saval Trust, as well as from the restricted and unrestricted funds we manage, to help the school operate its ‘business.’ I acknowledge with sadness that the sharp diminution of Saval Trust funds poses a real financial challenge for the school."

Swartz was traveling on business in Europe yesterday and said by BlackBerry he was not available for comment. School officials did not return calls and e-mails seeking comment.

Maimonides is the second local Jewish institution to report significant problems caused by the case of alleged fraud; last week, the Robert I. Lappin Charitable Foundation, which funded Jewish programs on the North Shore, closed its doors because its money had been invested through Madoff.

The school was founded in 1937 in Dorchester by Rabbi Joseph B. Soloveitchik, a revered figure in the Jewish community and a pioneer of modern orthodoxy. Located in Brookline since 1962, the school now has about 600 students in kindergarten through 12th grade.

The school has had a variety of financial and management challenges in recent years, and its investments have been hurt along with the broader stock market. Swartz’s letter warns of several potential future challenges – an increased number of families requiring scholarship aid, lower enrollment, reduced giving, and diminished endowments.

Here’s the email that went out Dec. 16:

Dear Maimonides School alumni,

I thought you would be interested in the following letter from Jeffrey Swartz, e-mailed late yesterday to parents, teachers and directors:

—– Original Message —–

I am writing to inform you that the chillul Hashem that is unfolding in New York, pertaining to investments handled by allegedly unscrupulous money managers, has had an impact of consequence upon our School.

In order to make the circumstances clear to you, I need to briefly explain to you the composition of our School’s endowment.

Maimonides has been blessed over the 70 years of its existence by incredibly generous support from families and individuals committed to perpetuating the School’s mesorah. From the largest investor to the smallest, my sense is that every single soul who has brought his or her terumah to Maimonides School has done so with a heart full of kindness, and with a determination to ensure that the School be adequately funded and capitalized in order to fulfill its precious mission. For all who have invested, it can be said that they fulfilled the pasuk in parashat Vayakhel, where Moshe relates to Bnei Yisrael the obligation to participate in the holy work of constructing the Mishkan:

K’chu me’itchem trumah l’Hashem, kol n’div libo y’vi’ehu et trumat Hashem, zahav, v’kesef, u’nchoshet. Take from yourselves a portion for Hashem, everyone whose heart motivates him shall bring it, as the terumah for Hashem — gold, silver, copper. (Shmot 35: 5)

What those who invested annual or endowed funds in our School demanded of us was a strict accounting, both in managing the funds they entrusted to us and in how those funds are used to further the School’s mission. We read at the beginning of parashat Pekudei,

Eleh pikudei ha’mishkan, mishkan ha’edut, asher p’kad al pi Moshe… These are the reckonings (or accountings) of the Mishkan, the Mishkan of Testimony, which were reckoned at Moshe’s bidding. (Shmot 38:1)

Even though the resources deposited for the construction of the Mishkan were under the control of Moshe Rabbeinu, the Torah recounts that Moshe undertook a strict accounting of the kahal’s donations, in order to be accountable to it and to be transparently responsible to it. There is a magnificent Midrash relating that upon the first "accounting," Moshe could not account for a certain amount of the silver that had been deposited for him. Only a second count revealed the scrupulous honesty that characterized Moshe’s stewardship of communal assets.

All this Torah underscores how explicitly the question of scrupulous behavior with communal funds must be answered.

Our School has benefited from two kinds of endowment funds. One is made up of funds donated for specific, restricted purposes. A second kind is general, unrestricted funds donated for supporting the School’s mission. In both cases, the School is responsible for investing those endowed funds carefully, and managing those funds in a fashion that is consistent with best fiduciary practice, and best halachic practice.

For many years, the School has stewarded the endowed assets, restricted and unrestricted, invested in us. We have relied on talented and purposeful volunteers from our community to oversee investment practices. We have had "good" years and "less good" years, but those who have watched our endowment have had eyes like eagles and hearts of wisdom.

Just recently, we consolidated the management and oversight of restricted and unrestricted endowment under the aegis of a talented and professional Investment Committee. Co-chairs Lee Weiss and Scott Tobin are both professional investment managers. Other committee members include Sam Wald ’92, also a professional investment manager; Heshy Marcus, an insurance and investment professional; and former co-treasurers Lisa Rosenbaum and Harvey Gertel. All of these dedicated volunteers are also current or former Maimonides parents.

The Investment Committee reports to the Board of Directors. It has a written charter, and it manages its responsibilities ably within that charter. The committee recommended to the Board last year that Maimonides consolidate its restricted and unrestricted funds in the Jewish Community Endowment Pool (JCEP). This 10-year-old pro bono effort, operated in conjunction with Combined Jewish Philanthropies, provides a vehicle accessible to all non-profits and family foundations that are part of the Boston Jewish philanthropic scene. Today, the pool embraces some 40 Jewish agencies, day schools and congregations, including Beth Israel Deaconess Medical Center. The pool’s board of managers has oversight responsibility for approximately $400 million, and its five-year annualized return as of Oct. 31 was 6.8 percent.

As world economic circumstances have been in "meltdown" mode for the last several months, JCEP funds have continued to perform better than the "market." Still, Maimonides endowment funds invested at JCEP have eroded in value. The Investment Committee has kept the Board very much up to date, and we have been developing a thoughtful response to the difficult financial circumstances that are all around us.

Besides the restricted and unrestricted funds, Maimonides has been blessed by the generosity of Mr. Maurice Saval, z"l, an early and incredibly devoted supporter of Rabbi Joseph Soloveitchik, zt"l. Mr. Saval was neither a student nor a parent at the School. He was simply a Jew who believed in the vision that the Rav lived and depicted. Mr. Saval’s generosity during his lifetime was profound, and his generosity continued even after his passing in 1988. Much of his estate was consolidated into a charitable trust, the sole beneficiary of which is Maimonides School. This fund is managed not by the School but by independent trustees, first appointed under the terms of Mr. Saval’s will and then perpetuated by an independent governance structure.

Over time, thanks largely to the good management by the independent trustees, the principal grew even as the Saval Trust was dispensing large sums of its income to the School every single year to help grow the School and maintain our financial footing. We estimate that the Saval Trust has through the years contributed eight million dollars of annual operating funds to the School — funds that have helped pay our faculty and keep our School solvent.

On Thursday night last week, I learned with horror that a large sum of Saval Trust money had been entrusted to a New York-based money manager, who had in turn invested those funds with a second investment manager, who had just been arrested and charged with a large-scale, heinous fraud.

I immediately contacted the independent trustees of the Saval Trust to verify what I had learned, and to my profound sadness, just before Shabbat, I received confirmation that the massive fraud that has been perpetrated on a whole range of investors has touched the Saval Trust, and thus Maimonides School. I am pained to report to you that we estimate at this moment that approximately $3 million of the Saval Trust principal – approximately 60 percent — have been stolen through this fraud.

I say "estimate" and "approximately" only because the fraud investigation is just beginning; the various authorities that are involved are doing whatever such authorities do under circumstances as this. I know that the trustees of the Saval Trust are pursuing the redemption of their remaining investments held by the money manager that were not invested with the alleged perpetrator of the fraud. I also know that they have not yet been able to redeem the funds that they believe are still held by that money manager, and so we cannot say with certainty if the loss is limited to $3 million. Worst case, there could be an additional $2 million invested in New York. At this point, we simply cannot predict whether the Saval Trust will recover the funds still invested or any of the funds that had been entrusted to the alleged thief. As we know more, we will share the details with you.

Three further points; I ask for your patience in this long letter:

First, although the trustees of the Saval Trust are independent of the School’s governance, not answerable to the Board in any fashion, and so quite apart from scrutiny by us, I hasten to say that it is my perception that the men who have managed the funds always have acted in a fashion that reflects the trust invested in them by Mr. Saval. Every one of the trustees that I know is a man of rectitude and deep commitment to the School; all of us must know that they are heartbroken at the fraud which has been perpetrated. Obviously these trustees are counted in a large kahal of heartbroken investors, as the scale and volume of this fraud has caught sophisticated and caring investors all over the world in its evil net.

Second, the consequence of this fraud is deeply felt. As I reported to you, we have depended upon the annual earnings from the Saval Trust, as well as from the restricted and unrestricted funds we manage, to help the School operate its "business." I acknowledge with sadness that the sharp diminution of Saval Trust funds poses a real financial challenge for the School.

Third, and as a direct consequence, I write to inform you that the Board is involved in an urgent effort to understand the financial implications of all the "bad news" that is swirling about — a sharply depressed economy, which could mean for us:

1. Greater need for tuition assistance for our parent body;
2. Lower enrollments;
3. Reduced annual giving;
4. Less endowment income, as a consequence of battered financial markets, and now by massive fraud.

The need to act with real financial caution with respect to our budget is self-evident. I have been engaged with the principals and the Board for nearly six weeks now, examining what can be done to minimize our expenses and maximize donations to the School. We were motivated by the meltdown in the financial markets and the economy. The incremental horror of the fraud has forced the work we have been doing to become even more urgent.

I appeal to you simply and humbly: The need for financial support for the School is real. For everyone who believes in our School, who benefits from our School, who shares a passion for what our School does, the need is immediate for each soul to bring forward terumah, as your heart motivates you.

Our development team of volunteers is about to launch the Annual Campaign, and our budget for next School year absolutely will be influenced by how much money we can raise from each other. I ask you to please make whatever investment in our School you can. Every single dollar matters deeply right now.

I will report back to you, both on further developments regarding the Saval Trust, and in more detail about the financial challenges that the School faces and our plans to overcome those challenges.

Permit me to conclude not with optimism but with determination and conviction. If you look at this week’s haftarah, from the sefer of Amos, we see fury — the fury of Hashem in the prophecy of Amos. The poor have been defrauded and punishment must ensue. All those great and powerful who have abused the people’s trust and violated the principles of Torah are called to account, and a purging punishment is prophesied. The haftarah is sharp and hard and a source of fear for those who sin.

But I took up the sefer of Amos this morning, because I knew that this fearsome prophecy in the haftarah is but a part of the sefer. And I knew that the navi would conclude differently — that no matter how fearful the moments are in which we find ourselves, the navi’s navua would promise a different tomorrow, if we would open our hearts and take on the incredibly hard work of building a more just and more perfect tomorrow. Sure enough, in the ninth perek, Amos reveals to us Hashem’s promise that night becomes day.

Behold, days are coming, declares Hashem, and the plowman shall meet the reaper and the treader of grapes him who carries the seed, and the mountains shall drip wine and all the hills shall melt… (Amos 9:13).

Those of us who will not flinch in these difficult times to plow the ground and sow the seeds for the continued success and the vibrant future of Maimonides can look forward together to the vision Amos conveys. Mr. Saval planted for us; countless other individuals invested of themselves for this future and for the future that lies in front of us. I assure you that every member of the Board is dedicated to this vision; we will plow, we will tread, we will do what it takes to ensure the future of our School.

Unquestionably, this news creates new challenges for us, but we will use this opportunity to rededicate ourselves to strengthening the school’s financial foundation and ensuring that we deliver on our mission for our children and future generations.


Jeff Swartz
Chair, Board of Directors
Maimonides School

About Luke Ford

I've written five books (see My work has been covered in the New York Times, the Los Angeles Times, and on 60 Minutes. I teach Alexander Technique in Beverly Hills (
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