The losers in the Bernie Madoff scandal rarely have clean hands. They were knowing participants in a scheme that was entirely imprudent and in more jeopardy than a virgin at a jailhouse rodeo.
The Elie Wiesel Foundation had $9 million in assets (2007 990 filing, 2006 filing). A very small amount as charities go – check out the Wiesenthal Center’s filings for some real ducats. You simply cannot hand $9 million in charitable funds to anyone, not even King Midas himself, and say, hey, daytrade the living bejeezus out of this thing, even though any financial advisor from Suze Orman to Louis Rukeyser (RIP) would tell you that you were a few fries short of a happy meal. These charities should have read the filings and asked, hey, Bernie, is there a safer way than daytrading like a poker shark to make my foundation money? And they knew that Bernie’s answer would have been – hey, if you do not like the type of activity, take your money elsewhere. So they accepted the risk and they should not get to complain when having to take a ration of crap.
Now look at pages 24-25 of the return, where the trading records are. The foundation turned its portfolio almost 10 times in one year – that would be like me taking my $100,000 401k and making $1 million worth of trades – ridiculously speculative, and that is with my money. This is the charity’s money, and this is pattern daytrading, and it is reckless. RSM McGladrey, who did the return, should have covered its tuchas with a letter to the foundation warning them of the amount of daytrading. It is also quite bizarre that trades all occur on the same day – this is not due to options expiration each month (charities cannot trade options and this is a charitable account and there would be no options trading). I think someone went back and did a bit of revisionism in creating trading dates to hit a certain profit/loss target. It is easier to do this on one day every quarter.
I wonder if you paired up the dates of purchase and sale if the numbers even match up – although madoff was probably clever enough to conform that to reality.
I am telling you, this sort of thing is too big for the normal media to cover. Its tentacles go to the professionals involved, the charities who enjoyed the cream while it was rising, and those greedy people who got their money out early and who are now crying about lost funds – baloney – they put in $5 million and probably got cash returns sent to them for about half that over the years. Net, they lost 50% – same as the Dow and S&P did recently, they just have a sexy story to tell and their story is going to land people in prison,some of whom are old enough that they will die there.