Tuesday, October 29, 2013
Jewish groups in new database admit losses of $150 million to Madoff
A new database of non-profit organizations’ tax disclosures sheds light on the scale of the damage inflicted on Jewish community organizations by the Madoff Ponzi scandal. It also paints a picture of organizations changing their regulations to prevent such disasters in the future.
Almost two dozen Jewish organizations are included on the list of over 1,000 nonprofit organizations which suffered a “significant diversion” of assets through unauthorized uses or unanticipated losses such as theft, investment fraud and embezzlement between 2008 and 2012. Half of the organizations’ losses can be attributed to the giant investment fraud scheme conducted by Bernard Madoff.
The entire database, compiled by the Washington Post, covers a veritable cross-section of American civil society, ranging from local parent-teacher organizations to the Teamsters, from Washington think tanks to small-town fire stations.
Investment funds linked to Madoff’s scheme, which targeted portfolios ranging in size from individual shareholders to massive organizations, are documented in the database as defrauding Jewish organizations of over $150 million. This database does not, however, include a number of the organizations also known to have been defrauded by Madoff, including the Women’s Zionist Organization of America and the Elie Wiesel Foundation. Total estimated losses as a result of what is believed to be the largest Ponzi scheme in US history are around $18 billion.
Yeshiva University, where Madoff sat on the Board of Directors and even served as treasurer, is prominent in the newly published list of declared losses. Madoff’s investment scam depleted almost $110 million from the New York institution and its affiliate organizations.
The database shows that the losses were at times catastrophic, but sporadic in their impact on YU affiliates. The Yeshiva Endowment Foundation alone lost some $2.6 million in 2008, and ended the year with negative revenue figures of over $1.3 million. They did better, relatively, than the Rabbi Isaac Elchanan Theological Seminary, which had over $10 million invested through Madoff, and finished the year with almost $2.4 million in negative revenue.
Following the scandal, Yeshiva University sprang into action to change its business practices. In December 2008, the university hired a law firm “to assist management in reviewing and addressing the then-current policies and procedures relating to corporate governance and oversight.” Following the review, the university toughened up its conflict-of-interest policy under which members of the Board of Trustees “may not be engaged in business with the University or the high schools” and established a waiver committee to review any exceptions.
University officials are no longer entitled to manage the money in the university’s investment pool or any individual investments, and the university engaged in a process of divestment from any investments managed by the university’s board of Trustees or Investment Committee. In addition, the Investment Committee was disbanded and reconstituted, university officials were required to fill elaborate conflict-of-interest forms and disclosures, and a professional chief investment officer was hired to oversee investments.
The database also gives some sense of the loss to local Jewish federations, the backbone of community life in dozens of states.
The Jewish Federation Council of Greater Los Angeles disclosed that in 2008, it lost approximately $6.4 million in investments due to the Madoff scandal. In February 2009, it filed a securities investment protection corporation customer claim for $500,000 related to the loss. The Jewish Community Fund of the Jewish Federation Council of Greater Los Angeles reported a more dire loss — $23.9 million, including $5.86 million of alleged earnings on investments that turned out to be fictitious. Reeling from the loss, the foundation appointed a special committee to investigate the fraud and to attempt to recover funds from Madoff’s liquidated assets.
The Los Angeles-based Lee and Herman Ostrow Family Foundation, which is active in Jewish giving, suffered losses as a result of the Jewish Community Foundation’s “common investment pool”, which invested its funds with Madoff. In that case – similar to Yeshiva University – the investment committee was reconstituted, and oversight was drastically increased.
The Jewish Federation of Greater St. Paul, which registered some $3.1 million in revenue in 2009, noted that the organization had $800,000 invested through Madoff, and added that “the organization does not expect to recover these funds.” The Jewish Community Centers Association of North America wrote succinctly that “the organization became aware during the year of one material diversion of the organization’s assets which related to its investments with Bernard L. Madoff Securities.”
The organization, which listed total 2008 revenue at $12.6 million, did not enumerate the scale of its losses. Organizations are only required to report such diversions if the total sum is above $250,000 or if they exceed 5% of an organization’s annual gross receipts or assets.
The American-Jewish Congress took a large hit, too. It recorded that approximately $2.2 of investiture “were stolen by Mr. Madoff” and that some $16 million in trust funds administered by AJC officers and employees were “also taken by Mr. Madoff.” The AJC’s total revenue that year was slightly over $1.3 million – significantly less than the amount pilfered in the Ponzi scheme.
ELEM Youth in Distress also recorded losses in 2008, but its files could not be accessed for further details. In other interviews, Zion Gabbai, Elem’s Israel director, said that the organization which cares for highly at-risk Jewish and Arab youth had invested some $850,000 with Madoff as a “safety net”.
The Etzion Foundation said in its disclosure that it had not known that its investment in Ascot Partners LP had been invested in Madoff Securities. The Teaneck-based organization which funds Orthodox educational initiatives in Israel and North America, did not disclose the amount lost for the organization, which had over $2 million in revenue in 2008.
The American Friends of the Israel Philharmonic were also hit by the Madoff scandal, writing tersely on the declaration that “as an investor with Bernard L. Madoff Investment Securities, LLC, AFIPO’s account no longer exists.” The America-Israel Cultural Foundation did not mention Madoff by name at all, but just noted in 2008 that “the custodian of the investment pool did not invest the funds and stole the remaining monies under his custody.”
The new database shows how ripples of the Madoff effect spread outside of the framework of Jewish community organizations. The Washington Institute for Near East Policy also took a hit on an investment with Tremont Group Holdings that was a feeder fund to Madoff Securities. The Washington think tank, which recorded slightly over $6 million in revenue in 2008, noted that its market value loss was almost $1.2 million and the principal loss was $250,000. In the shadow of the loss, the Washington Institute noted that in the next year the Board of Directors adopted “a new investment policy with enhanced due diligence standards and procedures.”
Not all the losses documented in the database, however, were from Madoff. The Conference on Jewish Material Claims Against Germany reported in 2010 losses estimated at $42 million after swindlers created thousands of fake identities of Holocaust survivors based on Russian-speaking elderly people who received kickbacks. The organization first reported the fraud to the FBI in 2009, and in 2010, 11 employees and several other individuals were indicted on fraud and embezzlement charges. Estimates of losses now are closer to $60 million.
The New York-based Touro College divulged in its forms that in 2010 “a former construction manager pled guilty to wire fraud for diverting Touro College assets. The perpetrator, with the aid of an unscrupulous contractor, utilized a sophisticated kickback scheme.” The disclosure forms emphasize that the “college aided in the investigation of the matter” but did not reveal the sums purloined.
Less-nationally prominent organizations were not immune from major fraud either. The Jewish Community Center of Duchess County (New York) recorded in 2010 that “it was discovered after the fiscal year end that the bookkeeper at the time was involved in an embezzlement scheme and had stolen company assets” and in 2010 the Lubavitch Center of Essex County’s director discovered that former employee Susan Shack had been embezzling money from the center. Shack was obligated by the court to return $220,000, although the organizations believes that the amounts embezzled were higher.
Philadelphia-based Jewish Heritage Programs appeared on the list as well, but no documentation of embezzlement could be seen for 2009, the year cited by the Washington Post. In its 2010 forms, the organization registered as Advancing Women Professionals and the Jewish Community Inc. recorded that approximately $62,000 – over 10% of its annual revenue – was diverted during an 21-month period by an independent contractor. The next year, the organization reported that the individual returned $70,000 to the organization to cover the loss and the related legal fees.
Another organization, Chessed Rivka – which, according to the Washington Post, is headquartered in Lakewood, CO, could not be found, and its documents could not be accessed
In at least two cases, the losses were incurred in Israel, not in the United States.The American-registered “Israel Tennis Center” organization recorded that in 2008, “a material diversion of the organization’s assets occurred as it pertains to the leasing agreements for both the Ramat Hasharon Center and the Sajor Center” and in 2009, the American Friends of the Tel Aviv Museum of Art reported that “certain works of art were stolen and destroyed by fire during the current year.”
It is possible that losses at Jewish charitable organizations may be even higher. The question that formed the basis of the database is only asked of larger non-profit groups, while smaller organizations and private foundations fill out different – or even no – paperwork documenting such losses.
http://www.timesofisrael.com/jewish-groups-in-new-database-admit-losses-of-150-million-to-madoff/
Almost two dozen Jewish organizations are included on the list of over 1,000 nonprofit organizations which suffered a “significant diversion” of assets through unauthorized uses or unanticipated losses such as theft, investment fraud and embezzlement between 2008 and 2012. Half of the organizations’ losses can be attributed to the giant investment fraud scheme conducted by Bernard Madoff.
The entire database, compiled by the Washington Post, covers a veritable cross-section of American civil society, ranging from local parent-teacher organizations to the Teamsters, from Washington think tanks to small-town fire stations.
Investment funds linked to Madoff’s scheme, which targeted portfolios ranging in size from individual shareholders to massive organizations, are documented in the database as defrauding Jewish organizations of over $150 million. This database does not, however, include a number of the organizations also known to have been defrauded by Madoff, including the Women’s Zionist Organization of America and the Elie Wiesel Foundation. Total estimated losses as a result of what is believed to be the largest Ponzi scheme in US history are around $18 billion.
Yeshiva University, where Madoff sat on the Board of Directors and even served as treasurer, is prominent in the newly published list of declared losses. Madoff’s investment scam depleted almost $110 million from the New York institution and its affiliate organizations.
The database shows that the losses were at times catastrophic, but sporadic in their impact on YU affiliates. The Yeshiva Endowment Foundation alone lost some $2.6 million in 2008, and ended the year with negative revenue figures of over $1.3 million. They did better, relatively, than the Rabbi Isaac Elchanan Theological Seminary, which had over $10 million invested through Madoff, and finished the year with almost $2.4 million in negative revenue.
Following the scandal, Yeshiva University sprang into action to change its business practices. In December 2008, the university hired a law firm “to assist management in reviewing and addressing the then-current policies and procedures relating to corporate governance and oversight.” Following the review, the university toughened up its conflict-of-interest policy under which members of the Board of Trustees “may not be engaged in business with the University or the high schools” and established a waiver committee to review any exceptions.
University officials are no longer entitled to manage the money in the university’s investment pool or any individual investments, and the university engaged in a process of divestment from any investments managed by the university’s board of Trustees or Investment Committee. In addition, the Investment Committee was disbanded and reconstituted, university officials were required to fill elaborate conflict-of-interest forms and disclosures, and a professional chief investment officer was hired to oversee investments.
The database also gives some sense of the loss to local Jewish federations, the backbone of community life in dozens of states.
The Jewish Federation Council of Greater Los Angeles disclosed that in 2008, it lost approximately $6.4 million in investments due to the Madoff scandal. In February 2009, it filed a securities investment protection corporation customer claim for $500,000 related to the loss. The Jewish Community Fund of the Jewish Federation Council of Greater Los Angeles reported a more dire loss — $23.9 million, including $5.86 million of alleged earnings on investments that turned out to be fictitious. Reeling from the loss, the foundation appointed a special committee to investigate the fraud and to attempt to recover funds from Madoff’s liquidated assets.
The Los Angeles-based Lee and Herman Ostrow Family Foundation, which is active in Jewish giving, suffered losses as a result of the Jewish Community Foundation’s “common investment pool”, which invested its funds with Madoff. In that case – similar to Yeshiva University – the investment committee was reconstituted, and oversight was drastically increased.
The Jewish Federation of Greater St. Paul, which registered some $3.1 million in revenue in 2009, noted that the organization had $800,000 invested through Madoff, and added that “the organization does not expect to recover these funds.” The Jewish Community Centers Association of North America wrote succinctly that “the organization became aware during the year of one material diversion of the organization’s assets which related to its investments with Bernard L. Madoff Securities.”
The organization, which listed total 2008 revenue at $12.6 million, did not enumerate the scale of its losses. Organizations are only required to report such diversions if the total sum is above $250,000 or if they exceed 5% of an organization’s annual gross receipts or assets.
The American-Jewish Congress took a large hit, too. It recorded that approximately $2.2 of investiture “were stolen by Mr. Madoff” and that some $16 million in trust funds administered by AJC officers and employees were “also taken by Mr. Madoff.” The AJC’s total revenue that year was slightly over $1.3 million – significantly less than the amount pilfered in the Ponzi scheme.
ELEM Youth in Distress also recorded losses in 2008, but its files could not be accessed for further details. In other interviews, Zion Gabbai, Elem’s Israel director, said that the organization which cares for highly at-risk Jewish and Arab youth had invested some $850,000 with Madoff as a “safety net”.
The Etzion Foundation said in its disclosure that it had not known that its investment in Ascot Partners LP had been invested in Madoff Securities. The Teaneck-based organization which funds Orthodox educational initiatives in Israel and North America, did not disclose the amount lost for the organization, which had over $2 million in revenue in 2008.
The American Friends of the Israel Philharmonic were also hit by the Madoff scandal, writing tersely on the declaration that “as an investor with Bernard L. Madoff Investment Securities, LLC, AFIPO’s account no longer exists.” The America-Israel Cultural Foundation did not mention Madoff by name at all, but just noted in 2008 that “the custodian of the investment pool did not invest the funds and stole the remaining monies under his custody.”
The new database shows how ripples of the Madoff effect spread outside of the framework of Jewish community organizations. The Washington Institute for Near East Policy also took a hit on an investment with Tremont Group Holdings that was a feeder fund to Madoff Securities. The Washington think tank, which recorded slightly over $6 million in revenue in 2008, noted that its market value loss was almost $1.2 million and the principal loss was $250,000. In the shadow of the loss, the Washington Institute noted that in the next year the Board of Directors adopted “a new investment policy with enhanced due diligence standards and procedures.”
Not all the losses documented in the database, however, were from Madoff. The Conference on Jewish Material Claims Against Germany reported in 2010 losses estimated at $42 million after swindlers created thousands of fake identities of Holocaust survivors based on Russian-speaking elderly people who received kickbacks. The organization first reported the fraud to the FBI in 2009, and in 2010, 11 employees and several other individuals were indicted on fraud and embezzlement charges. Estimates of losses now are closer to $60 million.
The New York-based Touro College divulged in its forms that in 2010 “a former construction manager pled guilty to wire fraud for diverting Touro College assets. The perpetrator, with the aid of an unscrupulous contractor, utilized a sophisticated kickback scheme.” The disclosure forms emphasize that the “college aided in the investigation of the matter” but did not reveal the sums purloined.
Less-nationally prominent organizations were not immune from major fraud either. The Jewish Community Center of Duchess County (New York) recorded in 2010 that “it was discovered after the fiscal year end that the bookkeeper at the time was involved in an embezzlement scheme and had stolen company assets” and in 2010 the Lubavitch Center of Essex County’s director discovered that former employee Susan Shack had been embezzling money from the center. Shack was obligated by the court to return $220,000, although the organizations believes that the amounts embezzled were higher.
Philadelphia-based Jewish Heritage Programs appeared on the list as well, but no documentation of embezzlement could be seen for 2009, the year cited by the Washington Post. In its 2010 forms, the organization registered as Advancing Women Professionals and the Jewish Community Inc. recorded that approximately $62,000 – over 10% of its annual revenue – was diverted during an 21-month period by an independent contractor. The next year, the organization reported that the individual returned $70,000 to the organization to cover the loss and the related legal fees.
Another organization, Chessed Rivka – which, according to the Washington Post, is headquartered in Lakewood, CO, could not be found, and its documents could not be accessed
In at least two cases, the losses were incurred in Israel, not in the United States.The American-registered “Israel Tennis Center” organization recorded that in 2008, “a material diversion of the organization’s assets occurred as it pertains to the leasing agreements for both the Ramat Hasharon Center and the Sajor Center” and in 2009, the American Friends of the Tel Aviv Museum of Art reported that “certain works of art were stolen and destroyed by fire during the current year.”
It is possible that losses at Jewish charitable organizations may be even higher. The question that formed the basis of the database is only asked of larger non-profit groups, while smaller organizations and private foundations fill out different – or even no – paperwork documenting such losses.
http://www.timesofisrael.com/jewish-groups-in-new-database-admit-losses-of-150-million-to-madoff/
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