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.
Long Island Jewish Medical Center in New Hyde Park. Investors, including the medical center, had more than $24 billion in funds overseen by Bernard Madoff.
Photo: AP
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.
Following the closure of the Massachusetts-based Robert I. Lappin Charitable Foundation and the dramatic overnight disappearance of the much larger Chais Family Foundation, these reports do not bode well for a community that has yet to catch its breath amid an avalanche of bad news.
"It's a major massive shock to the philanthropic system. You have organizations that may not be viable entities without the resources that would have come either directly from endowments or from significant donors," said Sandy Cardin, president of the Charles and Lynn Schusterman Family Foundation, which, he said, did not take a hit from the collapse.
Among the major losses announced over the weekend, the Los Angeles Jewish Community Fund reported that its $25.5m. investment in Madoff's firm had disappeared, the Carl and Ruth Shapiro Family Foundation may have lost as much as $145m., while the Technion-Israel Institute of Technology, had some $6m. in funds invested with Madoff's firm.
Contradicting rumors that the UJA Federation of New York had taken a significant hit as well, spokeswoman Jane Rubinstein said the federation had "no exposure" to Madoff directly and did not believe that any of its funds had been reinvested with Madoff through third-party money managers.
"This is a tidal wave, a tsunami," said a veteran advisor to Jewish nonprofits, who spoke on condition of anonymity. "You can live with a downturn in the economy, because there will be an upturn. But now we're talking about foundations that have been wiped out completely, money that's not recoverable."
Though observers agree it is still too early to ascertain the full extent of the damage, some estimates expect a 20 percent reduction in funding for US Jewish federations. The cutbacks are expected to hit educational and Israel programs first as the federations work to keep their local charity efforts going.
"People who are starving are going to have to continue to be fed," Avraham Infeld, president of the collapsed Chais Family Foundation, told the Post on Monday. "That means every other kind of Jewish expenditure is going to have to move aside in order to allow welfare to take place for the aged and the poor."
According to Infeld, "this is probably the hardest financial hit ever for the Jewish community. There will be major mergers, cutbacks, and once-and-for-all removal of duplications in the organizations. Why do I need both the Jewish Agency and the Joint [Distribution Committee] today?"
The loss of billions of dollars to Jewish life already hit hard by a worsening recession will hurt everyone, said Infeld.
"I don't think there will be a single institution of Jewish life that will go unaffected. Nobody can sit by the side and say 'this will pass.' It's not going to pass."
The Madoff crisis marked an unprecedented loss to the "Jewish economy" - the networks of Jewish institutions, donors and charities that include universities, schools, hospitals and community centers, agreed Jonathan Sarna, a scholar of American Jewish history at Brandeis University.
"I know of nothing [in history] on this scale," he said.
Sarna predicted that the wholesale destruction of fortunes and endowments would prove to be a turning point in American Jewish institutional life, which over the past 20 years has moved from a model of community funding - collecting small donations from a broad swath of donors - to focusing on a handful of "cowboy" mega-donors who launched hugely successful programs like birthright Israel outside of the traditional federation system.
"The reduction of billions - not millions but billions - in the Jewish economy means that there is just not going to be enough money to sustain all the institutions and initiatives that have been created," Sarna told the Post.
