Surviving Madoff

On Tuesday came word that Bernard Madoff, accused of running the largest Ponzi scheme in history, would plead guilty to charges that would result in a life sentence.

That settles much, and settles nothing.

Still left unanswered are at least three questions: Where the $50 billion or so that he stole disappeared to; how many others, including his family members, were party to his crime; and how a Jewish community devastated by this heinous man can regroup and rebuild.

That last question occurred to me the other day as I sat in Café Tamar in Tel Aviv, across the table from a beautiful Israeli woman who alternated between tears, rage, and hope. 

Orit Naor directs the America-Israel Cultural Foundation in Israel. The foundation, charged with supporting artistic life in Israel, had invested its entire endowment, $14 million, with Bernard Madoff Securities.  It’s all gone.

A lot of major, high-profile charities, from Yeshiva University in New York to Hadassah in Israel to the Jewish Community Foundation in Los Angeles, lost money to Madoff. They will face some struggles and challenges going forward, but they will survive.

For smaller organizations like AICF, which operated under the radar of the larger Jewish community, the future is far from guaranteed, though their contribution to Jewish life may be no less critical. Talking with Naor, I got a sense of what it will take to survive Bernie Madoff.

“We’re 70 years old,” Naor said, “and we’re the best-kept secret.”

The AICF provides scholarships to young, promising Israeli artists, performers and institutions. Since the beginning of the Israeli state, every serious cultural institution has been connected through seed money and artistic support to the foundation: the Israel Philharmonic Orchestra, the Batsheva Dance Company, the Israel Museum, the Tel Aviv Museum.

For generations, the AICF has held intensely competitive auditions across the country, and rewarded the winners with the money critical to advance their artistic endeavors at home and abroad. The roster of those it has plucked from obscurity and funded is the pride of Israel — and the world: Pinchas Zukerman, Daniel Barenboim, Itzhak Perlman, Batsheva’s Ohad Naharin, Yefim Bronfman, Gil Shaham and recent Grammy-winner Hila Plitmann, among many others.

Naor speaks of AICF so passionately because she belongs on that list. She was a 13-year-old South American immigrant living in Beersheba when she played her flute before a panel of AICF judges. Their scholarship provided her with coaching, advice, prestige and $10,000 to travel abroad for international music competitions. Naor went on to a vibrant career as a professional flautist.

“The idea is to locate the best, those with the potential to become world-class professionals,” she said. “We create the next generation of Israeli performance artists, of cultural ambassadors to the world. Without AICF, I would have stayed in Beersheba. I would have been the best flautist in the Negev.”

Two years ago at a gala fundraiser in New York City, Pinchas Zukerman expressed much the same sentiment.

“I want everyone to know,” he told the crowd, “I wouldn’t be here without AICF.”

For much of its history, AICF was run by the virtuoso Isaac Stern and his wife, Vera. It was clubby and exclusive: Most of the money came through the Sterns’ rich and influential circle.

About 10 years ago, a donor put the foundation’s entire endowment with Madoff — a mistake, but certainly AICF was not alone in making it. For the last decade, the Madoff investment spun off enough interest so that — combined with about $1 million in annual contributions — the foundation was able to launch and support the careers of hundreds of Israeli artists and the institutions they depend upon, such as the Jerusalem Music Centre.

Then, on Dec. 11, Naor received a phone call from David Homan, AICF’s executive director in New York.  The money was all gone, Homan said.

“I felt like I had lost a member of my family,” Naor told me, her voice choking.

Some foundations and organizations have indeed closed down.  But Naor, Homan and AICF’s supporters couldn’t conceive of that.  Not only have generations of Israeli artists depended on AICF, but Israel itself has received incalculable benefit through its support for some of the finest artists and institutions in the world.

“Israel has a large stake in the culture we support,” Homan told me by phone, “as does the Jewish people.”

To survive, the organization first had to pare down. It reduced its overhead by 75 percent, laying off an associate director and a development director, among other measures. For the foreseeable future, it has had to cut back on some of its funding commitments. 

“Next year it will be not 700 scholarships but 100 to 200,” Naor said. “We need to rebuild.”

To rebuild, AICF is zeroing in on those things it does best, that aren’t replicated elsewhere in the Jewish world — for example, no other group provides the level of scholarships it does to promising Israeli artists. 

Finally, AICF realized it needs to do a better job getting its story out. In a post-Madoff world, clubby doesn’t work.  In fact, we’ve all learned that clubbiness was at the heart of Madoff’s evil yet masterful form of exploitation.

AICF’s three steps — reduce, focus, reach out — already have helped the foundation begin to bounce back.

Madoff or not, those steps also can be a wise model for any philanthropy to follow in these terrible economic times.

As for the man himself, Naor turns from tearful to tough.

“I can’t even think of the right punishment for him,” she told me. “The damage he did is more than financial. He ruined lives. I hope he stays in jail the rest of his life.”