Peter Madoff taken into custody by FBI


Peter Madoff, the younger brother of jailed Ponzi scheme operator Bernard Madoff, has been taken into custody by the FBI.

Peter Madoff, 66, surrendered himself Friday morning at his lawyer’s office in midtown Manhattan ahead of an expected guilty plea to criminal charges related to the Ponzi scheme, according to the Wall Street Journal.

He is the eighth person to plead guilty to criminal charges in the government’s investigation into the collapse of Bernard L. Madoff Investment Securities since December 2008. Numerous Jewish foundations and individuals had invested with the firm. Among the victims were Hadassah, the American Jewish Congress and Nobel laureate Elie Wiesel.

The former chief compliance officer is expected to plead guilty to falsifying the records of an investment adviser, and conspiracy to commit securities fraud, make false filings and commit other crimes. He has agreed to serve 10-year-prison term and forfeit all of his assets, the Wall Street Journal reported.

Bernard Madoff is serving a 150-year sentence in a North Carolina federal prison for crimes associated with the Ponzi scheme.

Earlier this week former Madoff money manager J. Ezra Merkin agreed to turn over $405 million to duped investors in the scheme. That was the first settlement resulting from a government action against Merkin.

Madoff ‘clawback’ suit going after Jewish group helping elderly


The trustee charged with recovering assets lost in Bernard Madoff’s Ponzi scheme is suing the Jewish Association for Services for the Aged for $5.2 million.

The case, Picard v. Jewish Association, was filed in U.S. Bankruptcy Court, Southern District of New York in Manhattan on Oct. 14.

It is one of hundreds of “clawback” lawsuits filed by bankruptcy trustee Irving Picard in order to collect money received from the Ponzi scheme.

The New York-based association received the money, which it believed to be profits, over a six-year period, according to reports.

In a lawsuit filed last month against the owner of the New York Mets to claim back $1 billion received over a six-year period, a judge ruled that Picard could only seek to recover money received in the last two years.

Madoff pleaded guilty in 2009 to fabricating nearly $65 billion in profits to attract investors. He is serving a 150-year sentence at a federal prison in North Carolina.

Tell-all book drags Hadassah back into Madoff story


Sheryl Weinstein, the high-profile victim of Bernard Madoff claiming to have had an affair with the confessed swindler, kicked off her book tour Tuesday with an appearance on ABC’s “Good Morning America.”

Why would a married woman, interviewer Chris Cuomo wanted to know, decide to write a book certain to cause a stir in her own personal life? Weinstein responded that as the person responsible for losing her family’s money with Madoff, she felt compelled to make things right by selling the only thing of value that she has: her story.

“When this happened, the feelings of guilt, responsibility, failure, became overwhelming. What went through my mind was, how am I going to get out of this? How am I going to make this situation better?” Weinstein said. “I knew it was going to be very hard on me. I was going to take a lot of the brunt. And I was willing to do that because the amount of responsibility was, and still is, really overwhelming.”

Weinstein was right to think that her decision to sell her story would land her smack in the center of the Madoff media circus. In the process, however, she also ended up dragging her former employer into the spotlight.

“I certainly hope Mrs. Weinstein was more discrete about her investment decisions on behalf of Hadassah than she was about her sex life,” Madoff’s attorney, Ira Sorkin, said in a statement broadcast to the ABC morning program’s 4 million viewers.

Weinstein, as virtually every media report on her new book makes clear, met Madoff and carried on an alleged 18-month affair with the investment guru during her tenure as Hadassah’s chief financial officer.

It’s not the sort of branding opportunity Hadassah officials were looking for, especially after months of promoting the message that the organization had moved beyond being a victim of Madoff’s Ponzi scheme.

Weinstein hasn’t worked at Hadassah for 12 years. And, on Tuesday, she reportedly told The Associated Press that she did not control investment decisions at the organization. Still,

Still, the book’s release has not only reopened questions about how the Jewish community’s largest membership organization ended up investing $40 million with Madoff (as Hadassah’s CFO, Weinstein reportedly was a member of the organization’s investment committee). It also has prompted media organizations to take a second look at the possibility that Hadassah and other charities potentially could be forced to return millions of dollars in profit that they withdrew over the years from their Madoff accounts.

At the time that Madoff’s scheme was exposed last year, Hadassah thought its account was worth $90 million, leading to initial reports about the losses suffered by the organization. But later it emerged that over the years Hadassah actually had withdrawn $130 million from its Madoff account.

Weinstein and Hadassah officials both have said that the first $7 million the organization invested with Madoff in 1988 came from a donor who insisted the money be handled that way. Hadassah had invested another $33 million with Madoff by 1996, a year before Weinstein left the organization.

When news of Weinstein’s book first broke, Hadassah officials were quick to insist that it was the first that they were hearing of the affair; the organization also stressed that there were many other members on the committee that decided to invest some of Hadassah’s money with Madoff.

“Hadassah was shocked to hear the news reports of Mrs. Weinstein’s personal admissions regarding this relationship. Indeed, we knew nothing of her relationship with Mr. Madoff until today, and her departure was unrelated to Mr. Madoff,” Hadassah’s president, Nancy Falchuk, said in a message sent to members of the organization’s board of directors.

Hadassah officials will not say why Weinstein left, but insist that it had nothing to do with Madoff.

The Chronicle of Philanthropy reported in 1998 that upon leaving Hadassah after nearly 14 years, Weinstein received $112,700 for 195 days of accrued vacation and $300,000 of severance. A Hadassah official was quoted as saying that the payments were part of “reaching an agreement” on her departure from the organization.

Efforts to reach Weinstein through her publisher were unsuccessful.

Hadassah insiders who asked not to be identified offered a mixed picture on the fund-raising fallout from the Madoff scandal. On the one hand there are loyal supporters who have rushed to support the organization. But there are also those dismayed at how Hadassah ended up investing with Madoff in the first place, and others who say they are reluctant to donate to an organization that could be forced to return money relating to its Madoff investments.

One insider said it is believed that no Hadassah board members were hit by Madoff, though some members of the organization—smaller donors who belonged to the country clubs in New York and Florida where Madoff poached—were wiped out.

It is too early to calculate with certainty whether Hadassah will suffer a significant drop in fund raising this year because of the fallout. But even if donations are down, with so many organizations experiencing a drop in support because of the economic climate, it would be difficult to prove a direct link to the publicity from the Weinstein tell-all. Officials at many nonprofits say they are assuming that many donors are simply hiding behind any excuse they can to avoid making donations.

Meanwhile, Falchuk (who also is a member of JTA’s board of directors) is highlighting several recent fund-raising successes and hammering home the message that Hadassah is moving beyond the Madoff scandal.

“As we near the end of August, Hadassah has received some good news,” she said in a recent message. “A new pledge of one million dollars, with two others in the pipeline, reflect the excitement, vitality and health of the organization. To date, over $213 million in gifts and pledges have supported our commitment to build the Sarah Wetsman Davidson Tower at the Hadassah Medical Center in Jerusalem, approaching our goal of $318 million without equipment.

“What a hopeful way to end the summer and begin the New Year,” Falchuk added. “In three years, 2012, Hadassah will celebrate our Centennial Anniversary and dedicate the new Tower in Jerusalem. We look forward to a vibrant future for the organization and continuing our good work into the next century—in Israel, America and around the world.”

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.”

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