Report: At least 18 Jewish groups reported ‘diverted’ funds


At least 18 Jewish non-profit groups and non-profit groups that support Israeli institutions have notified tax authorities of likely illegal “diversions” of funds in the past five years.

The Washington Post on Sunday published its review of more than 1,000 non-profit organizations that have reported such anomalies since 2008, when the Internal Revenue Service began requiring the reporting of “diversions” of over $250,000 or 5 percent of a group’s gross receipts and assets.

Most such reporting is related to fraud, the Post said, although a small number have to do with “financial restructurings, mergers and other types of financial losses” that are not illegal.

A JTA review of a handful of states with large Jewish populations turned up 18 Jewish non-profits and non-profits that support Israeli institutions recording diversions.

Some are well known, among them the $42.5 million reported by the Conference on Jewish Material Claims Against Germany in fraudulent claims in 2009 and the $95 million Yeshiva University reported it lost from scams associated with Ponzi schemer Bernard Madoff in the same year.

Numerous others losses also appear to be associated with the Madoff frauds.

Others are less well known: The American Friends of the Tel Aviv Museum of Art reported in 2009 that “certain works of art were stolen or destroyed by fire”; The Jewish Community Center of Dutchess County, N.Y., reported in 2010 that its bookkeeper had embezzled funds; and the Advancing Women Professionals and The Jewish Community Inc. reported that an independent contractor in 2010 and 2011 had diverted $62,000 in funds.

Letters to the Editor: Monty Hall, Anne Frank, Boston Hero, Syria


L.A.’s Jewish Presence

Great cover story (“How the Jews Changed L.A.,” May 3). 
If it were not for the innovative ways of the Jewish people, Los Angeles would not be the entertainment empire it is today. 
In fact, it would be decades behind where it is and Sid Grauman might be famous for a gas station. Equality would still be a dream, and Barbie would not be a part of the American fabric. 
I don’t know where we would be in history or in the future. 
Thank God the Jews came here.

George Vreeland Hill
Beverly Hills 


Monty the Mensch

A mutual friend introduced me to Monty Hall in the late ’80s (“Monty Hall’s Best Deal,” May 3). Monty was told that I was the executive director of Shaare Zedek Medical Center in Jerusalem, and after a few minutes I asked him if he would emcee an upcoming dinner. He laughed and said yes, and that was the beginning of my asking Monty for that favor many times. Each time I would call, he would say “nuch a mul,” Yiddish for again, and I would say nuch a mul. He never said no. I doubt that he ever said no to anyone, unless it would have been impossible for him to do it. When Monty was born, the Almighty looked down and said, “Here, world, is a mensch.” Thank you, Monty, for everything you have done and for everything you continue to do. May you live past 120.

Shelly Levy
via e-mail

Holocaust Education at Santa Monica High School

I was dismayed by your article about an alleged incident at Santa Monica High School, which ignores the history of the pioneering work in Holocaust education at Santa Monica High School over the past 10 years (“Nazi Role-playing at High School Causes Stir,” April 26). We’ve partnered with Facing History and Ourselves, participated in Chapman University’s annual Holocaust art and writing contest, and been honored by the 1939 Club. During the fall quarter, all freshmen learn about the Holocaust, and students analyze the actions of perpetrators, bystanders and, most importantly, upstanders. As a result, we have seen an increase in students becoming upstanders — whether it be intervening to stop a fight on campus or joining an international organization’s actions to aid refugees. Students also recognize, and disrupt, anti-Semitism. For example, a few years ago, students noticed someone had marked a swastika on some lockers and they began a campaign to clean up the graffiti and to educate their fellow students about why that symbol is intolerable. It saddens me that the Jewish Journal did not investigate, nor report on, these important achievements.

Meredith Louria
Teacher-Leader, Santa Monica High School

Netherlands Anti-Semitism

There was always anti-Semitism in the Netherlands (“Anne Frank, Mehmet Sahin and the Netherlands,” May 3). I came in contact with it in 1935-36.

Even in 1946, anti-Semitism was not an exception. Vuile jood (dirty Jew) and worse words were heard almost every day. Not everybody in the Netherlands is a closet anti-Semite, but there always were a lot of people in Holland who did not like Jews. Their favorite saying was: Go back to Palestine.

Jerry Gerrit Meents
Ogden, Utah
via jewishjournal.com

Principles of Judaism in Action

I was particularly struck by Bruce Mendelsohn’s remarks concerning pikuach nefesh, wherein he said, “I think there’s a difference between Judaism in theory and Judaism in action” (“My Cousin: A Boston Hero,” May 3).

I am reminded of Rabbi Abraham Joshua Heschel, who was criticized by many in the Jewish scholarly community for stepping outside of the cloistered world of study to march with Dr. Martin Luther King from Selma to Montgomery. Heschel responded, “My feet were doing the praying.”

Arlene Ford
Culver City

A Community’s Challenge

Just what the Jewish community needs — another shandah (“More Ponzi in Iranian-Jewish Community,” May 3).

Suzy Lenkowsky Krikorian
Los Angeles
via jewishjournal.com

The Future of Radical Islam

The secular governments President Barack Obama and Sen. John McCain are helping to destroy will be replaced with more radical Islam governments that will come up against Israel and force Islam on the world (“Syria, Red Lines and Chemical Weapons,” May 3). Jimmy Carter helped destroy the secular government in Iran, and now Iran is a threat to Israel and the world. How many more Irans will Obama and John McCain help create?

Howard Grant
via jewishjournal.com

Correction

In “What Israel Means to Me” (April 19), the photographs of Joshua Holo, Sarah Sax and Shulamit Nazarian were not taken by Andy Romanoff. They were taken by Joel Lipton.

Obama returning money from alleged Ponzi schemer


The Obama campaign is returning the donation of a hedge fund manager who is accused of defrauding members of his Persian-Jewish community in Los Angeles.

Shervin Neman, also known as Shervin Davatgarzadeh, gave the maximum $35,800 donation to the Obama campaign and another $30,800 to the Democratic National Committee.

“With 1.8 million donors thus far, we constantly review those contributions for issues,” an Obama campaign official told Politico. “In this particular case, we will be refunding the contributions and have placed the funds in escrow until a trusteeship or other appropriate place to return these funds is established given the interests of the investors.”

Neman allegedly raised more than $7.5 million from 11 investors in the Ponzi scheme, according to the Securities and Exchange Commission.

He also has donated to the Democratic Congressional Campaign Committee, as well as U.S. Sens. Dianne Feinstein (D-Calif.) and Sheldon Whitehouse (D-R.I.), Politico reported.

SEC halts Ponzi scheme targeting Persian Jews in L.A.


A Ponzi scheme targeting the Persian-Jewish community in Los Angeles was shut down by the U.S. Securities and Exchange Commission.

The SEC obtained an emergency court order on April 13 to stop the scheme.

According to the SEC, Shervin Neman, also known as Shervin Davatgarzadeh, allegedly raised more than $7.5 million from investors in the Persian-Jewish community, of which he is a member, by posing as a hedge fund manager.

Neman, 30, of Los Angeles, told investors that he had a hedge fund called Neman Financial L.P., which invested in foreclosed residential properties that would be quickly flipped for profit, as well as in Facebook shares and other high-profile initial public offerings, according to the SEC.

Instead he allegedly used the investors’ money to pay off other investors and finance his extravagant lifestyle. Neman spent nearly $1.6 million of investor funds to buy jewelry and high-end cars, as well as to finance his wedding and honeymoon, other vacations and VIP tickets to sporting events, according to the SEC.

Judge Jacqueline Nguyen of the U.S. District Court for the Central District of California granted the SEC’s request for a temporary restraining order and asset freeze against Neman.

“By exploiting investors’ trust in him, Neman was continually able to raise more money to pay back existing investors and finance an extravagant lifestyle,” Michele Wein Layne, associate regional director of the SEC’s Los Angeles office, said in an SEC statement.

Mets’ owners settle lawsuit in Madoff Ponzi scheme


The owners of the New York Mets will pay up to $162 million to settle a “clawback” lawsuit filed in the Bernard Madoff Ponzi scheme.

Fred Wilpon and his brother-in-law Saul Katz will not have to make payments for three years under the agreement.

The lawsuit was settled Monday morning in Manhattan Federal Court just hours before jury selection was set to begin in the civil trial.

Irving Picard, the trustee charged with recovering billions of dollars in assets stolen in Madoff’s scheme, filed the lawsuit seeking more than $300 million that Wilpon and Katz allegedly made through the scam. A ruling blocked Picard from trying to collect the full $1 billion he sought to recoup.

Picard said the team owners knew that Madoff’s investments were a sham but continued to invest because of the large returns. Lawyers for Wilpon and Katz said their clients had no idea the investments were fraudulent.

Picard has filed hundreds of similar lawsuits seeking to regain money from those who profited the most from the scheme. The money will go into a fund to help victims of Madoff’s scheme.

Madoff pleaded guilty to fraud charges three years ago in the more than $17 billion scheme. Picard reportedly has recovered about $11 billion of the invested principal lost in the scheme. 

The Mets’ owners had to sell part of the National League team and have had to cut its payroll because of the ramifications of the scheme and lawsuit.

Madoff boasts he is “quite the celebrity” in prison


Imprisoned financial scam artist Bernard Madoff boasted in a jailhouse letter that he is “quite the celebrity” and treated “like a Mafia don,” ABC News said on Thursday.

ABC, which will feature an interview with Madoff’s daughter-in-law on news program “20/20” on Friday, released portions of a letter provided by Stephanie Madoff Mack, whose husband committed suicide in the wake of his father’s conviction in a massive Wall Street fraud.

Mack told ABC she had written Madoff a letter detailing family events he was missing due to his life sentence of 150 years behind bars, as a way of rubbing salt in the wound.

“I thought that that would really sting him,” Mack said, adding that her plan backfired.

The smug-sounding reply from Madoff, whom Mack said she holds responsible for her husband’s death, enraged her.

“As you can imagine, I am quite the celebrity, and am treated like a Mafia don,” Madoff wrote from the North Carolina prison where he is incarcerated.

“They call me either Uncle Bernie or Mr. Madoff. I can’t walk anywhere without someone shouting their greetings and encouragement, to keep my spirit up.

“It’s really quite sweet, how concerned everyone is about my well being, including the staff … It’s much safer here than walking the streets of New York.”

Mack described her reaction as having been “sick to my stomach,” but said she didn’t think she ever showed the letter to Madoff’s son, Mark.

“My husband was in terrible, terrible pain,” she said. “He was so deeply hurt by it all, that he just, he, he just couldn’t move past it.”

Mark Madoff committed suicide in December, two years to the day after Madoff’s arrest in the more-than $50 billion swindle, the biggest Ponzi scheme in U.S. history.

The interview will air on “20/20” on Friday. Mack, whose autobiography “The End of Normal: A Wife’s Anguish, A Widow’s New Life” will be published on October 20, will also appear on “Good Morning America” next week.

Reporting by Chris Michaud; editing by Bob Tourtellotte

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.

Ruth Madoff reportedly to divorce Bernie


Ruth Madoff will divorce her husband, Ponzi schemer Bernard Madoff, in order to reconcile with her son, a Madoff biographer said.

Ruth Madoff, 70, reportedly has not visited her husband of 52 years in prison since their son Mark, 46, committed suicide last December, according to Diana Henriques, author of “Bernie Madoff: The Wizard of Lies.”

Another son, Andrew, reportedly has not had contact with his mother since the suicide, and turned her away from a memorial service for Mark at his home in Greenwich, Conn., the New York Post reported.

The brothers, who turned in their father, broke off contact with their mother after she chose to support her husband during legal proceedings.

Henriques told CBS’ The Early Show that “there are good signs of reconciliation” between mother and son.

Bernard Madoff bilked investors out of approximately $20 billion during his 20-year Ponzi scheme. He is serving a 150-year sentence at the federal prison in Butner, N.C.

Picower estate to return $7 billion made in Madoff scam


The estate of one of the largest beneficiaries of Bernard Madoff’s multibillion dollar Ponzi scheme, Jeffry Picower, has agreed to return $7 billion to Madoff’s victims.

The figure is the difference between the amount of cash that Picower, a Jewish investor, put into his account with Madoff and the amount that he withdrew, The New York Times reported. The deal was set to be announced at a news conference on Friday.

Picower, whose foundation gave to Jewish causes before it was wiped out by the revelation of Madoff’s fraud, was found dead of a heart attack in his swimming pool in October of 2009.

Irving Picard, the trustee for Madoff’s estate who is charged with recouping funds from those who made money on the scam, returning it to those who lost money with Madoff, has estimated that the total cash losses in the scam are about $20 billion. He has filed hundreds of so-called clawback lawsuits against those who made money and has reached significant settlements with others, including a $45 million settlement with Hadassah: The Women’s Zionist Organization of America, and a $625 million settlement with Boston-area Jewish philanthropist Carl Shapiro.

Including the reported Picower settlement, Picard will have recovered about half of what he estimates was stolen by Madoff.

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.”

Bernie Madoff Reportedly Dying of Cancer


From NYPost.com:

Madoff, who is serving 150 years at a North Carolina federal prison after pleading guilty to swindling more than $65 billion, has been telling fellow inmate he doesn’t have much longer to live.

“He’s been taking about 20 pills a day for his cancer,” one inmate told the newspaper. “He talks about it all the time. He’s not doing very well.”

Read the full story here.

Creditors force Ezri Namvar into involuntary bankruptcy


Businessman and philanthropist Ezri Namvar was once a pillar of the local Iranian Jewish community, a trusted friend to whom many in the community loaned freely and without fear.

Now Namvar and his investment company, Namco Capital Group, Inc., are accused of losing as much as $400 million loaned to him.

For the last three months, lawsuits have been filed and extensive negotiations have been taking place to resolve the hundreds of millions of dollars in disputes between Namvar’s creditors and the Brentwood Iranian Jewish businessman. On Dec. 22, two dozen creditors filed an involuntary bankruptcy petition against Namvar and Namco.

The petition follows 17 lawsuits filed against Namvar, Namco, entities owned by Namvar and other Namvar family members alleging breach of contract and contractual fraud in a case that attorneys estimate involves 300 to 400 creditors, the majority of whom are Iranian Jews.

“Disputes happen all the time, but the magnitude of this case is huge,” said A. David Youssefyeh, a local Iranian Jewish attorney who is advising nearly 20 Iranian Jewish creditors in this case, of whom only a small group participated in the filing of the petition. “This case hits people in the community from such a broad socio-economic level — it includes everyone, from students that had entrusted Mr. Namvar with their bar mitzvah money, to retired people who invested their entire life savings in Namco and were paying their living expenses from the interest they received from the company.”

The creditors include investors in Namco Capital Group, those who lent money to Namco and received a personal guarantee from Namvar, lenders to Namco who received a lien on property owed by Namvar or one his entities and those who gave profits from their real estate transactions (1031 funds) to Namvar, according to the lawsuits.

“For 1031 money, the IRS will allow delayed payment of taxes on profits people give to a facilitator, such as Mr. Namvar, to hold for them until they find a substitute property to purchase,” Youssefyeh said. “But now that that money is gone, the people that entrusted Mr. Namvar with the money may potentially have to pay taxes on monies that they don’t have.”

Problems first arose nearly five months ago, when various creditors discovered they were unable to retrieve funds they had invested in Namco or given to Namvar, and that they were also no longer receiving interest payments from monies invested his company, Youssefyeh said.

While some community members filed suits to regain their money, the majority hoped instead to resolve the issue outside of the courts, in the traditional manner of the tight-knit community.

“Back in Iran, whenever a businessman in the Jewish community was unable to pay his creditors, the community leaders would get together and devise a plan to help the businessman get back on his feet financially so that he could repay those debts,” said Ebrahim Yahid, a community activist in his 80s who is a close friend of the Namvar family.

Indeed, such a group was organized after a meeting on Nov. 5 between Namvar and Namco’s Iranian Jewish creditors, according to a statement released to The Jewish Journal by the group on Dec. 16. Namco’s creditors first nominated and then voted to create a provisional committee, including prominent, independent community members. The group planned to trace all of Namvar’s assets and propose solutions to the creditors, according to the statement.

The all-volunteer committee included retired banker and former president of the Iranian American Jewish Federation (IAJF) Solomon Agahi and former IAJF Secretary General Sam Kermanian, as well as businessmen Jack Rochel and Nejat Sarshar. They had their first meeting on Nov. 24, according to the statement, and they were offered full authority by Namvar to resolve the disputes. The committee also hired an independent forensic accountant and attorney.

Nevertheless, talks broke down, and Youssefyeh said he advised his clients to file the bankruptcy petition when his negotiations with the local Iranian Jewish community leaders and Namco’s attorney failed to secure a deal to retrieve their investments for his clients and the nearly 200 other local Iranian Jewish creditors.

Youssefyeh said he became frustrated because Namvar’s paybacks seemed designed to protect the wealthy creditors, rather than the small investors whose life savings had been jeopardized. “What particularly made me mad was that with the $12 [million] to $13 million, Mr. Namvar could pay off 190 people, most of which needed the money for their survival, that had entrusted Mr. Namvar with $200,000 or less,” Youssefyeh said. “But people close to him told me that instead of Mr .Namvar paying off these creditors, Mr. Namvar had earmarked the remaining $17 million that he would receive from the sale of his Wilshire Bundy Plaza building to pay his 1031 obligations first, in order to avoid any potential liability arising from the 1031 funds not being available to the investors.”

Youssefyeh said bankruptcy was the only available option to protect his clients, because it allows the courts to distribute Namvar’s assets and even reverses settlement payments Namvar had made to his more affluent creditors, who have the financial means to proceed with litigation against him.

According to the bankruptcy petition, filed in U.S. Federal Bankruptcy Court in downtown Los Angeles, the dozen creditors include both Iranian Jews and non-Jews, with more than $7 million in claims against Namco Capital Group and $7 million in personal claims against Namvar.

While members of the provisional committee declined to comment on the filing, legal experts said the petition nullifies the committee’s ability to settle the case, giving the courts the responsibility of distributing Namvar and Namco’s assets.

Some community leaders, who asked not to be identified, argued that the bankruptcy petition could hurt the community’s numerous creditors, because they might never receive their money back, since the case could take years to litigate and any available monies could be eaten up by attorneys’ fees as well as other costs.

Youssefyeh defended the bankruptcy petition. “The [provisional] committee had not taken any steps to take control of Mr. Namvar’s assets and in so many words said that they were not qualified to disperse his assets,” he said, adding, “yes, it will be painful and take a long time, but at the end of the day there was no other viable solution that would have frozen the assets, brought all of the preferential transfers and securitization money back into the pot.”

Local Iranian Jews had been investing with Namvar and Namco since the late 1990s. The relationships were based on his family’s reputation for being honorable as well as his success in real estate development, Yahid said.

Some have compared Namvar’s situation to the Bernard Madoff scandal, which involves a Ponzi scheme, but this is unfair, according to Namvar’s friends and community supporters, who say Namvar’s losses are due simply to the economic downturn.

“I know he [Namvar] did not have bad intentions — the economy around the whole world has gone downward, including the real estate market here in Los Angeles, and everyone is hurting, including himself,” Yahid said. “If he really had bad intentions, he would not have welcomed the committee to resolve this case, but would have instead declared immediate bankruptcy himself and destroyed the lives of hundreds in our community.”

Madoff scheme deals new hit to FSU Jews


MOSCOW (JTA) — The Ponzi scheme perpetrated by Bernard Madoff is the latest in a string of financial blows to Jewish aid programs in the former Soviet Union, wiping out a major foundation that was the primary funder of Jewish higher education in Russia.

The Chais Family Foundation, a $178 million philanthropy forced to close after investing all its money in Madoff’s fraudulent fund, gave away more than $12 million per year to Jewish causes. About $2.5 million of that focused on the former Soviet Union, where the foundation funded at least 12 cultural and educational programs.

Even before the foundation’s collapse, several organizations — including the Jewish Agency for Israel, Chabad-Lubavitch and the American Jewish Joint Complete Madoff CoverageDistribution Committee — had announced in recent months that they would be reducing support for programming in the region, fueling doubt and fear among Russian Jewish communal leaders.

“Many of my colleagues and others think that 2009 could be the hardest year for the Jewish community of the former Soviet Union,” Mikhail Chlenov, the general secretary of the Euro-Asian Jewish Congress, who also sits on the board of a program that was funded by Chais, told JTA. “Education is the first sphere of work that is already suffering, but social welfare programs could be next.”

Re-creating a Jewish community in the former Soviet Union following the collapse of communism has been an intense project undertaken by the broader Jewish community, drawing hundreds of millions of dollars in recent years from the Jewish Agency, Chabad and the JDC. The Chais Foundation’s annual $2.5 million contribution was the driving force behind creating a sustainable and self-sufficient piece of infrastructure in the region — a higher education system equipped to train Jewish professionals and teachers.

Chais funded the Center for Biblical and Jewish Studies in St. Petersburg, the Jewish studies department at Moscow State University and the Chais Center for Jewish Studies in Russia, which it founded. The Chais Center brings professors from the Hebrew University in Jerusalem to the region to create accredited programs. Hundreds of Jewish professionals have been trained through the center.

In addition, the foundation was a major funder of the Open University of Israel, which transmits online curricula to the former Soviet Union.

Those programs are now in danger.

Arkady Kovelman, the head of the Jewish studies program at Moscow State, said his program could definitely expect to lose some opportunities for grant money.

The Moscow program relies on academics from the Chais Center at Hebrew University who conduct courses in Hebrew and Russian. Kovelman says it is too early to tell if the program will continue or what the loss of Chais money will do to his program.

“I am hoping that it will not have an immediate impact,” Kovelman said. “They are telling us that everything is more or less OK.”

Even if programs in Russia weather the loss of Chais, the foundation’s closing is only the latest in a half-year of calamity for programs in the region pinched by the downturn in the global economy.

The Heftziba system — a network of 41 state-sponsored schools that offer Jewish curricula, which is is administered by the Jewish Agency — is in peril. The system, which was set up by Russian municipalities in conjunction with the Israeli Ministry of Education immediately after the fall of communism, has seen its finances gutted by $40.5 million in cuts to the Jewish Agency’s overall budget.

The agency, which pays to have some 11,000 students bused to the schools, is reducing its funding for the system from $12.7 million in 2008 to just over $5 million for 2009, with the hope that local philanthropists will help pick up the slack.

Alan Hoffmann, the director of the Jewish Agency’s education department, estimates that the Heftziba budget now has a $5 million hole.

“It could really be a mortal blow” to the school system, he told JTA Sunday.

The Jewish Agency already had been forced to adjust after Russian-Israeli philanthropist Arcadi Gaydamak pledged $50 million in 2006 to help establish programming in the former Soviet Union, but then froze the gift after giving only $10 million.

The two other Jewish-run school networks in the region — the secular ORT system and the Orthodox Shma Yisrael — have suffered from cutbacks undertaken by the Jewish Agency. Shma Yisrael has lost $200,000 in funding and the ORT schools are struggling through a budget cut of $1.2 million in recent months, according to ORT officials, JTA reported in November.

In the past three months, the largest Jewish educational network in the region, Chabad’s Or Avner system, has been forced to make significant cutbacks as its main benefactor, Lev Leviev, withdrew a substantial portion of his funding in the face of the financial crisis.

On top of these cuts, the Joint Distribution Committee, which provides social services to the frail and elderly in the region, is cutting its $100 million-plus 2009 budget in the region by about $5 million.

“You put those factors together in one six-month period from June 2008 until January of 2009 and you have some serious dynamite there for some institutions,” Hoffmann said. “I think it is a serious body blow to Jewish life in the FSU.”

The survival of Jewish programming, he said, “will depend on how quickly the world economy improves and the philanthropy world improves.”

U.S. Jewish leaders and Israeli officials have long hoped that the creation of new Jewish wealth in the region would lead ultimately to the formation of a home-grown Jewish philanthropy class that one day could pick up the mantle. But that had been slow in coming, even before the financial crisis and the drop in the price of oil wiped out huge swaths of Jewish wealth in the region.

For a system still largely dependant on outside money, the disappearance of Chais could really hurt.

Outside of higher education, the foundation funneled tens of millions of dollars into several programs aimed at promoting Jewish identity among youth.

Hillel in the former Soviet Union relied on the Chais Foundation for 23 percent of its budget and the ripples of the Madoff scheme have forced its operations “to the edge,” said Hillel FSU director Osik Akselrud.

“Now I don’t know how to find the exit from this situation because we have to cut programs and reduce salaries,” he told JTA at a Hillel staff conference in Baltimore. “I just don’t know what to do.”

Akselrud, like others whose organizations received funding from Chais, received a letter last week saying that he could no longer expect any support from the now-defunct foundation. The letter, which arrived just as he was to fly to the United States, set off a frenzy of meetings to determine how Hillel FSU could stay afloat.

Akselrud is also the chairman for Limmud FSU, an increasingly popular series of educational conferences that began last year. Limmud has plans for two conferences next year, in Belarus and Ukraine, and the Chais Foundation was expected to be a major underwriter of both.

The Sefer Center, an umbrella group that holds conferences and brings together students in Jewish studies from across the region, had relied on the Chais Foundation for 50 percent of its budget, said its director, Victoria Mochalova. She also learned in a terse message last week that her organization would need to look elsewhere for support.

In the face of the bad news, Mochalova predicted that the older generation of Jewish community activists in the former Soviet Union who had built the network from scratch would find a way to get through a decrease in funding.

“We never had a great situation and we have learned how to live in a hard situation,” she said. “For the young it is a big blow to take.”

In the United States, at least one Jewish organizational leader is holding out hope.

“I am not going to predict the future, but today if you go to our JCCs or to Yesod in St. Petersburg, they are full and active and Jewish life is vibrant,” said Steven Schwager, the CEO of the JDC. “They are critical links in building a Jewish community, and some way or other they will find a solution to continue them.”

Madoff


I wish Jews believed in hell, because then I could take comfort that Bernard Madoff will go there.

Madoff ran the New York-based firm, Bernard L. Madoff Investment Securities, which was reported last week to have been a $50 billion fraud, a Ponzi scheme that paid investors with other investors’ money.

“It’s all a big lie,” Madoff reportedly confessed to his sons last Thursday, before they turned him in to authorities.

While most of Madoff’s victims were on the East Coast and in Europe, he burned through Los Angeles, as well. As we report online, millions of dollars of charitable donations and millions in personal wealth in this town have vanished for good.

“This is one of the biggest catastrophes ever to strike the American Jewish community,” a major donor and activist told me Monday.

The damage is not just monetary.

Madoff destroyed lives: charities that provide hot meals, mental health counseling, free loans, support for immigrants and money for Jewish education have all been hit and will all have to cut back or fold completely.

As our reporter Dean Rotbart discovered, Madoff even hurt hospitals and health care organizations, such as The Gift of Life, which matches Jewish bone marrow donors with patients who would otherwise die. It is conceivable that, thanks to Madoff, the sick will get sicker.

“A poor man is a dead man,” the Talmud teaches. Given the way the American health care system works, to rob people of their money may deny them treatment. I spoke with an elderly woman whose entire life savings, almost $1 million, was invested with Madoff. She has just enough to live on, she said, provided she doesn’t get really sick.

It really is a shame we Jews don’t believe in hell.

Madoff took in the Elie Wiesel Foundation for Humanity. Elie Wiesel! When I heard that news, I had to laugh so I wouldn’t cry. The man survives Auschwitz, lives to serve as the moral conscience of the world, then in the twilight of his noble life sees his charitable wealth destroyed by a fellow Jew. No one could plumb the darkness of a soul that could do such a thing, not even Wiesel.

He battered the foundations of the Jewish community. He attacked the lifeblood of community — nonprofit boards, clubs, friendship itself — using them to recruit clients and to recruit recruiters. People invested based on trust and got their friends to invest, as well. Into a venerated system of trust and mutual responsibility he injected the poison of betrayal and suspicion.

In doing all this, Madoff soiled the very word, “Jew.”

“The greatest American Jewish crime since the Rosenbergs,” said one local leader. An exaggeration? The Rosenbergs were traitors to the nation’s defense, Madoff to our financial system. But Madoff, with his posturing involvement in Yeshiva University, makes the Jewish claim to ethical standards look like a bad joke. The saving grace is that, as one victim told me, at least many of his victims are Jews.

Yes, there is a wider circle of responsibility here. The truth is, Madoff didn’t beg anyone to invest. People begged to get in.

That means when we examine our own values and leaders, we may find that Madoff was the greatest fraud among us, but not the only one.

There is a generation of Jews — at least one — raised on the idea that pushing paper creates real wealth. We are a generation of unbelievable materialism and indulgence, a generation that believes a 10 percent return is its birthright. We have rabbis who shut their mouths rather than risk alienating a potential donor. Sure they’ll preach tikkun olam and charity from the pulpit, but how often do they preach modesty, humility and moderation?

People are telling me the Madoff scandal all boiled down to one word — greed. But it’s not so simple. Madoff didn’t just want money, he wanted the immunity that being a big shot, a macher bestows upon all sorts of cheats, dimwits and blowhards in the Jewish community.

The questionable practices of some of our most admired charities grow out of this culture and leave me with a few unanswered questions. How is it that donor money found its way in the first place into nonguaranteed investments? What gives a 501(c)(3) the license to, in a word, gamble? Who was paying attention when chunks of charitable contributions ended up in the hands of a $50 billion firm whose auditors occupied an office smaller than mine? Why aren’t the names of every single investment vehicle in which nonprofits have significant money published online for donors to see?

Good questions, but I don’t want to spread the guilt too far just yet. I want to stay focused on the man who must take full responsibility for his crimes.

What kind of world is it where Jews can’t trust fellow Jews? Where worthwhile charities have to convince donors that their donations won’t be squandered? Where the bonds between friends and families mean nothing when it comes to money? Where Jews everywhere are suspect, because Jews somewhere behave like moral monsters? Where the poorest among us suffer because the richest cannot be satisfied until they are even richer?

There’s a name for that kind of world — hell.

‘Golden boy’ J. Ezra Merkin accused of misleading Jewish investors, groups


Bernard Madoff is not the only trustee of Yeshiva University who resigned in shame last week.

While international attention continues to focus on Madoff, who faces charges for his alleged $50 billion Ponzi scheme, some leaders in the Jewish community, particularly within Modern Orthodox institutions, are expressing shock and anger at the role played by J. Ezra Merkin, a prominent investment guru and philanthropist who appears to have misled at least some investors.

Merkin stepped down Dec. 12 as a Yeshiva trustee who played a primary role in managing the university’s endowment funds.

According to several sources close to the institution, about $100 million was invested through Merkin, which ended up in Madoff’s fund — without the board’s knowledge — and is presumed gone.

Yeshiva’s endowment is now about $1.3 billion, down from $1.8 billion last year, due largely to the general collapse of the economy.

“About $100 million of that total is directly attributable to our investment with Ezra,” according to one person close to the situation, who along with others interviewed for this article would only speak off the record.

No one is accusing Merkin, who did not respond to an interview request, of prior knowledge that Madoff was operating an alleged fraud. Indeed, Merkin informed investors in his $1.8 billion Ascot Partners fund on Dec. 11 that he was among those who suffered substantial personal losses when it crashed, since all of its dollars were invested with Madoff.

But while he has portrayed himself as a victim, Merkin is being criticized as having misled institutional and personal investors, including those wary of Madoff’s secretive and suspiciously successful earnings streak. Several people said that while they were reluctant to invest with Madoff, they trusted Merkin completely, not knowing that he in turn was taking their investment in his Ascot Partners and putting it into Madoff’s fund.

“We thought we were investing in Ezra,” said one official of a Jewish institution, “and now find out we were invested with Madoff. We feel duped and outraged.”

One private investor said that several years ago he asked Merkin directly if his investment in Ascot was going into the Madoff fund and was told it was not.

Another individual investing funds for a local Jewish institution said he was also given misleading information by Merkin about where the funds were going.

The assumption, several sources said, was that Merkin was doing due diligence and diversifying the investments, rather than putting them all in one fund, as he did with Ascot.

“This is, in general, an opaque business,” said someone familiar with hedge funds, noting that it is not uncommon for monthly reports to investors to simply show performance information without listing the companies invested in.

Yeshiva University was not the only organization where Merkin played a key role, formally or informally, in managing funds, and it is believed that Congregation Kehilath Jeshurun in New York and the Ramaz School of Manhattan were among those that lost substantial funds through investments that ended up with Madoff.

SAR Academy in Riverdale, a Modern Orthodox school in New York, also was affected.

In a letter to parents sent out Sunday night, SAR President Jack Bendheim reported on the school’s endowment fund, which had grown to $1.3 million.

“Years ago,” he wrote, the endowment was “invested in Ascot, a manager which, unbeknownst to us, had substantially all of its assets invested with Madoff.” Based on allegations, “we are now valuing this investment as zero.”

In hindsight, many in the community are now asking how a donor and/or trustee of a nonprofit could be in a position to manage money for the institution, as Merkin did.

“You have to know Ezra to really understand how this could have happened,” said one source who has sat on boards with him. “He is brilliant and incredibly well connected in the Jewish and financial community, with a long and incredible success rate in investments. Plus, he can be, at times, charming and considerate — as well as intimidating.”

Several people noted that when questioned or challenged about the wisdom of investing heavily in one fund rather than diversifying, “Ezra would ask, ‘Why would you reduce your concentration in your best- performing fund?'”

Still, there were grumblings. Some of the board members at Yeshiva had raised issues of good governance at meetings, unaware of specific problems with Merkin or Madoff. They felt Yeshiva was exposing itself to serious questions about potential conflicts of interest, regardless of who the personalities were. But veteran members resisted, insisting that Merkin was not only respected and trustworthy but “the Golden Boy controlling the Golden Goose,” as one person explained.

Ironically, the university was in the process of responding to calls for instituting stricter policies regarding conflict of interest when the news hit of the Madoff fiasco. Procedures that had been discussed for more than a year were scheduled to be put in place next year.

Merkin has served for the past several years as chairman of the investment committee at UJA-Federation of New York. But in part because the federation has a policy prohibiting members of the committee from directing funds, there was no exposure of its funds to Ascot Partners or Madoff.

“There were some on the board who grumbled about us missing out on a solid investment, but we weathered the criticism,” one source noted.

John Ruskay, the executive vice president and CEO of UJA-Federation, said that none of the charity’s funds were invested with Madoff, so it had “no direct exposure.”

“But obviously many donors who contribute to UJA-Federation, and many other charities, have been adversely impacted,” he said, “and this will have a long-term impact on Jewish philanthropy and the Jewish community.”

Some insiders say they expect that Merkin will be off the UJA-Federation board by week’s end.

Some people have pointed out that Merkin had benefited numerous individuals and nonprofit organizations for many years and deserves gratitude for boosting their levels of income and success. But most of those interviewed expressed more anger than appreciation and wondered how deep and extensive the impact will be on the Jewish philanthropic community. Everyone said they expect a slew of civil lawsuits.

At Yeshiva University’s annual dinner on Dec. 14 at the Waldorf, President Richard Joel made a reference to “tragic mistakes” that had been made, but struck a decidedly optimistic tone, noting that the dinner raised more than $3 million, up from $2 million last year. He asserted that Yeshiva is in strong shape financially and otherwise.

His most direct comment on the current scandal was to acknowledge “the 800-pound elephant in the room.”

Article reprinted courtesy of The New York Jewish Week.Gary Rosenblatt is the editor and publisher of The New York Jewish Week.

Madoff scandal rocks Jewish philanthropic world


NEW YORK (JTA) — Tthe securities fraud of Bernard Madoff has rocked the Jewish nonprofit world — and the worst may be yet to come.

Madoff, the founder of Bernard L. Madoff Investment Securities LLC, was arrested Dec. 11 after admitting to his board that a hedge fund he ran was essentially a $50 billion Ponzi scheme.

At least two foundations have been forced to close because they had invested their funds with Madoff.

The Robert I. Lappin Foundation in Salem, Mass., announced Dec. 12 that it would shut down after losing $8 million — all of its money. And the Chais Family Foundation, which gives out some $12.5 million each year to Jewish causes in Israel, the former Soviet Union and Eastern Europe, announced its closing Dec. 14.

At least one nonprofit is calling out for help in the wake of Madoff’s collapse. The Gift of Life Foundation, a Jewish bone marrow registry that relied heavily on Madoff as a benefactor, announced on its Web site Sunday that it would immediately need to raise $1.8 million to make up for recent losses.

Sources close to Yeshiva University, where Madoff served as treasurer of the board of trustees and board chairman of the university’s Sy Syms School of Business until he resigned last week, said the school has lost at least $100 million. Y.U. officials declined to offer any specifics.

Just as the reverberations of the subprime mortgage collapse are still seen as contributing to the nation’s wider economic meltdown, philanthropic insiders say the fallout from Madoff’s scheme could be even greater. The insiders note that Madoff and others heavily invested in his fraudulent fund were major supporters of a plethora of nonprofit organizations, served on their boards or advised those organizations on how to invest their money — in some cases placing large sums of the groups’ capital in Madoff’s hands.

Reflecting this sense that the full extent of the damage is still unclear, the executive vice president and CEO of the UJA-Federation of New York said that even though its endowments were not exposed, the organization still could be hurt if donors lost money in the scheme.

“We do not yet know the full extent of the losses that supporters of UJA-Federation and other Jewish institutions have had,” John Ruskay said. “But we have already heard that many major institutions had substantial funds invested, as did foundations. Already in the context of a very challenging economic environment this will present another significant difficulty. We don’t know yet the extent of the wreckage.”

Reports are trickling out in the national media about prominent businessmen from across the country who lost money in Madoff’s scheme.

New York Mets owner Fred Wilpon, GMAC Financial Services chairman J. Ezra Merkin and former Philadelphia Eagles owner Norman Braman all were reported to have taken significant hits due to their dealings with Madoff, who reportedly would not accept any investment in his fund below $10 million.

Reports have surfaced also that media magnate Mortimer Zuckerman was significantly hurt by investing with Madoff.

In Los Angeles, the Jewish Community Foundation’s $238 million Common Investment Pool lost $18 million it had invested with Madoff, according to a letter sent out by the foundation.

Among other Jewish institutions and foundations believed to be hit by the Madoff scandal: the American Jewish Congress, the Technion-Israel Institute of Technology, Steven Spielberg’s Wunderkinder Foundation, Elie Wiesel’s Foundation for Humanity and Carl Shapiro’s charitable foundation.

But Merkin, who last week told investors in his hedge fund, Ascot Partners, that all of their money had been defrauded by Madoff, is of particular interest to the Jewish community. He has philanthropic ties to a number of Jewish organizations and institutions, serving as a volunteer investment adviser for many of them, including Yeshiva University. Among other causes with which he is said to be connected are the SAR Academy, a Jewish day school in the Bronx, as well as State of Israel Bonds, The Jewish Campus Life Fund, Elaine Kaufman Cultural Center, the Ramaz School, Congregation Kehilath Jeshurun and the Fifth Avenue Synagogue.

Sources say that several of these entities had money in Ascot, which they now stand to lose because of Merkin’s decision to invest so heavily in Madoff’s fund. According to Orthodox communal insiders, Ramaz and SAR lost millions between them.

A woman who answered the phone Sunday at one of Merkin’s listed numbers suggested that he could be reached in the office Monday.

An official at one major Jewish foundation told JTA that it had been advised to invest with Madoff, but decided against it after concluding that his return-on-investment forecasts seemed too good to be true.

Certainly the extent of the damage to the philanthropic world could become clearer as details emerge in coming days and weeks of just who was invested with Madoff.

One philanthropic official said there is a lesson to be learned here for the philanthropy world, where Jewish businessmen and philanthropists directed their own private funds and the funds of institutions that they help oversee toward Madoff.

“What really emerges out of this,” said Jeffrey Solomon, the president of the Andrea and Charles Bronfman Philanthropies, is that “people sometimes forget to conduct the due diligence when dealing with others with social prominence — and especially in the hedge-fund area where people think you have to be really smart to be in hedge funds. In many ways for all investments something like this is tragic, but for nonprofits where boards have the fiduciary responsibility of acting with great prudence, it is even more tragic.”

According to a fund-raiser who has been scouring recent 990 tax filings to see how this might affect his nonprofit, several other major philanthropists have put money in Madoff’s hands: As of the end of 2007, Sandy Gottesman had $20 million of his foundation’s $144 million invested with Madoff and Robert Beren had two foundations with more than that in endowments invested with Ascot. U.S. Sen. Frank Lautenberg (D-N.J.) says his foundation has about $15 million invested with Madoff.

Yeshiva University issued a statement via e-mail to JTA on Sunday.

“We are shocked at this revelation,” the university said. “Bernard Madoff has tendered his resignation from all positions affiliated with the university and involvement with the university. Our lawyers and accountants are investigating all aspects of his relationship to Yeshiva University. We reserve our comments until we complete our investigation.”

Is Bernie Madoff Jewish?  Very. Oy.



Bernard Madoff at a 2007 roundtable discussion with Justin Fox, Ailsa Roell, Robert A. Schwartz, Muriel Seibert, and Josh Stampfli.



“It’s all just one big lie.”

With those words Bernard Madoff confessed to senior executives of Bernard L. Madoff Investment Securities that the $17 billion hedge fund company  he  founded was nothing more than a Ponzi scheme.
 
According to Timeonline.com, Madoff is at the center of “the largest investor swindle ever blamed on a single individual.”
 
Madoff was arrested Thursday by Federal agents and charged with securities fraud.  In its complaint the Securities and Exchange Commission said Madoff was at the head of an “ongoing $50 billion swindle.”  He could face 25 years in prison.

The news that broke today on the front pages of the New York Times and the Wall Street Journal reverberated in Jewish communities across the world.

“A lot of Jewish charities had investments with him,” one prominent investor — who said he had no connection to Madoff — told The Jewish Journal. “So did a lot of Jews.”

The collapse of the Madoff business leaves a mess that is yet to be sorted out and whose victims are just coming to the fore.

But what’s already clear is that Madoff used his ties to the Jewish community to garner at least some of his ill-used funds.



UPDATE SUNDAY 1:41 p.m.:

By Sunday the initial casualty reports showed that Madoff’s crimes reached deep into the Los Angeles Jewish community. 

“It has come to our attention that the Jewish Community Foundation [Los Angeles] is included among a number of major institutions as well asindividuals who may have been victimized by an alleged fraud,” wrote Jewish Community Foundation Board Chair Cathy Siegel Weiss and President and CEO Marvin Schotland in a letter sent to board members.

Regretfully, the Foundation was one of those clients. Mr. Madoff was highly regarded and his firm has been one of the most prominent firms on Wall Street for decades. We were shocked to learn of this alleged fraud.

Some $18 million of the Foundation’s Common Investment Pool (currently valued at 11% of its assets) was invested with Madoff, according to the letter.The CIP represents endowments from a variety of long-established Jewish organizations. The Journal is investigating which participants were involved and how much they stand to lose, and whether officials can expect any sort of remediation.

Meanwhile, there are reports that many other local institutions and individuals have been hit by the scandal.  Senior Writer Brad Greenberg and blogger Dean Rotbart are investigating and verifying these reports and will have updates here.



Madoff is a trustee of the Yeshiva University and a long-time philanthropist in Jewish circles.
 
According to Yeshiva University, “Bernard L. Madoff, a member of the University’s Board of Trustees since 1996, was elected chairman of the Board of Directors of Sy Syms School of Business in 2000. Mr. Madoff is chairman of Bernard L. Madoff Investment Securities, one of the nation’s largest third-market dealers in New York Stock Exchange and over-the-counter securities.
A benefactor of the University, Mr. Madoff recently made a major gift to the Sy Syms School.”
 
The first known charity victim, according to JTA, is the The Robert I. Lappin Foundation in Salem, Mass. which gave away about $1.5 million to Jewish causes.
 
After Madoff’s arrest, The Robert I. Lappin Foundation in Salem laid off all of its employees and locked its doors on Friday after its benefactor’s assets were frozen because they were invested with Madoff.

“Mr. Lappin investments were frozen,” the foundation’s executive director of the foundation Deborah Coltin told JTA. “The assets are frozen. We have no money. The foundation cannot access its money.”

Lappin, who was reached by JTA Friday afternoon, said that he lost $8 million – the entirety of his foundation’s money – because it was invested with Madoff. Lappin, who had been involved financially with Madoff since 1991 also took a “significant” hit personally. He said that he knew nothing of Madoff’s fraudulent activities.

The foundation, which gave away about $1.5 million per year to Jewish causes, let go all of its workers, one fulltime employee and six part-time employees.
 
Forbes details the fall of Madoff
 
“Bernard Madoff is a longstanding leader in the financial services industry,” his lawyer Dan Horwitz told reporters outside a downtown Manhattan courtroom where he was charged. “We will fight to get through this unfortunate set of events.”
 
A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment.
 
The SEC filed separate civil charges.
 
“Our complaint alleges a stunning fraud — both in terms of scope and duration,” said Scott Friestad, the SEC’s deputy enforcer. “We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors.”
 
The SEC said it appeared that virtually all of the assets of his hedge fund business were missing.
 
Madoff had long kept the financial statements for his hedge fund business under “lock and key,” according to prosecutors, and was “cryptic” about the firm.
 
And Reuters has the story here:

REUTERS – Edith Honan and Dan Wilchins:
 

NEW YORK (Reuters) – Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion “Ponzi scheme” in what may rank among the biggest fraud cases ever.

The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.

Madoff told senior employees of his firm on Wednesday that “it’s all just one big lie” and that it was “basically, a giant Ponzi scheme”, with estimated investor losses of about $50 billion, according to the U.S. Attorney’s criminal complaint against him.

A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors.

On Thursday, two agents for the U.S. Federal Bureau of Investigation entered Madoff’s New York apartment.

“There is no innocent explanation,” Madoff said, according to the criminal complaint. He told the agents that it was all his fault, and that he “paid investors with money that wasn’t there”, according to the complaint.

The $50 billion allegedly lost would make the hedge fund one of the biggest frauds in history. When former energy trading giant Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets.
U.S. prosecutors charged Madoff, 70, with a single count of securities fraud.

They said he faces up to 20 years in prison and a fine of up to $5 million.
The Securities and Exchange Commission filed separate civil charges against Madoff.

“Our complaint alleges a stunning fraud — both in terms of scope and duration,” said Scott Friestad, the SEC’s deputy enforcer. “We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors.”

Dan Horwitz, Madoff’s lawyer, told reporters outside a downtown Manhattan courtroom where he was charged, “Bernard Madoff is a longstanding leader in the financial services industry. We will fight to get through this unfortunate set of events.”

A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment.

Authorities, citing a document filed by Madoff with the U.S. Securities and Exchange Commission on Jan. 7, 2008, said Madoff’s investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management. Those clients may have included other funds that in turn had many investors.

The SEC said it appeared that virtually all of the assets of his hedge fund business were missing.

CONSISTENT RETURNS

An investor in the hedge fund said it generated consistent returns, which was part of the attraction. Since 2004, annual returns averaged around 8 percent and ranged from 7.3 percent to 9 percent, but last decade returns were typically in the low-double digits, the investor said.

The fund told investors it followed a “split strike conversion” strategy, which entailed owning stock and buying and selling options to limit downside risk, said the investor, who requested anonymity.

Jon Najarian, an acquaintance of Madoff who has traded options for decades, said “Many of us questioned how that strategy could generate those kinds of returns so consistently.”

Najarian, co-founder of optionmonster.com, once tried to buy what was then the Cincinnati Stock Exchange when Madoff was a major seatholder on the exchange. Najarian met with Madoff, who rejected his bid.

“He always seemed to be a straight shooter. I was shocked by this news,” Najarian said.

‘LOCK AND KEY’

Madoff had long kept the financial statements for his hedge fund business under “lock and key,” according to prosecutors, and was “cryptic” about the firm. The hedge fund business was located on a separate floor from the market-making business.

Madoff has been conducting a Ponzi scheme since at least 2005, the U.S. said. Around the first week of December, Madoff told a senior employee that hedge fund clients had requested about $7 billion of their money back, and that he was struggling to pay them.

Investors have been pulling money out of hedge funds, even those performing well, in an effort to reduce risk in their portfolios as the global economy weakens.

The fraud alleged here could further encourage investors to pull money from hedge funds.

“This is a major blow to confidence that is already shattered — anyone on the fence will probably try to take their money out,” said Doug Kass, president of hedge fund Seabreeze Partners Management. Kass noted that investors that put in requests to withdraw their money can subsequently decide to leave it in the fund if they wish.

Bernard L. Madoff Investment Securities has more than $700 million in capital, according to its website.

Madoff remains a member of Nasdaq OMX Group Inc’s nominating committee, and his firm is a market maker for about 350 Nasdaq stocks, including Apple, EBay and Dell according to the website.

The website also states that Madoff himself has “a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark.”

In the wake of the scandal, Internet message boards are alive with anti-Semitic vitriol.
 
The web site dealbreaker.com provides a list of Madoff’s victims supplied by CNBC’s  David Faber:

  • Fund of Funds
  • European banks
  • remont Advisers
  • “market confidence”
  • JEWS

The comments on that page reveal the kind of anti-Semitic writing that scandals involving Jewish financiers unleash with clockwork precision.
 
A sampling:

  • LOL Jews!…
  • Looks like a lot of Jews might be converting to Muslim soon….in prison….
  • Now that the JEW has been thrown down the well, is our country free?LETS THROW A BIG PARTY!!!

The message boards at the web site Stormfront, where neo-Nazis go to play, is rife with comments like, “One of satan’s children doing what comes naturally.”

Hey. If it’s small comfort the prosecutor in the case is Jewish, and it was Madoff’s sons who turned their crooked dad in.

Thousands of small Jewish investors who played by the rules and worked and saved are now financially ruined because of this man. For all but your garden variety bigots, one horrifically monstrously putrid apple doesn’t mean squat about the whole tree.

 

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