by Johanna Ginsberg
NJJN Staff Writer

January 1, 2009

While national philanthropies scramble to assist victims of Bernard Madoff’s alleged Ponzi scheme, local Jewish agencies are breathing a sigh of relief as most find they have not been touched directly by a scandal that has cost other Jewish nonprofits and philanthropists billions.

That’s because most had their funds invested through the Jewish Community Foundation of United Jewish Communities of MetroWest NJ, which had no exposure to Madoff’s alleged scheme.

UJC MetroWest NJ was among 55 North American Jewish federations and community foundations surveyed by the national United Jewish Communities, which found only seven were directly exposed, with losses ranging from $70,000 to $24.4 million.

But the national UJC warned that annual campaigns “could be affected if major donors and private foundations impacted by Madoff were contributors.”

Local agencies in MetroWest are already bracing for such fallout.

“We have heard through the grapevine that a couple of our donors have been affected,” said Reuben Rotman, executive director of Jewish Family Service of MetroWest NJ. “We are concerned. The issue is that we have donors who normally give us an annual contribution who may be affected. I don’t know what will happen. It will not affect our ability to function. It will just make it harder.”

JFS is among the agencies that had its funds wholly invested with JCF.

“Everyone is shaky and nervous, and I don’t know what the ripple effect will be,” added Rotman. “Today I think we’re okay. But who knows where we’ll be six months from now. And I don’t know if we’ll ever know, if someone chooses not to give us a gift, why they did not, unless they say directly, ‘I was invested with Madoff.’”

Asking how federations largely dodged the Madoff bullet, an analysis in The Jerusalem Post credited the organizations’ “multiple centers of power and competing layers of oversight within the top tier of the communal philanthropic structure.”

“Because federations have a fiduciary responsibility to multiple donors, their levels of oversight enjoy a degree of support that almost institutionally forces them to think twice about any initiative or investment,” wrote Edward Rettig, an Israeli representative of the American Jewish Committee, and Haviv Rettig Gur, a Post correspondent.

Added Joshua Rednik, the JCF’s executive director, “By partnering with a community foundation such as JCF, the donor receives the added benefits of professional oversight and due diligence that a private foundation may not be able to provide.”

Due diligence

The Healthcare Foundation of New Jersey doesn’t have to worry about the ripple effect of its donors. Instead, it relies on the endowment created in 1996 with proceeds from the sale of Newark Beth Israel Medical Center. Its funds are invested with State Street, the Boston-based provider of financial services to institutional investors.

“When the scandal broke, I went to our CFO. I said, ‘Please tell me we had no exposure,’” said Marsha Atkind, the newly hired executive director of the Healthcare Foundation. “She said, ‘Absolutely not.’”
Healthcare Foundation CFO Carolyn Weiss credits due diligence in saving her organization from the kind of losses felt by other Jewish institutions.

“There’s a lot of information out there; you’ve got to read it,” she said. In particular, Weiss said she looks for a specific form filed with the Securities and Exchange Commission known as SEC Form ADV. Some of the information included on that form would have tipped off careful investors, she said. According to Weiss, Madoff didn’t even always file the forms. “That would have been a red flag,” she said.

Weiss said the Healthcare Foundation only makes investments that are “totally transparent.” State Street provides reports showing where assets are held. That provides “a double layer of accountability,” she said.

Neil Goldstein, chair of the UJC/JCF MetroWest Investment Committee and immediate JCF past president, pointed out that his foundation also does its due diligence and has such policies in place. And yet, he said, “anyone can get caught in a fraud.”

For those who were caught, the Jewish Funders Network is working on a multi-pronged relief effort. By its estimates the JFN — a consortium of family foundations that has some 900 members who are major funders of Jewish causes — counts approximately $2.5 billion in philanthropic funds as erased by Madoff’s alleged scam.

These include the Los Angeles-based Chais Family Foundation, a $170 million philanthropy that was forced to close after losing its assets through Madoff, and the Massachusetts-based Robert L. Lappin Charitable Foundation, which also closed after losing as much as $7 million.

According to its head, Mark Charendoff, the JFN will create an information hub listing foundations that were hit by Madoff and can no longer meet their obligations, as well as a list of nonprofits that are in danger of closing and others that identify as candidates for merger.

The foundations involved with JFN will create a pro-bono human resources bank through which foundations and nonprofits can share costs for legal resources, accounting, grant writing, and development needs. The foundations also decided to create a mechanism to provide emergency loans from philanthropists to nonprofits in trouble.

The group also has reached out to a handful of executives at Jewish federations to see how the private philanthropists can work with the federation system to help in the wake of the damage caused by Madoff.

With reporting by Jacob Berkman of JTA

 

Comment: comments@njjewishnews.com

--TOP--