Nonprofits reeling after the year of Madoff

Crain's New York reported that pne year after swindler Bernard Madoff was arrested for orchestrating a massive Ponzi scheme, many affected charities are still sifting through their financial rubble.

Nancy Falchuk will never forget the phone call. She was in Boston, it was raining and the news was bad. Hadassah, the century-old Jewish charity she had been elected to lead a year earlier, had just lost a big chunk of its endowment in a Ponzi scheme — maybe as much as $90 million.

The man responsible for this disaster, the world would soon know, was Bernard Madoff.

"I don't even say his name anymore," Ms. Falchuk said in a phone interview this week.

The leaders of scores of charities around the country, and the world, found themselves living a similar nightmare in the days after Mr. Madoff's Dec. 11, 2008, arrest on charges he orchestrated the multibillion-dollar fraud, which affected thousands of investors.

With the global financial crisis in full bloom, 2009 was already shaping up to be a grim year for charities, but few have had such rough going as the philanthropies that learned a year ago Friday that some or all of their finances had been wiped out in the Madoff scandal.

Some, like the $1 billion Picower Foundation, the $240 million Betty and Norman F. Levy Foundation and the $198 million Chais Family Foundation, lost everything and shuttered within days.

Others survived. They have spent the year cutting staff, curtailing grants and hoping, often in vain, that new donors would step in and help replenish what they lost.

"It has been a very difficult year," said Richard Gordon, president of the American Jewish Congress, which saw a $21 million trust left to it by philanthropists Lillian and Martin Steinberg vanish in the fraud. "Like anything else, you go through anger and outrage, and over the year, I think you work through some of the issues. But there is a tremendous sense of loss of what you could have done."

The damage caused to charities, especially Jewish nonprofits and those that aided Israel, is still being assessed.

Scores of foundations and charitable trusts appear to have lost enough money because of Mr. Madoff, who was active in the Jewish community and knew the heads of many of the organizations that invested with him, to hinder or cripple operations. Others lost nothing but suffered anyway.

Jewish Communities of MetroWest New Jersey, a charity that didn't have a dime invested with Mr. Madoff, still had to slash operations after more than a dozen of its major donors, who had been giving $600,000 a year, were wiped out in the fraud.

Its chief executive, Max Kleinman, said it had to lay off 12 people, furlough staff and cut executive salaries.

Still, the work continued.

The Elie Wiesel Foundation for Humanity, founded by the writer and Holocaust survivor, said in a posting on its Web site that it still managed to have "a productive year," despite losing almost all of what it thought was a $15.2 million endowment.

"Thanks to generosity from around the country and world, with donations from $5 and up, we are pleased to let you know that we are able to honor all of our commitments and continue all of our projects," the message said.

American Society for Technion, which raises money for a technological institute in Israel, said that in 2009 it raised $77 million — slightly more than the book value of its vanished Madoff investments.

There were budget cuts and a small reduction in staff, spokesman Kevin Hattori said, but no programs were canceled.

But while several charity directors said they are optimistic about the future, a few are still wondering whether more bad news lies ahead.

Over the past 12 months, investigators unraveling Mr. Madoff's finances have learned that several charities that had invested with the swindler had withdrawn millions of dollars over the years that, unbeknownst to them, were false profits stolen from other investors.

Some of those groups face the possibility that they could be asked to give that money back. Read more here.