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September 30, 2009
Will the Real Stanley Chais Please Stand Up?
Stanley Chais
Who is Stanley Chais?
There is Stanley Chais, the generous super-donor who year after year gave up to $10 million annually to dozens of Jewish and Israeli causes.
There is also, according to a civil suit filed Sept. 22 by California attorney general Jerry Brown, Chais, the man who misled hundreds of investors, skimmed off exorbitant fees and was at least indirectly responsible for the financial ruin of numerous clients.
Crucially, was Chais a California middleman for Bernard Madoff and well aware of the New Yorker’s $65 billion Ponzi scheme, or was he himself taken in and victimized by Madoff?
Chais is currently facing suits filed by the U.S. Security and Exchange Commission (SEC), U.S. Bankruptcy Court trustee Irving Picard and now the State of California. In the latter case, the complaint charges that over nearly 40 years, Chais established three major and numerous minor feeder funds to funnel investors’ money to Madoff, without their knowledge.
Following a seven-month investigation, Brown charged that over the years Chais made nearly $270 million by taking a 25 percent fee on each investor’s annual profits.
Still, those who worked with Chais or benefited from his donations tend to think of him kindly, though they would rather not talk about him publicly.
Jay Sanderson, for one, considers Chais “one of the most charitable persons I have ever met, who cared deeply about Israel and the Jewish community.”
Sanderson is the CEO and executive producer of the Jewish Television Network (JTN) and was recently chosen as the new president of The Jewish Federation of Greater Los Angeles.
He has known Chais for 15 years, during which period Chais was a major JTN financial supporter, giving $101,000 during the 2007-08 fiscal year, according to the statement filed by the Chais Family Foundation with the IRS.
“We never talked about Stanley’s business dealings, and it was a huge shock to me when the first media reports about him and Madoff surfaced,” Sanderson said.
A major Los Angeles investor, who spoke on condition of anonymity, had extensive business dealings with Chais for decades and said he had absolutely no idea whether Chais duped other people or was duped himself.
“If I had had any suspicion that Chais was not on the level, would I have invested my money with him?” he asked rhetorically.
Like Madoff, Chais’ method was to find investors mainly in Jewish social circles, and he made it appear he was conferring a favor in accepting the investors, who were rewarded with annual returns of between 12 and 25 percent.
In recent years, Chais declined to accept any more investments in his feeder funds, telling associates, “I’m getting into my 80s, I don’t want to expand, I don’t want to be bothered.”
Now 83, Chais is suffering from a rare blood disease and lives quietly in New York.
Robert Chew, a Los Angeles retiree now living in Colorado, felt less kindly about Chais. He could not be contacted for this story, but told The Journal last May that he felt Chais misled his clients.
“We never knew exactly what he was doing, but he had been doing it for 40 years and very successfully,” Chew said. “We thought he was the guy making the trades, and he led us to believe that.
“He led us to believe he was the genius and his people were the geniuses behind all this, when really all he did was collect the money and move it on to someone else. And he was getting a 25 percent cut for this.”
There are plenty of questions still unanswered. For one, with the SEC, the U.S. bankruptcy court and attorney general Brown all going after Chais money, who will take the pot?
Secondly, what will happen to the huge sums Chais donated to Israeli institutions and Jewish American causes?
Available reports filed by the Chais Family Foundation with the IRS go back to the year 2000, when the foundation reported nearly $7.8 million in charitable distributions, increasing every year to nearly 11 million in the 2007-08 fiscal year, the last reported finding.
In that year, the two largest among 39 recipients were the American Jewish Joint Distribution Committee, which got $1.5 million, and the Avi Chai Fund with $1.09 million.
Chais was a prime donor to Israeli universities in 2007-08, and, through their American support groups, gave $840,000 to the Weizmann Institute of Science (down from $1.4 million the previous year), $500,000 to the Technion, $350,000 to the Open University of Israel, $300,000 each to the Hebrew University and the Israel Education Fund, and lesser sums to Ben-Gurion and Tel Aviv universities.
On the Los Angeles scene, donations included $500,000 for the Jewish Community Foundation, $155,000 to The Jewish Federation, $40,000 to Children’s Hospital, $25,000 to Temple Emanuel and $18,000 to UCLA Hillel.
Chais’ name is listed on the boards of many of these organizations, and two buildings on the Rehovot campus of the Weizmann Institute bear the family name.
Jeffrey Sussman, vice president of the New York-based American Committee for the Weizmann Institute, said in a statement that he could not provide information based solely on media reports and could not divulge whether Chais had made any more recent contributions.
A New York spokeswoman for the American Friends of the Hebrew University declined any comment.
Although some institutions were added and some dropped from Chais’ list over the years, he stuck pretty consistently with the same major beneficiaries.
Aside from not receiving such contributions in the future, the institutions face the possibility that some U.S. investigators will seek to recover, or “claw back,” past donations.
California’s Brown is not planning to do so, at least at this time, a spokesman said. At this point, this may, or may not, soothe the nerves of certain financial officers in Israel and the United States.
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