While Madoff himself is a primary butt, and those on charitable boards most responsible for investing with Madoff are also targets of scorn, even board members, trustees and other fiduciaries who had no direct relationship with the disgraced investment manager are under fire.
At least one governance expert, James Kristie, editor of Directors & Boards magazine, says that more board-level resignations are in order.
"You don't see board members resigning when a bad situation happens. I think there is something wrong with that," Kristie said. "It is not usually a single board member who has contributed to a bad situation."
Kristie cites as an example J. Ezra Merkin, a director of Yeshiva University and chairman of its investment committee. YU says that it had entrusted a portion of its endowment to Merkin's Ascot Partners, which in turn placed substantially all of those funds with Madoff. YU says its loss amounts to $110 million, or 8 percent of its total endowment, although it seems probable that the university is counting millions of dollars of "phantom" investment returns among its losses.
Merkin quickly resigned his YU posts after Madoff confessed to federal authorities in December that his investment firm had been a Ponzi scheme of unprecedented size and duration. YU says Madoff, who was its board treasurer and served as chairman of the board of its Sy Syms School of Business, also resigned.
But YU has declined to answer direct questions from the Jewish Journal and other news organizations pertaining to the remaining YU board members, including President Richard M. Joel, and their responsibility and accountability in the Madoff matter.
"I know you have more questions but ... this is what we can say at this time," e-mailed a spokesperson for YU, attaching a brief statement reiterating points that Joel made earlier in an official letter to the YU community. In essence, YU said it has hired "a top team" of legal, accounting and other experts to advise it going forward.
"The Board of Trustees supports these efforts and will help in any way it can to ensure the best possible outcome," the spokesperson's statement says.
But many questions persist about YU's leadership and how existing trustees and administrators can objectively assess their own culpability, if any, for permitting so much of the university's money to be invested with a fellow trustee.
"More and more board members should accept culpability," Directors & Boards' Kristie said, adding that trustees often pardon themselves, saying, "We did the best job we could with the facts that were before us."
Richard Silverstein, who was a nonprofit fundraiser for 18 years and since February 2003 has penned an avowedly progressive blog, Tikkun Olam, writes there that "Yeshiva University needs to clean house." Silverman contends that "any member of the [YU] investment committee or executive committee who hasn't resigned by now should be forced to do so."
Of course, the Madoff investment wreckage is widely strewn. Among educational institutions on the direct victims' list are Tufts University ($20 million), New York University ($24 million), The Technion ($6.7 million), Maimonides School in Boston ($3 million-$5 million), and Manhattan's Ramaz School (almost $6 million). The American Technion Society, which supports The Technion, lost its $29 million Madoff investment as well as $43 million in "phantom" gains.
Hadassah, which placed $40 million directly with Madoff and thought its investment had grown to $90 million, or roughly 11 percent of its total investment portfolio, says that like YU, it will now seek out "independent professionals to review our invest [sic] practices, guidelines and procedures."
But in a Dec. 22 letter, Nancy Falchuk, Hadassah's national president, offered little if any hint that her fellow board members feel responsible for failing to conduct sufficient due diligence concerning the organization's Madoff investment. "This is a painful moment, when, with the very best of intentions, we find ourselves victims of the actions of one man," Falchuk wrote.
Kristie said that one unheralded victim of the Madoff scam is certain to be the trust that nonprofit trustees and board members have historically placed in one another.
"There is so much trust that one has to have in your fellow directors. Trust in their judgment, trust in their character, trust in the knowledge and their expertise," Kristie said, adding "that is the way an awful lot of business is conducted."
Yet trust and safeguards are not mutually exclusive, as the UJA-Federation of New York can attest. The umbrella group, which last year raised $220 million, does not allow board members to manage endowment funds. Further, UJA-Fed NY requires transparency on the part of its diversified group of fund managers, a policy that prevented the philanthropy from investing any money with Madoff, despite his once-glowing reputation among so many other UJA-Fed NY major donors.
Stuart Tauber, UJA-Fed NY's senior vice president for financial resource development, noted that while his organization avoided direct exposure to Madoff, many of its large donors and even beneficiaries were not so fortunate.
Charitable giving overall is certain to suffer in the immediate post-Madoff era, Tauber acknowledged. "I don't know any professional in the field who deals with major donors who doesn't know someone who has been hurt by this," he noted.
Tauber, who has dedicated 32 years of his life to raising funds for Jewish nonprofits, said he takes personal umbrage when hundreds of millions of dollars -- perhaps even billions of dollars -- of charitable contributions are lost in a blink.
"I'm angry. I am angry," Tauber said. "We are the voice of very powerless people. That is the point. They need us to say the things that need to be said. And they don't want to hear that there was a 'mistake' and [as a result] there may be services that might be cut back."
While some donors may question the merits of pumping fresh dollars into those charities and institutions that failed to adequately safeguard their funds from the Madoff Ponzi scheme, Tauber argued that to withhold funds would be to punish the true victims.
"The vulnerable need to be protected" regardless of the bitter aftertaste of any previous donations, Tauber said. "In Judaism, you do it because it is the just thing to do."
Tauber, however, does not give a free pass to trustees and other fiduciaries who work on behalf of groups that lost funds to Madoff. "Every dollar is a sacred trust," he said. "You really have to always be on top of the best game that you have. A lot of people count on you to do just that."
Tauber added that some of the individuals asking the toughest questions to Madoff-inflicted board members are the members themselves. The vast majority of these leaders are volunteers who care deeply about the institutions they govern.
"They've got their skin in the game; they are giving a lot of money," Tauber noted. No doubt some board members are "doing some enormous soul searching among themselves, asking, 'Was there something I missed, something I should have seen?'"
Moreover, Tauber said, serving on the boards of some of these institutions, such as YU, has gone overnight from being an honor to being suspect. "People are asking them, 'Where were you? What did you do? How did this happen,'" Tauber said.
Indeed, one member who currently serves on the YU board said the prospective wrath of donors "scares me." This member pledged to resign if YU's investigation uncovers that the YU board's Madoff investment resulted from a knowing breach of integrity by board members other than Madoff.
Along with the painful losses, UJA-Fed NY's Tauber noted, one positive outcome of the Madoff mess will be a renewed vigor on the part of charitable groups to put into place policies and procedures to help prevent a repeat.
"They will have better checks and balances going forward," Tauber forecasted. Moreover, major donors will demand more accountability. "I think they will start off by saying, 'I need to be assured that the charities have learned from this experience.'"