December 18, 2008
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.