Posted by Rob Eshman
Writing in The New York Times, columnist Nicholas Kristof detailed how much money foundations lost in the Madoff Ponzi scheme.
A friend of Kristof’s compiled the most detailed list so far of the dozens of family foundations and private philanthropies invested with the New York crook. Their assets, worth billions, are now worth bupkis.
The real losers here, Kristoff notes, are the thousands of worthy charities that were the beneficiaries of these foundations’ largesse:
Most of the discussion of the Bernard Madoff scandal has focused on the impoverished zillionaires who are now mere millionaires. Yet much of the money invested by Mr. Madoff was money destined for charities, and so the losers will include some good causes and truly disadvantaged people.
A few private foundations have owned up to the money they’ve lost with Mr. Madoff, but most haven’t. So let me help them out.
I’ve obtained a list of nearly all the private foundations that invested money directly with Mr. Madoff, at least at the time of their most recent tax filings. Even in the unlikely event that they cashed out since then, they may still have to repay the money to others.
What is staggering is how many of these 147 foundations had all their assets invested with Mr. Madoff and may have been wiped out as a result.
Interestingly, the PDF list is grouped more or less by geographical area: LA, Florida, New York, etc. It reads like a travelogue of Madoff’s journey through the Jewish communities and country clubs of America.
In LA, the victims are (relatively) few but the damage is enormous:
Katzenberg Foundation, Marilyn & Jeffrey
TOTAL ASSETS: $22,057,386
POSSIBLE MADOFF EXPOSURE: $10,534,582
DONATIONS PRIOR YEAR: $455,333
LARGEST DONEE : Cedars‐Sinai Medical Center
The Wunderkinder Foundation
Steven Spielberg, Grantor
Los Angeles, CA
DONATIONS PRIOR YEAR: $8,624,506
LARGEST DONEE: Cedars‐Sinai Medical Center
Chais Family Foundation
MADOFF EXPOSURE: ALL
DONATIONS PRIOR YEAR: $8.1 million
LARGEST DONEE: United Jewish Communities
AMOUNT: $3 million
This list does not break down the damage to smaller foundations whose monies were invested with Chais,
which would seem to include the $18 million exposure of the Jewish Community Foundation
[NOTE: According to the Jewish Community Foundation’s PR company, the Foundation had no money invested through Chais. In a Sunday morning e-mail to me, Gerald S. Freisleben, president of the PR firm of Foley/Freisleben, stated:
“We have gone to extraordinary lengths to communicate that—as painful, humiliating and unprecedented as the Madoff fraud is—The Foundation invested directly with Madoff on recommendations and decisions of its own Investment Committee. The Foundation had no relationship whatsoever at any time with Stanley Chais, nor did it invest funds through his firm or rely on him for advice.”
He added that the JCF posts an FAQ about its exposure in the Madoff scheme on it’s web site:
In The Foundation’s expressed commitment to full transparency regarding all matters Madoff, there is a dedicated section of its website that includes regularly updated disclosures and FAQs for your reference. This specific issue of how The Foundation came to be invested with Madoff is addressed in one of the Q&As, in fact.
The Madoff Affair does reveal, as Kristof points out, a lack of due diligence on the part of these foundations and/or their accountants:
hen there’s the question of the accountants who prepared these tax returns. A surprising number of the foundations invested in Mr. Madoff shared the same accounting firms, generally small ones at that. One wonders if they could have looked more skeptically at the kinds of trades that supposedly were being placed on the foundations’ behalf by Mr. Madoff.
There is a need, as we have written, for greater transparency and accountability in the way Jewish non-profits invest.
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January 28, 2009 | 3:07 am
Posted by Brad A. Greenberg
The list of mini-Madoffs is growing. Here’s a bit of a run-down from The New York Times:
Some of these schemes have been operating for years, and others are of more recent vintage. But what is causing them to surface now appears to be a combination of a deteriorating economy and heightened skepticism about outsize returns after the revelations about Mr. Madoff. That can scare off new clients and cause longtime investors to demand their money back, which brings the charade tumbling down.
“There is no way for a Ponzi to survive given the large number of redemptions and a lack of new investors,” said Stephen J. Obie, the head of enforcement at the Commodity Futures Trading Commission. The agency has experienced a doubling of reported leads to possible Ponzi schemes in the last year, and its enforcement caseload has risen this year.
On Monday, at a suburban New York train station, Nicholas Cosmo surrendered to federal authorities in connection with a suspected $380 million Ponzi scheme, in which investors paid a minimum of $20,000 for high-yield “private bridge” loans that he had arranged.
Mr. Cosmo promised returns of 48 percent to 80 percent a year, and none of his investors apparently minded — or knew — that Mr. Cosmo had already been imprisoned for securities fraud. In the end, 1,500 people gave him their money, often through brokers who worked on his behalf.
And in Florida, not far from the Palm Beach clubs where Mr. Madoff wooed some of his investors, George L. Theodule, a Haitian immigrant and professed “man of God,” promised churchgoers in a Haitian-American community that he could double their money within 90 days.
He accepted only cash, and despite the too-good-to-be-true sales pitch, he found plenty of investors willing to turn over tens of thousands of dollars.
“The offices were beautiful, and I was told it was a limited liability corporation,” said Reggie Roseme, a deliveryman in Wellington, Fla., who lost his entire savings of $35,000 and now faces foreclosure on his home.
According to federal regulators who have accused him of operating a Ponzi scheme, Mr. Theodule bilked thousands of investors of modest means, like Mr. Roseme, out of $23 million in all, and put $4 million in his own pocket. This money helped pay for two luxury vehicles for Mr. Theodule, a wedding, a lavish house in Georgia and a recent trip to Zurich that federal authorities are now investigating. The fate of the other $19 million is still unknown.
Investors in Idaho say they lost $100 million in a scheme that promised 25 percent to 40 percent annual returns. In Philadelphia, a failed computer salesman tried his hand at trading nonexistent futures contracts for 80 investors and surrendered to federal authorities this month after losing $50 million.
A Ponzi scheme in Atlanta that promised investor returns of 20 percent every month through something called “30-day currency trading contracts” was shut down this month after losing $25 million. And Tuesday, Arthur Nadel, a prominent money manager in Sarasota, Fla., and philanthropist turned himself in to the authorities. He had disappeared this month, just days before the Securities and Exchange Commission charged him in a $300 million investment fraud that may be a Ponzi scheme.
January 26, 2009 | 3:11 pm
Posted by Tom Teicholz
According to a Reuters article, Zsa Zsa Gabor’s attorney disclosed that she has lost at least $7 Million in investments with Madoff. Zsa Zsa Gabor whose age is guesstimated to be 91 (the true age of Zsa Zsa is something that no one can ever really know), is reportedly wheelchair bound suffering the effect of old age, a stroke—this makes life all the more difficult for her.
January 8, 2009 | 8:25 pm
Posted by Brad A. Greenberg
Even though they lost whatever was left in their account, Madoff investors who took money out over several years or decades may actually have made off with money Madoff received from others, the AP reports:
The many Bernard Madoff investors who withdrew money from their accounts over the years are now wrestling with an ethical and legal quandary.
What they thought were profits was likely money stolen from other clients in what prosecutors are calling the largest Ponzi scheme in history. Now, they are confronting the possibility they may have to pay some of it back.
The issue came to the forefront this week as about 8,000 former Madoff clients began to receive letters inviting them to apply for up to $500,000 in aid from the Securities Investor Protection Corp.
Lawyers for investors have been warning clients to do some tough math before they apply for any funds set aside for the victims, and figure out whether they were a winner or loser in the scheme.
Hundreds and maybe thousands of investors in Madoff’s funds have been withdrawing money from their accounts for many years. In many cases, those investors have withdrawn far more than their principal investment.
“I had a call yesterday from a guy who said, ‘I’ve taken out more money then I originally put in, but I still had $1 million left with Madoff. Should I file a $1 million claim?’” said Steven Caruso, a New York attorney specializing in securities and investment fraud. “I’m hard-pressed to give advice in that situation,” Caruso said.
January 8, 2009 | 7:09 pm
Posted by The Web Guy
Jeffrey Katzenberg is not a happy mogul, at least according to Bloomberg News:
Jeffrey Katzenberg, chief executive officer of DreamWorks Animation SKG Inc., said personal losses from investments with Bernard Madoff did “extraordinary damage” to his philanthropic efforts.
“The first time I heard the name Bernie Madoff was about three weeks ago when I found out that, you know, he had swindled all this money,” Katzenberg said today in an interview on CNBC.
The film-making executive is among Hollywood personalities who suffered losses at the hands of Madoff, including director Steven Spielberg and actor Kevin Bacon. Katzenberg wasn’t specific about the scope of his loss.
“This is extremely painful and humiliating for me,” Katzenberg said. “It has done extraordinary damage to my philanthropy.”
The Marilyn & Jeffrey Katzenberg foundation listed assets of $22.1 million as of 2007, according to a September tax filing. The books were managed by Breslauer Rutman & Anderson LLC in Los Angeles.
The filing listed two sources of income from “B Madoff”: Treasury bill interest of $220,371 and income of $98,944.
“That this man is actually walking free today I think is a disgrace,” Katzenberg said on CNBC. “And this guy is living in a $7 million apartment today walking free. There is something very, very wrong.”
Katzenberg’s contributions in 2007 totaled $455,333, according to the tax filing, with the largest sum, $100,000, going to the Motion Picture & Television Fund. He also donated to the Michael J. Fox Foundation.
The whole Bloomberg article is here.
January 7, 2009 | 4:47 pm
Posted by Tom Tugend
The victims of Bernard L. Madoff’s fraud includes no small number of boldface names and institutional investors.
There are Hollywood moguls Steven Spielberg and Jeffrey Katzenberg, financiers Fred Wilpon and Henry Kaufman, and actors Kevin Bacon and Kyra Sedgwick.
Then there were banks like HSBC and Banco Santander, and nonprofit groups including Yeshiva University and the Robert I. Lappin Charitable Foundation.
But a number of average-Joe investors have discovered that they, too, had money invested with Madoff. Their retirement funds, family trusts, and other savings usually found its way to Madoff through “feeder” funds, some of which were run by friends, acquaintances, or financial advisers.
Since they were not direct investors with Madoff, their status in recovering any money is uncertain. But there is no doubt that they, too, are victims of what appears to be the greatest Ponzi scheme in history.
Here’s my story:
In 1992, when I was 67 years old, I unexpectedly found myself with some extra cash on hand. During the preceding half century, I had served in three wars, earned a master’s degree, married, bought and paid off a house, and put three daughters through college.
I had started my fulltime working life in 1950 as a copyboy and later reporter on the San Francisco Chronicle and then, for over 30 years, was simultaneously a science writer at UCLA and a freelance journalist. My wife, Rachel, had worked full or part-time during much of that period.
We had bought a hillside house in suburban Los Angeles in 1968 and were close to paying off our mortgage.
Our two older daughters had married, were working and raising their own families, and our youngest child was independent, and likely to marry in the near future.
As a family, we were always quite disciplined about the household budget. As a matter of principle, we never got into debt and we paid off our credit card balances in full every month.
I wasn’t exactly a tightwad, we traveled frequently overseas, but, as my daughters like to remind me, when they were kids and scrawled drawings, I made them use BOTH sides of a blank sheet.
So in 1992, Rachel and I found ourselves with an extra $25,000 in the bank and decided to invest it, but knew enough to know that we knew nothing about the market.
So we turned to a trusted friend, whom we shall call Phil, who was our sometime lawyer and a fellow volunteer in local political campaigns. Phil had many years of successful investment experience, and although $25,000 was pretty small potatoes in his league, we insisted that we wanted into the game.
Thus I became one of some 99 limited partners in Caroline Investment Co. Phil told me that the partnership had consistently returned 15 percent to 16 percent a year, sometimes as much as 20 percent, and added that he had millions of his own money in the fund.
But he warned me that even he, with decades of experience, had no idea how the partnership managed to generate such high and steady returns.
Phil sent me a 73-page document, which I never read closely until after I learned about my link to Bernard Madoff. In the papers, I have learned that Caroline was a limited partner in the Lambeth Fund, operated entirely by Beverly Hills investor and arbitrage maven Stanley Chais, whom Phil had known for many years.
Chais, in turn, passed on the funds in Lambeth, Caroline and other partnerships to an unnamed brokerage and investment firm in New York. That firm, we learned since, was Madoff Investments; Chais had known Bernie Madoff for decades, but the name never appeared in any papers and was unknown to Phil.
For years, this opacity didn’t matter. Like most small-time amateur investors, with a full work and family life, I had happily watched as my stake steadily grew. Even with 25 percent of the profits going to Chais and 5 percent to Phil for their administrative work, I averaged an annual net return of 10 percent to 14 percent.
This compounded rapidly, since I didn’t need the income to make ends meet. Since my investment was in the form of an I.R.A. account, I didn’t have to withdraw money until I was 70½ years old and started receiving mandatory minimum distributions.
I had about $150,000 accumulated in Caroline on Dec. 11, when I received an e-mail from Phil, which started, “I have some terrible news for us.”
The shocking news, of course, was that Madoff had been arrested for fraud and that the many millions Phil and his daughter, a successful Los Angeles restaurateur, had been wiped out, as had Chais’ Lambeth Co.—and my $150,000.
Sure the loss hurts, and with the simultaneous devaluation of our house, we have dropped plans to move into an upscale retirement community.
On the upside, our mortgage is paid off, I still earn money as a journalist, and I get Social Security. Although my retirement-savings plan with the University of California is sinking like a stone, I’m pretty confident that my wife and I will not go hungry.
I take some irrational satisfaction from the thought that, for the first time in my life, I’m in the company of so many millionaires and billionaires, and we are all going down together on the same financial Titanic.
The real losers, I’m afraid, will be the families of my three daughters, and my eight grandchildren, to whom I will now leave a rather meager monetary inheritance.
This report was initially published on Portfolio.com, the Web site of Conde Nast Portfolio Magazine
January 5, 2009 | 6:11 pm
Posted by The Web Guy
From the AP:
Prosecutors in New York are asking a judge to put Bernard Madoff behind bars without bail.
They told the judge today that the disgraced financier had violated bail conditions by mailing about a million dollars worth of jewelry and other assets to relatives.
Madoff’s lawyer described the items as heirlooms, and said they weren’t significant assets. They were sent to Madoff’s children and to friends who were vacationing in Florida.
He also said Madoff is “not a threat to the community,” and that there’s “no danger he’s going to flee.”
Not a threat to the community, eh? It is to laugh.
January 4, 2009 | 6:20 pm
Posted by The Web GuyDear anti-Semites: