Outraged philanthropists worldwide are nursing wounds from the alleged US$50 billion fraud by former NASDAQ chairman Bernard Madoff, forcing some charities to shutter and hitting others with massive losses.
When Jeanne Levy-Church created the JEHT Foundation in 2002 to promote justice, equality, human dignity and tolerance, she tapped into investments run by Madoff.
Those investments were initially made more than three decades ago by her father, Norman Levy, who entrusted his real estate fortune to Madoff. Funded solely by contributions from Levy-Church, the foundation gave away more than US$75 million over the next few years.
But on Monday, the foundation announced that it would cease operations by the end of next month.
The allegations of massive fraud by Madoff came at a difficult time, with many charities already struggling from losses in financial markets and facing growing demand for their services in the US recession.
“Sometimes we have seen this wrongdoing happen, and it cuts into endowment funds. But I have been working here for 10 years and I haven’t seen a situation where organizations simply disappeared,” said Michael Nilsen, a senior director at the Association of Fundraising Professionals.
US prosecutors and regulators have accused Madoff, 70, a former chairman of the NASDAQ Stock Market, of running the fraud through his investment advisory business.
As of Monday, at least three foundations had shut or planned to shut, including JEHT, and another may be forced to close.
In New York, the nonprofit Philoctetes Center for the Multidisciplinary Study of the Imagination lost all of its funding, co-director Francis Levy said. The group may shut.
The Chais Family Foundation, which gives about US$12.5 million annually to Jewish causes mostly in Israel and the former Soviet Union, shuttered and laid off its five staff.
“The entire fund was invested through Mr Madoff, and as a result the fund has been completely obliterated,” Chais Family Foundation president Avraham Infeld said by cellphone from Jerusalem, where the foundation is headquartered.
Some charities suffered indirectly because donors who invested money with Madoff scaled back contributions.
“It’s not catastrophic, but it does hurt us,” said Madeline deLone, executive director of the Innocence Project, which was supported by JEHT in its work to use DNA evidence to exonerate improperly convicted criminals and to reform the US criminal justice system.