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JPost: Federations were inherently protected from Madoff

By Jacob Berkman · December 26, 2008

The Jerusalem Post says that Jewish federations by their nature where better protected from exposure to Madoff than private foundations and other nonprofits:

They were founded to centralize and rationalize communal fund-raising, to be an address where all institutions together raise and dispense the communal treasury. The result is a system that generates competition over resources, but then structures it and channels it into compromises that allow the community to pay for itself.

True, the board members and executive leadership of federations are not the average Jew on the street, though the system is by its nature more representative of varied interests. But federation leaders still constitute multiple centers of power and competing layers of oversight within the top tier of the communal philanthropic structure.

When a federation board comes to manage policy-making and risk, it is more often than not a place of debate, of clashing egos and different visions for Jewish life, incorporating different donors, competing communal leaders and disagreeing religious movements.

Because federations have a fiduciary responsibility to multiple donors, their levels of oversight enjoy a degree of support that almost institutionally forces them to think twice about any initiative or investment.

This can be a frustrating experience in daily governance, but Mr. Madoff may have taught us that it has a positive side to which we may not have paid sufficient attention in recent years - that it can be an institution's salvation from the sort of woes afflicting the Jewish world in these very days.
 

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Rabbi: Kick Madoff out of the Jewish people

By Ami Eden · December 26, 2008

Rabbi Joshua Hammerman, religious leader of Temple Beth El in Stamford, Conn., wants Bernard Madoff excommunicated. Here's the rabbi's letter to Malcolm Hoenlein (not sure why this is a job for the Conference of Presidents, but we can discuss that another time) making the case for such a drastic step:

Malcolm I. Hoenlein
Executive Vice Chairman
Conference of Presidents of Major American Jewish Organizations

Dec. 23, 2008

Dear Mr. Hoenlein,

I call upon the leadership of the American Jewish community, specifically the Council of Presidents of American Jewish Organizations -- which includes both lay and rabbinic groups -- to initiate action leading to the excommunication of Bernard Madoff.

Such a move would be unprecedented in the annals of American Jewry, and by its scope and power, perhaps in all of Jewish history. But never before has one man done such damage to individual Jews, Jewish organizations and Judaism itself. His actions were a betrayal of trust of an unprecedented degree. An overwhelming and overpowering statement of condemnation is essential. A clear message needs to be sent to others who might also be involved in similar schemes, to the Jewish public seeking moral leadership and to the public at large.

There have been many who have done more harm to Jews. To my knowledge, Madoff has not killed anyone (update: Rene-Thierry Magon de la Villehuchet committed suicide on Tuesday, after the hedge fund he operated lost $1.4 billion because of Madoff). But the foundations and charities he has harmed irreparably will prevent people from getting needed health care or educational assistance, will likely keep Jewish youth from rediscovering their identities and aged Holocaust survivors from recording their stories. Mark Charendoff of the Jewish Funders Network described it to “The Forward” in near apocalyptic terms, as "an atomic bomb in the world of Jewish philanthropy.” An apocalyptic crime calls for an unprecedented response.

But the greatest damage done by Madoff has been to Judaism itself.

David Harris of the American Jewish Committee wrote in a letter to the New York Times of his concern that the Times’ coverage of Madoff had placed a “striking emphasis on his being Jewish.” But the Times is hardly alone in drawing that connection: Google “Madoff” and “Jewish” and 295,000 Web links already appear. The ADL called this a spike in online anti-Semitism. So we have a situation where Jews are being blamed for a crime that has disproportionately harmed Jews. I can understand why Jewish organizations are jittery about anti-Semites having a field day on this matter, but the most effective way to address it is through a clear repudiation not only of Madoff himself, but of the anti-Judaic nature of his acts.

Abraham Joshua Heschel said that in a free society, some are guilty; all are responsible. On so many levels, beginning with that commandment about not stealing, Jewish tradition abhors what Madoff has done. Unless we Jews raise our voices louder than anyone else in condemnation of these acts , we are not only giving credence to all the false images being perpetrated by the anti-Semites, but we are perpetuating what the ancient sages dubbed a “hillul ha-shem,” a desecration of God’s name.

Rabbis have employed excommunication often over the centuries, particularly in chasing down husbands who refuse to grant religious divorces to their wives; but usually the impact has been localized. In medieval times, it was used as a political weapon against alleged heretics, like Spinoza and some Karaites. In our time this tool has lost its clout, simply because the Jewish community lacks unity, and because rabbinic sanction has little impact outside the ultra-Orthodox world.

But Madoff’s crimes cut across the Jewish spectrum - like a hatchet, not a scalpel. Hadassah reportedly lost $90 million; the Robert E. Lappin Foundation of Boston, which sent twenty of my community’s teens to Israel for free two years ago, was forced to shut down. Imagine if all the organizations represented by the Council of Presidents were to come together and say, flat out, that Madoff has done irreparable harm to Jews and Judaism and that he is not welcome in any synagogue, JCC or Federation event anywhere. No rabbi will marry him or bury him. No organization will make excuses for him. He is to be cut off. Period.

The mechanism for excommunication would need to be devised from scratch, along with the precise consequences. There would need to be a degree of rabbinic and lay cooperation that we’ve rarely if ever seen among Jews in this country. We are in uncharted territory. But to this point, the response of the organized Jewish community to this scandal has been tepid at best, likely because many fear the anti-Semitic backlash that, ironically, will only be exacerbated by continued tentativeness. Most of those directly impacted by the scandal were blameless save for their blind faith, but too many traveled in the same social circles that honored this man for all the wrong reasons; too many proclaimed his genius. Those images are what will remain unless American Jewry recognizes that there is something rotten that must be exorcised from our culture and from our midst. Some have said that what we need is the equivalent of a moral bailout. What we certainly need is resolute action.

Ultimately, it’s not because of the anti-Semites that this needs to be tackled head-on. Our own children are watching us. If the communal response to Madoff is concerted, unified and reasonable, this could be American Jewry’s finest hour. If not, it will be the continuation of our worst nightmare.

Sincerely,

Rabbi Joshua Hammerman

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More details on the plan to help nonprofits hurt by Madoff

By Jacob Berkman · December 26, 2008

The Washington Post and the Forward both added some more color to the description of the meeting of the Jewish Funders Network that JTA first reported on earlier this week.

The JFN, which has some 900 members, all of whom are major funders of the Jewish community, convened a meeting Tuesday of 35 of the largest Jewish foundations, during which the participants decided to come up with bridge funding for nonprofits now in trouble because they took losses as a result of Bernard Madoff’s scam.
 

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UJC surveys 55 federations and finds seven lost money in Madoff scheme

By Jacob Berkman · December 26, 2008

The United Jewish Communities has conducted a survey of 55 of the larger federations, in an attempt to try to figure out how badly the federation system was hurt by Bernard Madoff's Ponzi scheme.

According to an e-mail UJC president and CEO Howard Rieger sent out to the board of trustees of the Jewish federation system's umbrella organization, seven federation endowment funds or communal foundations lost money through Madoff. Their losses ranged from $70,000 to $24.4 million. Though the e-mail does not mention which federations lost money, we believe that the Jewish Federation of Greater Los Angeles took the largest kown hit so far.

Here is the e-mail:

We want to convey to our Board of Trustees that, in the wake of the Madoff scandal allegations, UJC verified its own endowment and pension funds had no exposure to any related funds. UJC also surveyed federations, community foundations and National Agency Alliance members to gauge their losses and determine a response.
 
UJC received survey responses from 55 federations and community foundations. We learned that seven communities with endowments/foundations were directly exposed, with losses ranging from $70,000 through a fund of funds to $24.4 million. We also learned that one federation had exited a position with Madoff's fund over a lack of transparency, but that the federation still had a $100,000 "hold-back" in escrow.
 
UJC also learned that two National Federation Agency Alliance members lost money, one losing several thousand and one losing several million dollars. Many communities also have donors who were personally victimized.

The survey asked federations how UJC can help them respond. "UJC's Planned Giving and Endowments Department should continue to share information as it becomes available and provide guidance and support especially in the area of donor and leadership communications," one respondent said.
 
Other suggestions included:
 
1.    Provide best practices in financial management;
2.    Provide updates that federations can send to their donors;
3.    Forward a list of charities impacted so that federations and donors can help;
4.    Prepare talking points for the federations to use with their donors.
 
UJC's preliminary conclusions:
 
1.    Less than one-half of 1 percent of the federation system's total assets was affected.
2.    Annual Campaigns could be affected if major donors and private foundations impacted by Madoff were contributors.
3.    The coming year could see major philanthropic gaps created by these losses.
4.    The scandal could accelerate a trend towards mergers and consolidation of infrastructure as NGOs seek more efficient structures.
5.    One federation also thanked UJC for providing subsidies to attend the UJC Investment Institute.
 
UJC is planning a series of responses to this alleged scheme, which include:
 
1.    Supporting federation efforts toward financial accountability and transparency by helping communities adhere to high fiduciary standards;
2.    Helping federations build trust with donors by advising on communications strategies;
3.    Creating marketing that positions the Annual Campaign as an all-weather strategy, especially critical when the economy falters.

UJC's Washington office reports Congress will likely focus on numerous aspects of the Madoff case, including how non-profits make their investment decisions and other internal governance and performance issues. Some of the Congressional outreach will, undoubtedly, place the Jewish philanthropic world under renewed focus. UJC will carefully monitor and respond to such investigations on behalf of federations.

 

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