Should Charities Repay Their Madoff Money?

Today, Bernard Madoff will likely be sentenced to spend the rest of his life in a federal penitentiary. But his sentencing is merely the beginning of the litigation and recrimination he has spawned with his vast investment fraud.

The inevitable accusations — and perhaps criminal charges — against his co-conspirators, and particularly his family, are sure to continue. And another troubling aspect of the Madoff fraud has emerged in the past few weeks. It is now being alleged that certain charitable foundations and individuals on the whole reaped profits in the millions, if not billions of dollars, from Mr. Madoff’s misdeeds.

And much of this money may have been subsequently donated to innocent charities. This situation raises some of the most troubling questions about Bernie’s legacy. First, did charities on the whole benefit from Mr. Madoff’s crime? And second, do these innocent charities have a moral or legal obligation to return the money?

To understand these questions and the enormity of Bernie’s fraud, one need merely peruse the complaint recently filed by the trustee of Mr. Madoff’s estate, Irving H. Picard of Baker & Hostetler, against Jeffrey M. Picower and a host of affiliated entities, including the Picower Foundation.

The complaint alleges that the Picower Foundation profited to the tune of more than $5 billion dollars investing with Bernie for over two decades, including reaping $2.4 billion in profits in the last six years alone. The complaint alleges that the entities knew or should have known what Mr. Madoff was doing, because of the extremely high returns in consecutive years, which often averaged over 100 percent and in one year over 950 percent.

I’m guessing that they would.

Yes, it's certainly covered under a clawback / "fraudulent conveyance" provision, since money from the victims was not intended to be donated to the charity, no matter how legitimate it is, or how sincere or generous the "donor" was with what really was other people's money.

The Madoff mess is more complicated than most, not only because of size and time span, but also because some used Madoff the way Hillary used Jim Blair and Refco in her infamous commodity trading infamous commodity trading (e.g. Picower and Chais et al) and/or possibly using Madoff Securities to launder money, in US and internationally.

.....some used Madoff and/or Madoff Securities to launder money, in the US and internationally.....

You got that right. Madoff was reportedly choosy about his investors---many were told they were "favored" if Madoff allowed them to "invest" with Madoff's "sure thing."

Remember Madoff’s pal----J Ezra Merkin---- was using four hedge funds to feed Madoff. Merkin was a "feeder." He introduced wealthy people to Madoff and gave Madoff access to prominent tax-exempt Jewish religious charities and universities.

Merkin was also then-GMAC chair and got a $6B bailout.

Bernanke, Paulson, Merkin---salivating to divvy up the taxpayers' billions. Americans have not yet learned the full extent of official corruption, thievery, schemes and scams involving $BILLIONS in bailouts.

BACKGROUND News organs reported they both attended the same house of worship and were on the same committees----J. Ezra Merkin, then-GMAC chair, Fifth Avenue Synagogue president, and chair of Yeshiva University's Investment Committee invested some $1.8 billion w/ Madoff (through Merkin‘s Ariel and Ascot Partners hedge funds).

Members of the Fifth Avenue Synagogue, located on the wealthy Upper East Side of Manhattan, are estimated to have invested $2 billion with Madoff. Former Fifth Avenue Synagogue congregants include infamous tax dodger and Clinton pardonee Mark Rich who renounced his American citizenship to evade prosecution. Rich's fellow congregants later sprang to his defense and used their stature and power to get Rich the Clinton pardon.

Merkin also served as Chairman of the Yeshiva University Investment Committee w/ Bernie (both forced out in the Madoff scandal).

Ex-GMAC Chair Merkin got a $6B US bailout......and also co-owns an Israeli bank. Israel is the only place in thr world when an individual can fly in, debark, go to a bank with a suitcase full of cash and nobody asks where it came from or if taxes were paid on it.

One infamous fraud nailed several years ago (not involving Madoff)-----an individual gave a generous donation to his synagogue “with conditions.” The rabbi kept a cut then deposited the rest in an Israeli bank for the donor’s use later---all tax free.

I suspect a close look at the specific charities would find that many were in position to steer valuable favors to big donors. Charities that were getting money via this sort of route should be made to cough it back up.

New York University filed a lawsuit claiming J. Ezra Merkin turned over his investment responsibilities to Madoff's funds and lost $24 million of the school's money. The suit names as defendants Merkin's Ariel Fund Ltd.; the fund's investment manager, Gabriel Capital Corp.; and Fortis Bank. NYU had invested $94 million in Ariel, a partnership between Merkin and Fortis, in the mid-1990s. A lawyer for Mr. Merkin said the school only invested $30 million and made $60 million. Ariel plans to liquidate due to Madoff-related losses, but a temporary restraining order prohibits assets from being transferred out of the fund.

Martin Mr. Rosenman, managing member of Rosenman Family LLC, NY-based heating oil distributor, wired $10 million to Madoff via a JPMorgan Chase Bank account on Dec. 5, just six days before Madoff's arrest. The funds weren't supposed to be touched until Jan. 1, according to a suit filed in bankruptcy court, but Mr. Rosenman received a statement Dec. 5 explaining the money was used to sell short $10 million in U.S. Treasuries. There is no record that the Treasury short ever occurred.

Chais Family Foundation A charity that gave to Jewish causes. Money manager Stanley Chais managed investments he called "the arbitrage partnerships," according to investors and firm correspondence. His California-based charity group invested entirely with Madoff, and was forced to shut down operations after years of donating some $12.5 million annually to Jewish causes in Israel and Eastern Europe.

MADOFF FEEDER FUND Brighton Co Investments is headed by Stanley Chais, a Beverly Hills, "philanthropist" who served on "charitable" boards with Madoff. Chais (pronounced Chase) told the Jewish Journal of Los Angeles that he personally invested with Madoff but also "facilitated" others who wished to do likewise. However, spokesmen for the SEC and the California Dept of Corporations said they could find no record of Chais registering as an investment advisor or a broker.

Stanley Chais offers remarks at the Weizmann Institute of Science.

STANLEY CHAIS IS PROMINENT WITHIN THE SOCIAL LABYRINTH MADOFF USED TO RAKE IN BILLIONS---

MAP IS INTERACTIVE AT WEB SITE http://news.muckety.com/2008/12/28/madoff-used-social-family-networks-to-rake-in-billions/9031

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