At least $600 million in Jewish charitable funds have been wiped out by the collapse of Bernard Madoff's Wall Street investment firm, a partial review by The Jerusalem Post revealed Monday.

Long Island Jewish Medical Center in New Hyde Park. Investors, including the medical center, had more than $24 billion in funds overseen by Bernard Madoff. Photo: AP

Slideshow: Pictures of the week Yet much is still hidden about what may amount to the most spectacular financial disaster to hit Jewish life since the Great Depression, with unconfirmed losses totaling up to $1.5 billion.

Furthermore, the Post's figures do not include billions of dollars lost to individual and family investors, many of whom were the primary donors to Jewish schools, synagogues and communal charities.

The Madoff scandal erupted last Thursday when the 70-year-old financier was arrested on a single count of securities fraud at his Park Avenue home after being turned in by his sons.

Prosecutors contend that Madoff, who is free on a $10 million bond, told employees of Bernard L. Madoff Investment Securities that he had lost as much as $50 billion in investor funds and reportedly described his operation as "a giant Ponzi scheme."

For the worldwide Jewish community, the fact that the man at the heart of what may be Wall Street's worst-ever fraud was an active member of the community could be the worst news yet in a bad recession period. Not only could Madoff's alleged dishonesty increase anti-Semitic feeling in a time of worldwide economic downturn, said many Jewish leaders, but his close involvement with the Jewish community has exposed vast amounts of Jewish communal assets to his scheme.

Most of the Jewish leaders reached by the Post on Monday said they did not yet know the extent of the damage to their own organizations because they were still checking with their major donors and reviewing their investment portfolios to determine their exposure to Madoff's scheme.

Some organizations, however, already know they have been hit, with many of them hit hard. Reports are surfacing that Yeshiva University has lost far more than a reported estimate of $100m. from its endowment fund, though the university declined to respond to an explicit query about the rumor.

The American Jewish Congress also declined to respond to a query about reports that a majority of its endowment has been lost, a loss that would threaten the organization's survival.

Following the closure of the Massachusetts-based Robert I. Lappin Charitable Foundation and the dramatic overnight disappearance of the much larger Chais Family Foundation, these reports do not bode well for a community that has yet to catch its breath amid an avalanche of bad news.

"It's a major massive shock to the philanthropic system. You have organizations that may not be viable entities without the resources that would have come either directly from endowments or from significant donors," said Sandy Cardin, president of the Charles and Lynn Schusterman Family Foundation, which, he said, did not take a hit from the collapse.

Among the major losses announced over the weekend, the Los Angeles Jewish Community Fund reported that its $25.5m. investment in Madoff's firm had disappeared, the Carl and Ruth Shapiro Family Foundation may have lost as much as $145m., while the Technion-Israel Institute of Technology, had some $6m. in funds invested with Madoff's firm.

Contradicting rumors that the UJA Federation of New York had taken a significant hit as well, spokeswoman Jane Rubinstein said the federation had "no exposure" to Madoff directly and did not believe that any of its funds had been reinvested with Madoff through third-party money managers.

"This is a tidal wave, a tsunami," said a veteran advisor to Jewish nonprofits, who spoke on condition of anonymity. "You can live with a downturn in the economy, because there will be an upturn. But now we're talking about foundations that have been wiped out completely, money that's not recoverable."

Though observers agree it is still too early to ascertain the full extent of the damage, some estimates expect a 20 percent reduction in funding for US Jewish federations. The cutbacks are expected to hit educational and Israel programs first as the federations work to keep their local charity efforts going.

"People who are starving are going to have to continue to be fed," Avraham Infeld, president of the collapsed Chais Family Foundation, told the Post on Monday. "That means every other kind of Jewish expenditure is going to have to move aside in order to allow welfare to take place for the aged and the poor."

According to Infeld, "this is probably the hardest financial hit ever for the Jewish community. There will be major mergers, cutbacks, and once-and-for-all removal of duplications in the organizations. Why do I need both the Jewish Agency and the Joint [Distribution Committee] today?"

The loss of billions of dollars to Jewish life already hit hard by a worsening recession will hurt everyone, said Infeld.

"I don't think there will be a single institution of Jewish life that will go unaffected. Nobody can sit by the side and say 'this will pass.' It's not going to pass."

The Madoff crisis marked an unprecedented loss to the "Jewish economy" - the networks of Jewish institutions, donors and charities that include universities, schools, hospitals and community centers, agreed Jonathan Sarna, a scholar of American Jewish history at Brandeis University.

Sarna predicted that the wholesale destruction of fortunes and endowments would prove to be a turning point in American Jewish institutional life, which over the past 20 years has moved from a model of community funding - collecting small donations from a broad swath of donors - to focusing on a handful of "cowboy" mega-donors who launched hugely successful programs like birthright Israel outside of the traditional federation system.

"The reduction of billions - not millions but billions - in the Jewish economy means that there is just not going to be enough money to sustain all the institutions and initiatives that have been created," Sarna told the Post.

"We will be a poorer community for that. What's been wiped out is an infrastructure that was particularly important in sustaining these institutions. The people who were invested with Madoff were the generation that not only supported institutions like Yeshiva University or the Holocaust museums, but that created them," Sarna said.

Slideshow: Pictures of the week Older donors from Florida's Palm Beach community, where Madoff found many of his investors, might be replaced by a younger generation of Jews whose wealth was invested elsewhere, Sarna speculated.

"It's a different group of people who will be called on to step in. It's almost impossible to imagine that the group that has lost so much money will regain it," he said.

The challenge facing American Jewry will be saving programs and institutions that provide "the most bang for the buck," a task complicated by the absence of a unifying organization to take the lead.

"Are these decisions going to be made by the market... or are we going to ask for a communal bailout?" Sarna asked. "We don't have anybody who can act with the speed and the authority of the federal government, and it's going to take time to sort this out and figure out how to make these decisions professionally."

The crisis triggered by the Madoff scandal was amplified by the scale of losses already sustained by nonprofit foundations and individual donors in the stock market over the past three months, which had already left many struggling to meet their budgets for the coming year.

"It's a triple whammy for Jewish and other not-for-profits that are already staggering because their donor base has been so hard-hit by the sharp drop in the value of their assets, and their own endowments have declined too," said Jack Wertheimer, a professor at the Jewish Theological Seminary.

Most of the nearly $20b. in losses already reported due to the Madoff scheme have been carried by financial institutions in the United States and Europe.

As the bad news continues to pour in, some media reports are beginning to question the "disgraceful negligence" on the part of American financial regulators, who reportedly examined Madoff's investment operation several times over a 20-year period without finding any wrongdoing.

"There were a lot of very sophisticated people who were duped, and that happens a great deal when you've had somebody decide to be unscrupulous," said Harvey Pitt, a former chairman of the Securities and Exchange Commission, a regulator in charge of monitoring investment funds like the one Madoff operated.

"this is probably the hardest financial hit ever for the Jewish community. There will be major mergers, cutbacks, and once-and-for-all removal of duplications in the organizations."

I hate to see theis happen to the Jewish community. This quote, though lept out at me associated with recent events.

CEOs have been destroying America by simply taking such edicts and parroting them to their junior organizations. Such direction makes sense when speaking at the holding company level, where a larger institution might reasonably dispose of redundant assets when their direction has a functional design. For example, Corporation X has 6 holding companies and between them they have redundant company functions in making particular products, the Corporation as a whole might benefit by selling off a duplicate company, while the market as a whole might benefit from increased competition.

When applied as common rule throughout the organization, it can lead to undermining the foundations of the corporate structure.

I recently spoke with a fellow engineer who heads an engineering section for a major power utility. His utility requires 5 engineers to perform the engineering work for the utility in his discipline (and that of the utility). Word from above announced redundancy would be cut. 3 of the five engineers were laid off. 2 engineers remained and their secretary. Day after day, their senior management criticized their efforts for not performing their responsible charge. One day the junior engineer walked by the senior engineer's door with a box in his hands and simply remarked, he'd see him later. He walked out the door, quit, and went on to other work, without notice.

Now the utility only had one engineer, the Chief in charge of the section and his secretary. Moments later his boss came in and demanded to know when certain engineering assignments were going to be performed. The Chief Engineer told him simply when he got to them, in a prioritized fashion, and perhaps he would have his secretary being screening his e-mails to free up a larger percentage of the day for engineering work, at least until they could hire some more engineers.

His boss told him he didn't rate the secretary in recent administrative reassignments and wanted a schedule for when work would be completed. The engineer then explained he was already 2 hours over normal end of work hours, and he had remained to try to get things organized, but what he was being requested would take more than several hours to produce, and with the several month backlog it could wait till the morning, considering he was late to meet his wife by an hour and the same pace had been ongoing for the past year or two and was the primary reason his fellow engineer finally walked out, unannounced.

The following morning when we walked in his department's door, the company VP and his boss were sitting there waiting for him, demanding to know when assignments would be produced. He asked for them to wait for him to use the restroom. walked back outside and got his coffee from off his car, returned to the office and explained to them that he would work on it when he returned, but had a plane to catch to attend a requisite professional seminar amongst utility engineers of his profession, required to coordinate the utility systems for the region.

Since then he lost the secretary, but they gave him another engineer position in return to assist him with labor,...provided of course they can get their manpower offices to advertise, recruit and hire a real engineer and not somebody they want to place to build their own creative empire.

Now here's the scary part. Folks, these are the engineers who keep us supplied with the utilities we generally assume are and will always be there. They have not only been over-tapped, but those overloading them have progressed with their own insatiable desires, sincerely thinking their policies are productive.

We are finding fewer and fewer mid level managers who actually understand the mechanics of their vocation from the bottom up, and fewer craftsman who know how to fabricate anything unless it is prefabricated off the shelf. The managers rely on only off-the-shelf fabrications and the entire market is becoming/has become an oligopoly of off-the-shelf suppliers. We are very susceptible to failure by the simple interruption in supply lines of communication. When they fail, they won't merely disrupt one commodity, but multiple commodities and even utilities may begin to fail.

Stories such as this one place the blame on criminal behavior or key personnel. IMHO, the much larger problem by several orders of magnitude, isn't the major criminal behavior of those who are identified as causing irreparable damage, but those who commit slightly criminal behavior, are ignored, or not justly held accountable, and establish that behavior as normal operating procedure. It is a system which is simply corrupted from its original functionality. IMHO, that is the real meaning of corruption which destroys empires.

Corruption isn't to be confused only with criminal behavior, as much as it is those who have committed a criminal act, are not held accountable, ignore their unjust action, then perform what is right in their own eyes.

Madoff's Victims

The fallout from Bernard Madoff's alleged Ponzi scheme reverberated around the world as the list of investors facing losses widened. Among the biggest losers were charities, hedge funds, and banks in Europe and Asia. Below, see some of the most exposed investors and sort by the amount of potential losses. Updated 12/15/08

Investor		Description		Amount of Exposure		Comment
Investor	Description		Amount of Exposure		Comment
Grupo Santander	Spanish bank		$3,190,000,000		In euros, the figure is 2.33 billion.Of that, 2.01 billion euros belongs to institutional investors, Optimal Strategic hedge fund investors (international private banking customers); 320 mllion euros belongs to other private banking customers.
BNP Paribas	French bank		$479,280,000		The company said it has no investment of its own in Madoff-managed hedge fund but it does have risk exposure (up to 350 million euros) through its trading business and collateralized lending to funds of hedge funds.
HSBC	British bank		$1,000,000,000		HSBC provided financing to a small number of institutional clients who invested in funds with Madoff; some clients in its global custody business have invested with Madoff, but the company doesn't believe these arrangements should be a source of exposure to the group.
Nomura Holdings	Japanese brokerage firm		$303,000,000		The 27.5 billion yen exposure is through Fairfield Sentry; That amount represents 0.2% of assets under management.
Nordea Bank AB	Swedish Bank		$65,730,000		The amount of exposure is about 48 million euros.
Societe Generale	French Bank		$13,690,000		The company says its exposure, which is less than 10 million euros, is "negligible."
UniCredit SpA	Italian Bank		$102,700,000		The company's total exposure is about 75 million euros. Dublin-based Pioneer Alternative Investments is indirectly exposed to Madoff via feeders; Italian clients have zero exposure.
Union Bancaire Privee	Swiss bank		$1,250,000,000		The bank's exposure to Madoff -- less than 1.26 billion Swiss francs -- is less than 1% of overall bank assets.
Steven Spielberg	The Spielberg charity -- the Wunderkinder Foundation		N/A		N/A
Fred Wilpon	owner of New York Mets		N/A		N/A
Norman Braman	former owner of Philadelphia Eagles		N/A		N/A
Carl Shapiro	The founder and former chairman of apparel company Kay Windsor Inc., and his wife		N/A		N/A
Sen. Frank Lautenberg	The charitable foundation of the New Jersey Senator's family		N/A		N/A
Leonard Feinstein	The co-founder of retailer Bed Bath & Beyond		N/A		N/A
The Elie Wiesel Foundation for Humanity	The charitable foundation of Nobel laureate		N/A		N/A
Yeshiva University	A New York-based private university		N/A		N/A
UBS AG	Swiss bank		N/A		The bank says is has "no material exposure."
Neue Privat Bank	Swiss bank		$5,000,000		The bank invested in a certificate based on a hedge fund with exposure to Madoff
Access International Advisors	A New York-based investment firm		$1,400,000,000		N/A
Banque Benedict Hentsch & Cie. SA	A Swiss-based private bank		$48,000,000		N/A
Harel Insurance Investments & Financial Services Ltd.	Israel-based insurance firm		$14,200,000		The exposure is 55 million shekels
Korea Teachers Pension	A 10 trillion won Korean pension fund		$9,100,000		N/A
Man Group PLC	A U.K. hedge fund		$360,000,000		Invested in funds directly/indirectly sub-advised by Madoff Securities
Bramdean Alternatives	An asset manager		N/A		The exposure is about 9.5% of assets.
EIM SA	A European investment manager with about $11 billion in assets		$230,000,000		The European investment manager with about $11 billion in assets. Overall, EIM assets at risk are less than 2% of what it manages.
Fairfield Greenwich Advisors	An investment management firm		$7,500,000,000		More than half of Fairfield Greenwich's $14.1 billion in assets under management, or about $7.5 billion was connected to Madoff.
Tremont Capital Management	The fund-of-funds business run by Tremont Group Holdings		$3,300,000,000		Tremont's Rye Investment Management business had $3.1 billion invested, and its fund of funds group invested another $200 million.
Maxam Capital Management	A fund of funds based in Darien, Connecticut		N/A		The fund reported a combined loss of $280 million on funds they had invested.
Ascot Partners	A hedge fund founded by billionaire investor, philanthropist and GMAC chief J. Ezra Merkin		$1,800,000,000		The hedge fund had $1.8 billion under management as of Sept. 30, had substantially all of its assets invested with Mr. Madoff.
Royal Bank of Scotland Group PLC	British bank		$612,260,000		The bank had exposure of about 400 million pounds to Madoff through trading, collateralized lending.
Reichmuth & Co.	A Swiss private bank		$327,000,000		About 3.5% of its assets under management were exposed to Madoff
Natixis SA	A French investment bank		$616,200,000		The company says it didn't make direct investment in Madoff-managed funds; some investments made on behalf of customers could have ended up being managed by Madoff. Exposure is about 450 million euros.
Hyposwiss	A Swiss private bank owned by St. Galler Kantonalbank		$50,000,000		Hyposwiss said roughly 0.1% of its overall assets was invested in Madoff products through managed accounts. Another $100 million is exposed through clients who chose to invest in Madoff funds. St. Galler Kantonalbank said its financial situation and liquidity aren't hurt by Hyposwiss' exposure.
CNP Assurances	French insurer		N/A		No direct exposure. Indirect exposure of 3 million euros via a fund of funds
Banco Espanol de Credito SA (Banesto)	A Spanish bank contolled by Banco Santander		N/A		Its clients have a total 2 million euros exposure
Allianz Global Investors	The asset management unit of German insurer Allianz SE		N/A		The unit says exposure "is not significant."
BBVA in Argentina	Spanish bank		$410,820,000		The company reiterated it doesn't have direct exposure to Madoff but would face losses of 300 million euros if Madoff funds were found not to exist.
Mediobanca SpA	via its subsidiary Compagnie Monegasque de Banque.		$671,000		Limited to $671,000 via its Compagnie Monegasque de Banque. via its subsidiary Compagnie Monegasque de Banque.
Dexia	French bank		N/A		No direct investments in funds managed by Madoff,; private banking clients have total exposure of EUR78 million to funds primarily invested in Madoff funds. Indirectly, Dexia is exposed through partially collateralized lending operations to funds exposed to Madoff funds for a gross amount of EUR164 million. If the assets managed by Madoff Investment Securities were nil, the above mentioned lending operations could trigger an after tax loss of about EUR85 million for Dexia.
Barclays PLC	British bank		N/A		The bank says it has "minimal" exposure" and is "fully collateralized"
AXA SA	French insurance giant		$136,940,000		Exposure is well below 100 million euros.
Clal Insurance Enterprise Holdings	An Israel-based financial services company		$3,100,000		N/A
Credit Agricole SA	French bank		$13,690,000		Exposure is less than 10 million euros.
Credit Suisse	Swiss bank		N/A		The company says it has "no material direct exposure." It is reviewing if any client funds were affected.
Groupama SA	French insurer		$13,690,000		Exposure is around 10 million euros.
KBC Group NV	Belgian banking and insurance group		N/A		No direct exposure; some indirect exposure through collateralized loans, but the exposure is very limited and immaterial to KBC's earnings. KBC has also made some loan advances to institutional customers who have invested in funds managed by Madoff Investment Securities, but this shouldn't have any material impact either, the company said.
Jewish Community Foundation of Los Angeles	The largest manager of charitable gift assets for Los Angeles Jewish philanthropists		$6,400,000		N/A
Banco Popolare	Italian bank		$10,950,000		The company says it had indirect exposure of up to 8 million euros; maximum lost on funds distributed to institutional, private clients is about 60 million euros.
Chais Family Foundation	A charity that gives away about $12.5 million annually to Jewish causes		N/A		The California-based charity group invested entirely with Madoff, and was forced to shut down operations on Sunday after years of donating some $12.5 million annually to Jewish causes in Israel and Eastern Europe.
Robert I. Lappin Charitable Foundation	A Massachusetts-based Jewish charity		N/A		The group, which financed trips for Jewish youth to Israel, was forced to close on Friday because the money that supported its programs was invested with Madoff.
Mortimer B. Zuckerman Charitable Remainder Trust	The charitable trust of real-estate magnate, who owns the Daily News and U.S. News & World Report		N/A		Funds exposed represented 11% of the value of that charitable trust.
JEHT Foundation	A New York foundation focused on electoral and criminal justice reform		N/A		The foundation, which stands for Justice, Equality, Human dignity and Tolerance, will close its doors at the end of January 2009. Donors Jeanne Levy-Church and Kenneth Levy-Church had all their funds managed through Madoff.
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Sources: WSJ reporting; the companies and charities

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