Christmas is coming. More and more people are facing unemployment in the United States and around the world. Nonprofits are reeling from a deepening global recession. And an alleged Ponzi scheme an investment broker hatched has apparently lost millions not just for the wealthy elite but also for charities around the world.
Carl Shapiro, 95, watched $145 million disappear from his family's $345 million foundation upon revelation of the fraud.
The Bernard Madoff fraud is shuttering several nonprofit organizations, most of them Jewish, and more and more foundations are publicizing their losses because of the scheme. Numbers available as of Wednesday put losses for nonprofits at about $265.7 million, though several large foundations like that of Sen. Frank Lautenberg have not published any figures.
Madoff confessed to his sons that he had been running a Ponzi scheme where he used investments to pay out high returns to investors, instead of generating profits from actual investments. Analysts say it could be the biggest swindle in history-Madoff controlled around $50 billion in assets.
So far, 14 nonprofit groups have stated they were clients of Madoff. Three foundations are shutting down after realizing the loss of their funds. Other organizations may suffer tangentially from the fallout because their donors had investments with Madoff, like Steven Spielberg's Wunderkinder Foundation.
Many of the foundations affected, like Shapiro's, fund research and the arts in the United States. Funds totaling $110 million belonging to New York's Yeshiva University evaporated as well.
After 23 years of funding Jewish causes in Israel, the Chais Family Foundation will close its doors. Other affected groups having to shut down include the Robert I. Lappin Charitable Foundation, which lost $7 million, and the JEHT Foundation, which funds millions of dollars of research into justice and social policy issues every year.
"The impact is really quite deep because we're talking about $25 to $30 million in funding to organizations that are no longer going to be getting that money," said Robert Crane, president of the JEHT Foundation.
Some clients may find restitution through a $1.6 billion investment insurance fund chartered by Congress, the Securities Investor Protection Corporation (SIPC), where victims of bankrupt brokerage funds can receive up to $500,000 of their money back. But with the extent of losses under this fraud, these funds will not save some organizations. Courts will likely divvy up Madoff's remaining assets, though it doesn't appear that his assets will cover the losses.
Those nonprofit groups who do survive will face tight budgets and perhaps downsizing.
Madoff had personal relationships with many of his investors, who now feel anger not just over their financial losses, but also over the breach of trust.
On Wednesday, Madoff appeared at the federal courthouse in New York to complete paperwork for his $10 million bail, which includes conditions such as a curfew and a monitoring device he has to wear on his ankle. Securities and Exchange Commission Chairman Chris Cox berated SEC regulators Wednesday for not pursuing the Madoff case sooner.
The Associated Press contributed to this report.