The news that former Nasdaq chairman Bernard Madoff may have defrauded investors of as much as $50 billion sent yet more waves through the jittery financial markets. Those waves ended up being tsunamis for some charities, at least three of which will close their doors entirely as a direct result.
The Robert I. Lappin Charitable Foundation, which has financed the trips of hundreds of Jewish youth to Israel, posted a stark message on its website: "The programs of the Robert I. Lappin Charitable Foundation and the Robert I. Lappin 1992 Supporting Foundation are discontinued, effectively immediately. This includes Youth to Israel and Teachers to Israel. The money used to fund the programs of both Foundations was invested with Bernard L. Madoff Investment Securities and all the assets have been frozen by the federal courts. The money needed to fund the programs of the Lappin Foundations is gone."
They're not alone. The JEHT Foundation, which supports reform of the criminal justice system, said it would also shut down because its largest donors were Madoff investors. The Chais Family Foundation, which gives about $12.5 million each year to Jewish causes in Israel and in the former Soviet Union, laid off its staff and shut down after losing millions with Madoff. This closure will also cause other ripple effects: The United Jewish Communities and the American Jewish Joint Distribution Committee were among its main beneficiaries.
So far, no evangelical Christian organizations have been identified as victims of the Madoff scandal. Dan Busby, acting president of the Evangelical Council for Financial Accountability (ECFA), told WORLD, "The good news is that I haven't picked up anything from our members." But only about 2,000 of the more than 500,000 religious nonprofits in America are members of the ECFA. The overwhelming majority of Madoff's victims is still unknown to the public.
As bad as this fraud is, it could have been much worse. Hedge funds were heavy investors with Madoff. During the market sell-offs, hedge funds needed to raise money fast to cover their highly leveraged positions in the market. These hedge funds, desperate for cash, rushed to liquidate their Madoff investments, and Madoff's inability to deliver apparently caused the Ponzi scheme to fall apart-and likely itself contributed to the market volatility. So, ironically, it was the market meltdown that brought this apparently long-term fraud to light.
But the fact that Madoff is now finally exposed is only small consolation to what will likely be the thousands of investors who will probably never see their money. Such losses will also likely delay the recovery of confidence in the financial system that will be essential for economic recovery.
One final irony: Madoff was a well-known contributor to politicians. One of his favorites? New York Democratic Sen. Charles Schumer, who has received at least $12,000 from Madoff since 1992. Schumer is a senior member of the Senate Banking Committee, one of the bodies that is supposed to be watching the financial services industry.
Some of America's best-known names from business, media, and politics are among Madoff's victims. Many had foundations or charities that invested with Madoff.
• Hollywood executive Jeffrey Katzenberg
• U.S. Sen. Frank Lautenberg (D-N.J.)
• Screenwriter Eric Roth
• Director Steven Spielberg
• Author Elie Wiesel
• New York Mets owner Fred Wilpon
• Publisher Mortimer Zuckerman