Back before he was disgraced for losing investors billions in a massive alleged Ponzi scheme, financial adviser Bernard Madoff offered his services with a soft sell.
Mark Seal, a longtime veteran of Jewish organizations, recalls watching Madoff make his pitch twice to Jewish organizations — once in the early 1990s, and once 10 years later. Each time, Seal said, he was struck by Madoff’s combination of confidence and low-key charm, and by the sense of familiarity he conveyed.
“His pitch was one part technology and one part record and one part that he was a lovely guy and you felt that — it’s funny, in retrospect — you felt a certain amount of integrity,” Seal told the Forward. “That was his presentation, in essence — his reputation and his personality.”
Madoff’s sterling reputation, his affable personality and his apparent financial acumen allowed him to move easily through the clubby Jewish philanthropic circles of New York and Palm Beach, Fla. Madoff served on prominent boards, such as that of Yeshiva University; fellow board members, and even other money managers, sought after him to invest their money.
Now, Madoff’s collapse has gone off like an atomic blast in the midst of that world, leaving behind the wreckage of shattered lives and fortunes, and creating a gaping hole where there were once billions of dollars — and, more importantly, implicit trust.
It is this trust that makes possible the very existence of the relatively intimate world of Jewish philanthropy, where charity and business often mix. The loss of money and trust together has dealt Jewish philanthropy — a pillar of American philanthropy — a blow from which it will not recover anytime soon.
“He has savaged Jewish civil society for a decade,” said one philanthropic recipient, who spoke of receiving “30, 40 calls from longtime donor friends who told me about the money they lost.” The recipient spoke on condition of anonymity to protect his donors and his institution.
Others agreed: Jewish charities, donors, and ordinary individuals could be feeling the effects for years.
“Many Jewish philanthropies are dependent on high-end donors in very close social and economic networks, and this guy is right in middle of them,” said Jewish philanthropy expert Gary Tobin, president of the Institute for Jewish and Community Research. “It’s like finding out that your father is a felon — this is bad news for the family.”
Mark Rosenblum, director of the Jewish Studies Center at Queens College said: “This is a much more Draconian hit on American Jewish philanthropy than the generalized credit crunch has been. This one man has demonstrated a capacity to radically impact American Jewish philanthropy and, even more important, elements of American civil society.”
The collapse of Bernard L. Madoff Investment Securities LLC, an alleged Ponzi scheme that swallowed an estimated $50 billion, has sent shockwaves around the globe, engulfing major banks and investment firms. It also has engulfed dozens of bold-faced Jewish names, including Steven Spielberg, Elie Wiesel, Mortimer Zuckerman, and Mets owners Fred Wilpon and Saul Katz.
No less important, Madoff’s disgrace promises to affect, among others, the youngsters of rural Luzerne County in Pennsylvania, who were being sent to juvenile detention centers without first being able to consult a lawyer. The Philadelphia-based Juvenile Law Center used a $250,000 grant from the JEHT Foundation this year, in part to support legal action to stop this practice. But the money the foundation has lost with Madoff has forced JEHT to close, and the Center does not now know where it will receive future funding to continue this work.
Jewish organizations large and small have also seen their reserves sapped. Y.U., where Madoff was treasurer, announced that it had lost $110 million from its $1.3 billion endowment. The women’s Zionist organization Hadassah lost $90 million.
The damage extends outward from Madoff in successive rings. J. Ezra Merkin (see accompanying article) and Stanley Chais, both significant Jewish philanthropists, invested not only their own money with Madoff, but also that of their clients. Merkin’s investors included the endowments of Y.U. (where Merkin chaired the investment committee) and the Modern Orthodox day school SAR. Chais entrusted his family’s foundation, which donated $8.1 million in 2007, to Madoff. The foundation has since closed. The charitable foundation of media and real-estate mogul Zuckerman also lost substantial funds because of Madoff, via Merkin — funds that will, he has said, significantly impact his charitable giving.
The fraud has also wiped out or severely damaged the finances of wealthy Jews who, though less famous, are among the most reliable donors to Jewish causes. At the exclusive Palm Beach Country Club, where Madoff recruited many of his clients, philanthropic giving was a requirement for membership.
“This scandal has wiped out a generation of Jewish wealth,” said Brad Friedman, a lawyer representing a number of the victims of the alleged Madoff scam. “Let’s not kid ourselves, this is the most philanthropic community in America.”
Jewish philanthropic experts estimate that the total losses in Jewish giving — to both Jewish and non-Jewish causes — could run into billions of dollars.
“You’ll see organizations going out of business,” said Mark Charendoff, president of the Jewish Funders Network, which advises wealthy Jewish donors. “Staff will get fired, programs will get slashed. In some cases, you could see organizations merge. We just don’t know yet.”
The scandal could also shake up the way not-for-profits do business. Over the past few decades, they have come to rely increasingly on endowments donated or bequeathed by wealthy supporters. The not-for-profit organization would then invest the endowment to fund operations or programs. With hundreds of millions of endowment dollars gone up in smoke, observers say that donors may no longer be so willing to entrust their money to charities to invest, unless organizations assure them that the money will be safe.
“What I hope happens is people become more careful,” said Rabbi Daniel Allen, CEO of the American Friends of Magen David Adom. “For instance, how is it that Y.U. lost $100 million, and the person who invested the money was an officer of the board? I think that’s called conflict of interest.”
Y.U. has already announced that it will re-examine its conflict-of-interest policies.
In contrast, UJA-Federation of New York, the country’s largest local philanthropy, announced in a statement December 16 that it had no funds invested with Madoff and had lost nothing, despite Merkin being on its investment committee.
“UJA-Federation does not make any new investments without the manager meeting with, and responding to questions from, members of the Investment Committee to give them an understanding of the manager’s strategy and execution,” the statement said.
The statement continued: “In the case of managed accounts (such as we understand Madoff ran), UJA-Federation would insist that securities be held by our independent custodian (JPMorgan). That alone would have prevented investment in Madoff securities, as we understand Madoff’s structure depended on his firm also acting as the custodian.”
Despite this, the charity will doubtlessly feel the impact of reduced donations from those of its supporters who did not exercise such prudence.
This raises questions that go to the core of the Jewish communal ethos: Why did so many entrust him with their money? Why did so few recognize the fraud? At the root are the largely unexamined ways in which a number of Jewish groups have operated for many years.
Ironically, Madoff’s firm, with its consistent but unspectacular returns, was seen as a low-risk place to park one’s money.
Seal said that in the two instances where he saw Madoff give his presentation, board members who already knew Madoff had brought him in. Unlike other financial consultants who came in with flashy suits and elaborate presentations, Seal said, Madoff was modest and kept things simple.
“He had a couple of pieces of paper with annualized returns, and you got an explanation of covered options,” Seal said, referring to Madoff’s purported investment strategies. “It wasn’t slick, and that, in some ways, endeared him to people.”
Madoff also wasn’t pushy about selling his investment services, Seal recalled.
“It was almost like he didn’t need your money, because he was so successful and so well invested. So you got a sense of a real comfort,” Seal said. “Everyone else always seemed a little hungry and eager to get your business.”
In addition to wealthy clients, Madoff lured in more modest investors. Starting 32 years ago, on the advice of their accountant, Joan and Arnold Sinkin of Boynton Beach, Fla., began investing with Madoff. After they finished putting their kids through college, the Sinkins began to steadily add to their stake with Madoff, a few thousand dollars at a time, until he controlled most of their life savings.
“We were really what you call middle class,” said retired physical therapist Joan Sinkin, 75, in an interview with the Forward. “I felt lucky to be with them.”
Now, their savings are almost entirely gone, and they may be forced to sell their condo on Long Island. Yet even now, reflecting on her talks with Madoff, Joan Sinkin can’t quite believe what has happened.
“He explained the philosophy,” Sinkin said. “We really couldn’t lose.”source: www.potsmokersubhuman.org
At approximately 8:20 p.m. on August 19, 1991, Yosef Lifsh, 22, was driving a station wagon with three passengers west on President Street, part of the three-car motorcade of Rabbi Menachem Mendel Schneerson, then-leader of the Chabad Lubavitch Hasidic sect. The procession was led by an unmarked police car with two officers, with its rooftop light flashing Lifsh's vehicle fell behind. He continued through the intersection at President Street and Utica Avenue in an attempt to rejoin the group. Witnesses could not agree upon Lifsh’s speed and could not agree whether the light that Lifsh went through was yellow or red. Lifsh’s vehicle struck a car being driven on Utica Avenue, veered onto the sidewalk, knocked a 600-pound stone building pillar down, hit a wall, and killed seven-year old Gavin Cato, the son of Guyanese immigrants. Angela Cato, his seven year old cousin, survived but was badly injured.
Lifsh believed he had the right of way to proceed through the intersection because of the police escort. Lifsh said he deliberately steered his car away from adults on the sidewalk, toward the wall, a distance of about 25 yards (22.9 m), in order to stop the car. Lifsh later commented that the car did not come to a full stop upon impact with the building, but rather slid to the left along the wall until it reached the children.
Accounts differ as to the next sequence of events. After the collision, Lifsh said that the first thing he did was to try to lift the car in order to free the two children beneath it. The EMS unit that arrived on the scene about three minutes after the accident said that Lifsh was being beaten and pulled out of the station wagon by three or four black men. All accounts agree that Lifsh was beaten before ambulances and police arrived.
A volunteer ambulance from the Hatzolah ambulance corps arrived on the scene at about 8:23 pm followed shortly by police and a City ambulance which took Gavin Cato to Kings County Hospital, arriving at 8:32 p.m. Cato was pronounced dead shortly thereafter. Volunteers from a second Hatzolah ambulance helped Angela Cato, until a second City ambulance arrived and took her to the same hospital.
Two attending police officers, as well as a technician from the City ambulance, directed the Hatzolah driver to remove Lifsh from the scene for his safety, while Gavin Cato was being removed from beneath the station wagon. According to the New York Times, more than 250 neighborhood residents, mostly black teenagers, many of whom were shouting "Jews! Jews! Jews!", jeered the driver of the car and then turned their anger on the police. Some members of the community were outraged because Lifsh was taken from the scene by a private ambulance service while city emergency workers were still trying to free the children who were pinned under the car. Some believed that Gavin Cato died because the Hatzolah ambulance crew was unwilling to help non-Jews. Their anger was compounded due to a rumor at the time that Lifsh was intoxicated. A breath alcohol test administered within 70 minutes of the accident indicated that this was not the case. Other false rumors that circulated shortly after the accident included: Lifsh was on a cell phone, Lifsh did not have a valid driver's license, and that police prevented people, including Gavin Cato's father, from assisting in the rescue.
Later on that evening, as the crowd and rumors grew, people threw bottles and rocks to protest the treatment of the children. At about 11:00 p.m., someone shouted, “Let's go to Kingston Avenue and get a Jew!" A number of black youths then set off toward Kingston, a street of predominantly Jewish residents several blocks away, vandalizing cars and heaving rocks and bottles as they went.
After the death of Gavin Cato, members of the black community believed that the decision to remove Lifsh from the scene first was racially motivated. They also maintained that this was one example of a perceived system of preferential treatment afforded to Jews in Crown Heights. The preferential treatment was reported to include biased actions by law enforcement and allocations of government resources amongst others. Furthermore, many members of the black community were concerned about the expansion of Jews moving into the neighborhood, believing the latter were buying all of the property.
Members of the Jewish community did not share this view. Many believed that allegations of favoritism made by blacks were not supported by facts; a number of studies disproved the allegations, including one study conducted specifically in response to this allegation. It was widely believed in the Jewish community that these allegations were an attempt to mask blatant anti-Semitism committed against Jews during the riot. As examples, they point to anti-Semitic statements made by protesters throughout the rioting, and comments made at Gavin Cato’s funeral. In his eulogy at the funeral, the Rev. Al Sharpton made comments about "diamond dealers" and commented "it's an accident to allow an apartheid ambulance service in the middle of Crown Heights." In addition, a banner displayed at the funeral read "Hitler did not do the job".
About three hours after the riots began, a group of approximately 20 young black men surrounded Yankel Rosenbaum, a 29-year-old University of Melbourne student in the United States conducting research for his doctorate. They stabbed him several times in the back and beat him severely, fracturing his skull. Before being taken to the hospital, Rosenbaum was able to identify 16-year-old Lemrick Nelson, Jr. as his assailant in a line-up shown to him by the police. Rosenbaum died later that night. Nelson was charged with murder and acquitted, but later convicted of violating Rosenbaum's civil rights; he eventually admitted that he had indeed stabbed Rosenbaum.
Duration and impact
For three days following the accident, numerous African Americans and Caribbean Americans of the neighborhood, joined by growing numbers of non-residents, rioted in Crown Heights. In the rioting of the ensuing three days, many of the rioters "did not even live in Crown Heights."
During the riots, Jews were injured, stores were looted, and cars and homes were damaged. The rioters identified Jewish homes by the mezuzot affixed to the front doors. Rioters marched through Crown Heights carrying anti-Semitic signs and an Israeli flag was burned. Rioters threw bricks and bottles at police; shots were fired at police and police cars were pelted and overturned, including the Police Commissioner’s car.
An additional 350 police officers were added to the regular duty roster on August 20 and were assigned to Crown Heights in an attempt to quell the rioting. After episodes of rock- and bottle-throwing involving hundreds of blacks and Jews, and after groups of blacks marched through Crown Heights chanting "No Justice, No Peace!", "Death to the Jews!", and "Whose streets? Our streets!", an additional 1,200 police officers were sent to confront rioters in Crown Heights. Riots escalated to the extent that a detachment of 200 police officers was overwhelmed and had to retreat for their safety. On August 22, over 1,800 police officers, including mounted and motorcycle units, had been dispatched to stop the attacks on people and property.
By the time the three days of rioting ended, 152 police officers and 38 civilians were injured, 27 vehicles were destroyed, seven stores were looted or burned, and 225 cases of robbery and burglary were committed. At least 129 arrests were made during the riots, including 122 blacks and seven whites. Property damage was estimated at one million dollars.