Fraud and Philanthropy

By now, Bernie Madoff is a household name. The man who until recently was only well-known in financial circles is now internationally notorious, thanks to his $50 Billion Ponzi scheme that defrauded thousands of investors. The revelation of Madoff's criminal enterprises will have quite an impact on the global philanthropic community - after all, many of those who thought they were "investing" in Madoff's funds are among the America's most generous givers. In Boston, the Shapiro Family Foundation (big hospital and healthcare backers) took an immediate hit:

Via Bloomberg

Boston philanthropist Carl Shapiro’s charitable foundation lost at least $145 million to Bernard Madoff’s alleged Ponzi scheme that cost investors $50 billion, the Boston Globe reported

A smaller Boston-area foundation and a larger California-based foundation have shut their doors:

Via JTA News

On Dec. 12, the Robert I. Lappin Charitable Foundation based in Salem, Mass., shut its doors after saying it had lost all its money -- $8 million -- by investing with Madoff.

[...]

California-based ... Chais Family Foundation, which gives away approximately $12.5 million annually to Jewish causes in Israel, the former Soviet Union and Eastern Europe, closed Sunday because all of its assets were invested with Madoff. The United Jewish Communities and the American Jewish Joint Distribution Committee were among its main beneficiaries.

And count a prominent member of Congress among the victims:

Via IHT.com

New Jersey Sen. Frank Lautenberg, one of the wealthiest members of the Senate, entrusted his family's charitable foundation to Madoff. Lautenberg's attorney, Michael Griffinger, said they weren't yet sure the extent of the foundation's losses, but that the bulk of its investments had been handled by Madoff.

Lautenberg's foundation handed out more than $765,000 to at least 100 recipients in 2006, according to the most recent listing on Guidestar, which tracks charitable organization filings.

The foundation helps support a variety of religious, educational, civic and arts organizations in New Jersey and elsewhere, and its contributions range from a gift of than $300,000 to the United Jewish Communities of MetroWest New Jersey to a $2,000 donation to a children's program at the Hackensack Medical Center.

And Madoff, through his family foundation, also made many big-money gifts himself:

Via Fox News

In fact, the Madoffs have poured millions upon millions into lymphoma research — just under $6 million in just 2003, their peak year of total giving to charities. In 2004, a year when their total donations came to almost $6 million, the Madoffs sent $2.5 million to Memorial Sloan Kettering Hospital and $1.7 million to the Leukemia and Lymphoma Society. Some non-cancer charities made out pretty well in 2005. Girls Inc – a sort of "Big Sisters" group — got $25,000; Lincoln Center put $50,000 in its till; the Special Olympics had a gift of $25,000 and Robin Hood Foundation, $30,000.

[...]

In 2006, that huge total sum included one big winner: the Gift of Life Bone Marrow Foundation, which received $1 million.

The upshot? If you're about to submit a request to a family foundation, pull their 990 and find out if they invested in Madoff's hedge funds. If so, you may want to pull that proposal out of the queue until the foundation figures out where they stand.