December 29, 2008
Should Donors Aid Nonprofit Victims of Ponzi Scheme?
Should donors help the nonprofit victims of Bernard Madoff’s alleged Ponzi scheme?
A new Web site, titled They Need Us Now, has been set up to raise money for charities that have been hurt financially because donors who supported them lost major investments with Mr. Madoff.
Lucy Bernholz, a philanthropy consultant, praises the effort, though she cautions that it’s unclear who is operating it.
“It is a great idea, I hope it is legit. It was also put together fast – the Madoff scandal only came to light 10 days ago,” she writes on her blog, Philanthropy 2173.
About three dozen large Jewish foundations have also joined together to aid Mr. Madoff’s victims, many whom were Jewish nonprofit groups, reports The Washington Post.
But Bob McInnis, executive director of an anti-hunger group in Calgary, Canada, questions whether the nonprofit world should be rushing to aid the nonprofit groups that invested with Mr. Madoff.
“While I appreciate the good works of these organizations, I am concerned about their ability to steward resources entrusted to them,” he says in response to Ms. Bernholz on her blog.
“Before we (I) sink good money after good money into any of these charities, I would want to understand how they were induced into a ponzi scheme and what culpability they should accept,” he says. “To draw focus away from other well-managed and diligent organizations who were more prudent is an even greater catastrophe.”
Indeed, Connecticut’s attorney general is examining whether board members of charities in the state shirked their fiduciary responsibility to protect charitable assets by placing investments with Mr. Madoff or other funds that invested with him, reports The Chronicle.
What do you think? Should donors support the charities hurt by Mr. Madoff? Click on the comments link below to share your thoughts.
Comments
Commenting is closed for this article.
Previous: Blogging for Job Offers
Next: Tips for New Philanthropists
Just a point of clarification – the nonprofits listed on the TheyNeedUsNow website are not necessarily – or even primarily – Jewish. While many of those immediately affected by Madoff’s ripoff are part of the Jewish community, the ripples extend far beyond that community. The nonprofits listed on the TheyNeedUsNow site appear to me to be former grantees of the JEHT Foundation, one of several foundations wiped out by Madoff.
The nonprofits were downstream victims – a funder lost its endowment, so grants can’t be paid. It is not necessarily the case that these nonprofits involved had any money invested with Madoff. Surely we want to think twice before deeming nonprofits responsible for where foundations invest their endowments, don’t we?
As I said in my post, holding nonprofits responsible for funds lost by their funders seems to me like holding a person who gets e. coli responsible because they ate a tainted tomato grown by an irresponsible farmer, overlooked by a negligent food safety system, and sliced unwashed by a sloppy sandwich shop.
There is plenty of blame to go around, many who made mistakes and rue investment decisions they made, and, yes, criminal behavior by some. And, yes, some organizations and people just got hurt in this series of events. Distinguishing between these different roles may not be easy, but as the calls for new oversight and regulation have already begun, it seems to me that we should be careful about what we demand and from whom. Accountability certainly has its place, greater transparency is much needed, and new rules or oversight may very well help. But the Madoff case is more complicated, of far greater scale, involved lax oversight by more regulatory bodies for far longer than is believable, and reaches across more communities and issues to think blame can be simply assigned or solutions cast from a single mold.
This is my interpretation – I have no affiliation with the TheyNeedUsNow site, nor with JEHT, nor more than a passing familiarity with any of the nonprofits listed. I do not know who launched /is running the site other than what I inferred from the site itself.
— Lucy Bernholz Dec 28, 05:48 PM #
Thanks Lucy. I clarified the Give & Take entry to reflect your points.
— Ian Wilhelm Dec 29, 10:40 AM #
How did JEHT and others get away with investing so narrowly with Madoff? Doesn’t the tax code (section 4944) prohibit just these sorts of “jeopardizing investments”?
— Archana Sridhar Dec 29, 11:56 AM #
This is again a sobering moment to not only ensure that foundations have an investment policy but that the protections are being applied. The boards of these foundations and their investment officers need to be wide awake.This is a tragic circumstance that is the result of continued ethical voids that at the end of the day have impacted the most vulnerable among us. Lets all stay awake in 2009 and move forward sharing the responsibility.Before I respond to the call for matching contributions to the impacted organizations I want to know where the trail leads, where exactly the billions dissappeared to and why these investments were made in the first place.
— Maggie Osborn Dec 30, 02:19 PM #
How can you blame a charity for their investment with Madoff? He was a prestigious financial player with a long-time history (40+ years) of financial successes for his clients. Even brilliant financial advisors were caught by his knavery. Charities investing with him, or with fund advisors that gave hime money, thought they were dealing with the top of the line, not the scum of the earth. How would board members know he was a theif when even experienced investment experts were fooled.
— Lorri Greif, CFRE Dec 31, 11:24 AM #
Again greed. Lets put the rules back in place and people in charge should toe the line. or be gone !
— larry0928 Dec 31, 01:06 PM #
As an experienced fundraising consultant, I agree wholeheartedly with Lucy and with those who state that the groups should not be punished. However, due to the vast amounts needed and the wide variety of causes, it seems to me that donors should give to the individual groups, not to this collaborative appeal. That way they can focus their donations and won’t need to be concerned with even the appearance of bailing out bad investments by their funders. The group appeal is not as effective as during a hurricane because this particular storm has hit pretty much everyone. The case for any one of these worthy causes including outstanding Jewish philanthropies can be made on its own merits.
— Maria Gitin Dec 31, 03:12 PM #
I agree with Lorri (comment #5), and I would add: if experienced investors could be fooled by Madoff, is it any wonder that inexperienced homeowners could be fooled by unscrupulous mortgage lenders? Let’s not blame the victim in either case.
— Dennis Fischman Jan 2, 04:16 PM #
Thanks for the link and for covering They Need Us Now. I put the site together just before Christmas as the Madoff news broke in an attempt to bring some critical funding to the many groups losing their grants.
I agree that we should re-evaluate the foundations that invested with Madoff, but every non-profit listed at “http://theyneedusnow.org“http://theyneedusnow.org is an indirect victim of Mr. Madoff’s pyramid scheme. They simply relied on foundations for grants, as countless other non-profit organizations do. Now they have been left reeling as their funding disappeared overnight.
Before lashing out at the foundations involved for not having proper foresight to see this coming, you may want to check out this essay in today’s Wall Street Journal, where an expert in gullibility admits that he, too, had been conned into investing with Mr. Madoff:
http://online.wsj.com/article/SB123093987596650197.html
Lastly, @Maria, the site is designed to do exactly what you describe. Rather than re-invest with the foundations, we have provided direct links to the donation pages of the many outstanding groups affected.
— Matt Stempeck Jan 4, 01:48 AM #