Madoff Scandal Arouses New Legal Issues and Other Updates

December 29, 2008

Madoff Scandal Arouses New Legal Issues and Other Updates

The Madoff investment scandal continues to ripple throughout the world of philanthropy — and board members could be held liable for failing to do due diligence, reports The Chronicle of Philanthropy.

Following is a roundup of other key developments reported elsewhere online:

New York University is suing a hedge-fund executive associated with Bernard L. Madoff, the investor accused of running a $50-billion Ponzi scheme, reports Reuters. The university is suing Ezra Merkin, who heads the Ariel Fund, which invested with Mr. Madoff. NYU lost $24-million.

At a meeting last week, 35 of the nation’s largest grant makers that support Jewish causes have pledged to provide financial and legal assistance to affected groups, reports The Boston Globe. Mark Charendoff, president of the Jewish Funders Network, which represents grant makers that focus on Jewish charities, told the newspaper that he estimates the losses incurred by Jewish organizations that invested with Mr. Madoff to total $2.5-billion, a number he says is sure to rise.

The Madoff scandal has made donors more wary of giving to groups that might not have handled donations well by investing them in a fund that turned out to be a scam, notes The Wall Street Journal. The newspaper also reports that the UJA-Federation of New York managed to avoid the Madoff scandal because of its conflict-of-interest policy. Because Mr. Madoff was an executive-council member of its Wall Street & Finance Division, the organization did not allow him to invest the organization’s money. Plus: An opinion article published by the Journal says that the Madoff scandal imparts a stinging lesson to Jewish philanthropy about the danger of relying too much on the donations of a very wealthy few.

(Free registration is required to view the Boston Globe article, and a paid subscription is required to view the Wall Street Journal news articles. The Journal opinion piece is free.)

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