Madoff's Tangled Web Includes Charities that Benefited
Bernie Madoff was sentenced to 150 years this morning, but his fraudulent investment scheme is still unraveling, snaring many nonprofits who both won and lost as a result of the Madoff crimes.
The New York Times reports that many charities made money from foundations and investors that were reaping large profits from investments with Bernie Madoff's fraudulent fund. These funds came through charitable donations from foundations that invested with Madoff, such as the Picower Foundation, the Chais Family Foundation, and The Carl and Ruth Shapiro Family Foundation. The Times says, in its article:
"The bottom line is that there were net winners in the Bernie Madoff scandal, and many charities received money that was at best tainted by Mr. Madoff, and at worst directly attributable to his crime. In the coming months, many of the people who benefited from Mr. Madoff, inappropriately or otherwise, are going to be sued or otherwise asked to return the money they received."
The questions are: is that money tainted even though it went to good causes? Can it be traced? Should it be given back to reimburse the victims in this mess?
You can bet that those who gained from Madoff’s Ponzi scheme will be asked to return funds to the victims. We saw this happen in the 1990’s Ponzi scheme, the Foundation for New Era Philanthropy. In the Madoff case, the demand to return funds will be more problematic since the gains were accrued over two decades, and because the economy melted down over the past year. Many of the nonprofit organizations that gained have spent those funds in good faith, and the demand for them to return funds to victims will likely drive some into bankruptcy. More victims on the horizon.
Ron Mattocks, Author of Zone of Insolvency: How Nonprofits Avoid Hidden Liabilities and Build Financial Strength
Thanks, Ron….good to hear from you. That’s scary too.