Monday, February 23, 2009

Travesty Within Tragedy


For those of you who haven’t really had much sympathy for Madoff fraud victims, here’s some food for thought. It seems that at least 147 foundations had all their assets invested with Big Bernie – money that was to be allocated to several non-profits, charities, research & social projects - further proof that there is no room for sustainable philanthropy in traditional Laissez-faire economics.

In addition to significant cutbacks in securing any sort of traditional funding, healthcare research & science initiatives may well be forced to go on hiatus or depend solely on government funding. Here are some of the notable victims (direct & coincidental) with ties to life sciences:

- The $1 billion Picower Foundation of Florida, whose beneficiaries include a neurological research institute at MIT (led by nobel laureate Susumu Tonegawa), children’s health fund, a planned parenthoo
d group, and Parkinson & diabetes research at UPenn.
- The $1.75 million Auld foundation of Seattle, supporter of the Seattle biomedical research institute.
- The $15 million Elie Wiesel Foundation for Humanity
- Over $5 million of the Shapiro Foundation donations to various health & human services.
- The Fiterman Endowment Fund for Digestive Diseases.
- The Gift of Life Bone Marrow Foundation which is now $1.8 million short of its projected annual budget.
- North Shore Long Island Jewish Health System which had a $5.7 million gift invested with Madoff.


Madoff's absence of integrity is no longer shocking, but what continues to strike me is how such a sociopath can gain such an immensely deep level of trust within a circle valued for its smarts (arguable), without ever being questioned. Even more sickening, is the lack of due diligence and the level of laziness & stupidity demonstrated by the above mentioned foundations. Not only do they decide to invest all assets in one basket, but what exactly were the board’s upto? To quote a comment on a blog - “Were these boards having investment advisors come in monthly or quarterly and explain exactly where the funds were and how they were diversified? And questioning why they were not riding the market more instead of such fabulously steady returns?”


Private foundations are too often treated as extensions of the founder’s estate - to be managed with the same care or lack of care - when by law they are separate entities obligated to serve the public good. The losses of these foundations are the public’s losses, and it’s important to remember they were funded 1/3 or more by the U.S. Treasury through tax deductions. In the wake of this scandal perhaps the best option is to limit the types of investments & securities that can be held by foundations & pension funds, in order to secure and to maintain their exempt status.

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