ACCOUNTABILITY MATTERS

When the Bernie Madoff scandal broke, I was one of the first fundraising professionals to call for the resignation of the trustees who were overseeing the millions of dollars for the charitable organizations who had invested with Madoff.

I was quite shocked to receive comments/emails in return telling me "it was not the fault of the trustees, they just look at the statements for favorable results on investment."

I kid you not; I did receive several emails with similar sentiments.

My response has been the following: 1) nonprofit organizations are held accountable by the Internal Revenue Service to have an investment committee that functions as the fiscal agents of the organization. In short order: The buck stops with the trustees; 2) trustees need to be held accountable both legally and by the organization(s).

Governance and Compliance are the basic tenants of any good running nonprofit. It is the public trust, after all. So, why should the trustees get away with not being held accountable?

THEY SHOULD NOT!

Please read the article (below) that appeared this morning on

BLOOMBERG.COM

I encourage discussion. My entire career has focused on building the endowments of nonprofit organizations. This sad story just makes me sick.


Cuomo Probing Charity Fraud Tied to Madoff Scandal (Update1)

By Andrew Harris and Karen Freifeld

Jan. 13 (Bloomberg) -- New York Attorney General Andrew Cuomo is investigating “people who defrauded charities” in connection with Bernard Madoff’s alleged $50 billion Ponzi scheme.

Cuomo, whose office oversees nonprofit entities in New York, said today “a number of charities” were defrauded by the alleged scam. “We are looking at frauds in charities and people who defrauded” them, Cuomo said after a press conference on an unrelated issue.

The attorney general said he isn’t investigating Madoff, 70, who was charged last month by federal prosecutors with bilking investors by using money from new investors to pay old ones. Madoff’s lawyer, Ira Sorkin, declined to comment on Cuomo’s statement.

Yeshiva University, a not-for-profit New York school, sustained about $110 million in losses related to the scandal, a spokesman has said. Most of those losses were allegedly invested through hedge funds controlled by J. Ezra Merkin, a Yeshiva trustee and chairman of the school’s investment committee, the spokesman, Bill Anderson, said last month. Merkin has denied any wrongdoing.

Private School
A 122-year-old private school that combines academic and religious education, Yeshiva has an endowment of about $1.2 billion remaining. Yeshiva spokesman William Burgos didn’t immediately return a call and e-mail seeking comment.

U.S. Senator Frank Lautenberg’s foundation was also among the charitable groups that invested with Madoff, who allegedly told his sons he committed a $50 billion fraud, according to an FBI criminal complaint.

The foundation run by Lautenberg, a New Jersey Democrat, invested $12.8 million of its $13.8 million in assets with Bernard L. Madoff Investment Securities at the end of 2006, according to a tax return for the organization.

Scott Mulhauser, a staff member for the senator, declined to comment on Cuomo’s announcement, referring calls to the senator’s attorney, Michael Griffinger of Newark, New Jersey’s Gibbons law firm. He didn’t immediately return a call seeking comment.
Brandeis University

The Carl and Ruth Shapiro Family Foundation had about 45 percent of its $345 million in assets invested with Madoff, a spokeswoman previously said. The foundation, a major donor to Brandeis University and Boston’s Museum of Fine Arts, was funded by Carl Shapiro, who sold his Kay Windsor Inc. women’s clothing business to VF Corp. in 1971.
Jean Whitney, executive director for the Boston-based charity, didn’t immediately return a call seeking comment.

The case is U.S. v. Madoff, 08-mag-2735, U.S. District Court, Southern District of New York (Manhattan).