Brandeis Prof puts Madoff fraud into perspective
Prof. Jonathan Sarna (NEJS) spoke to students about the historical perspective of the Bernard L. Madoff scandal and its effects on the Jewish community during a Feb. 11 event.
The event, called "Why were we susceptible to the Madoff scandal?" was held over dinner in Sherman Dining Hall and was sponsored by Brandeis University Conservative Organization.
Madoff, a former chairman of the NASDAQ composite,was accused of running a $50 billion Ponzi scheme, a fraud operation in which investors are paid out of the money input by other investors rather than out of profits. Although many Brandeis donors such as Carl and Ruth Shapiro invested with Madoff and lost much of their wealth, the University did not invest any money with Madoff.
Sarna said that the stock market crash of 2008 caused most people to tighten their budgets and be more careful with their spending habits. "The stock market collapse not only led to a decline in every Jewish organization's endowment but also to a big loss in donations, and that of course meant that a lot of people that had invested money with people like Madoff suddenly needed that money," Sarna explained. "The minute you need money, a Ponzi scheme collapses," he said.
Sarna explained that affinity fraud, a system that relies on the trust in a group of people, was Madoff's main tool in his Ponzi scheme. "That's one of the reasons one chooses to belong to a Jewish community: They're all related to one another; they all trust one another. â€¦ But all good things have an evil twin. The evil twin of trust is betrayal," he said.
Sarna closed his lecture by speaking about impact with "regard to [the] loss of wealth in the Jewish community due to the stock market crash and the Madoff scandal. ... The truth is that the Jewish community can no longer afford all the things that it's doing."
Sarna said that the future of Jewish donation is unknown but that he is curious to see if it returns to an older system of receiving smaller gifts from large groups of people rather than larger donations from fewer "mega donors," which has been the norm for many years, he said.
Lisa Aremband '11 explained her motives for coming to the event: "I didn't really understand a lot of the Madoff scandal, so it was good to get a professor's view. It was definitely helpful, and I feel like I understand a lot better how it happened and the effects that made it happen."
Gideon Klionsky '11 said that "hearing the insight of one of the greatest Jewish educational minds in the field today is important." "It's just really interesting to hear the foresight of Sarna and also the hindsight since he's been around in the field for a long time, ... . and to hear his interpretation is really eye-opening," Klionsky said.