Yeshiva’s Madoff Losses Based on ‘Fictitious’ Profits
Yeshiva’s Madoff Losses Based on ‘Fictitious’ Profits

By Janet Frankston Lorin

Dec. 30 (Bloomberg) -- Yeshiva University said its previously reported profits in a fund tied to Bernard Madoff were ‘fictitious,’ underscoring how customers of the money manager may have been misled about the investment gains they had amassed.

The school said it had a net investment of $14.5 million tied to Madoff as of Dec. 11, the day he was arrested, according to an e-mail today from J. Michael Gower, the New York school’s vice president for business affairs and chief financial officer. Yeshiva said a financial statement from Ascot Partners, which fed to Madoff, valued the investment at $110 million as of Dec. 16.

Madoff was charged with operating a Ponzi scheme that may have bilked investors of $50 billion. Yeshiva’s endowment value fell to $1.2 billion, from $1.7 billion last Jan. 1, the school estimated five days after his arrest. Part of the decline was attributed to the collapse of Ascot. Yeshiva today said the Madoff-related loss assumed profits that weren’t real.

“Although the university has an estimated loss of approximately $110 million, it now appears that any ‘profits’ above the $14.5 million were fictitious,” Gower said in the statement.

The $50 billion alleged in the fraud may reflect the amounts of money that clients were told they had in accounts, not the amounts they originally invested.

Madoff’s Channel

Ascot was controlled by J. Ezra Merkin. He resigned from his volunteer positions with Yeshiva as a trustee and investment- committee chairman. The school declined to disclose how much it invested with Merkin, who had long ties to the school. His father, Hermann Merkin, served as a trustee for three decades.

Madoff, 70, who served as treasurer of Yeshiva’s board of trustees and chairman of the school’s Sy Syms School of Business, resigned from his positions.

About 7,000 students attend the 122-year-old private Jewish school in upper Manhattan. In addition to training rabbis, the school has graduate divisions, including the Albert Einstein College of Medicine and Benjamin N. Cardozo School of Law.

To contact the reporter on this story: Janet Frankston Lorin in New York

Last Updated: December 30, 2008 17:24 EST
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