Boston Investors and Charities bilked by Madoff

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Boston donors bilked out of millions
Trader accused of $50 billion con game; One nonprofit closes; others may suffer

By Beth Healy and Steven Syre
Globe Staff / December 13, 2008

Some of Boston's wealthiest and most prominent philanthropists have lost millions of dollars to a Wall Street investor accused of running a $50 billion Ponzi scheme, a case that has already shuttered one foundation and could hurt nonprofits in medicine, education, and the arts.


His clients include philanthropists Carl and Ruth Shapiro, major donors to the Museum of Fine Arts, Brandeis University, and Beth Israel Deaconess Medical Center. The Shapiro family foundation lost almost half its money, or about $145 million, to Madoff. Other clients include Avram and Carol Goldberg, former owners of the Stop & Shop supermarket chain, and Stephen A. Fine, president of Biltrite Corp. in Waltham.

In Salem, the Robert I. Lappin Charitable Foundation, a private family organization that financed trips for Jewish youth to Israel, said it was forced to shut down and lay off seven employees yesterday after losing all of its estimated $8 million to Madoff. The foundation also supports Jewish educational and cultural services on the North Shore. Lappin lost personal funds as well.

"We are all devastated," said Deborah Coltin, executive director of the Lappin foundation. "You put your faith in someone. It turns out to be a huge scheme." Authorities say Madoff confessed to effectively paying one set of investors with money he took in from others.

Another apparent victim is the Massachusetts state pension, whose officials invested in Madoff's company through a hedge fund vehicle and said yesterday that it has lost $12 million.

Madoff, 70, appears to have made inroads in philanthropic circles in Boston and Palm Beach, Fla., as well as in New York. As with the Shapiros, some of the Boston clients maintained homes in Palm Beach and socialized with Madoff there, especially at the country club. Madoff had many clients in the Jewish community in particular, where word of the alleged fraud spread rapidly yesterday.

"We are deeply disappointed to learn about the allegations against Mr. Madoff," the Carl & Ruth Shapiro Family Foundation said in a statement. The foundation said it was reviewing its options to recover the funds and planned to fulfill its giving commitments.

Madoff managed nearly 45 percent of the Shapiros' charitable family foundation, according to a spokeswoman for the fund.

It was unclear how much of the Shapiros' personal fortune outside the foundation was also invested with Madoff. The Shapiros did not return a call seeking comment.

The Goldbergs had a portion of their $29 million in charitable trusts managed by Madoff, according to a public tax filing. They, also, could not be reached for comment yesterday.Continued...

Fine, whose firm makes products for footwear and flooring, yesterday confirmed that - like the Shapiros - he was an investor with Madoff.

Carl Shapiro, 95, and Madoff have been friends for decades. Shapiro was among the original investors in Bernard L. Madoff Investment Securities, according to several people who know them both.

And Madoff's chief recruiter of clients in Boston, Robert Jaffe, is married to one of the Shapiros' daughter's, Ellen. Robert Jaffe, a socialite who golfs at Pine Brook Country Club in Weston and at Palm Beach Country Club, drew many clients in the clubby wealthy Jewish circles in which he travels, according to clients and people who know him.

Jaffe, a former Boston branch manager for brokerage Cowen & Co., operated a company whose sole purpose was to market Madoff investment products, according to a Madoff investor and a Boston investment professional who has known Jaffe for years. Jaffe's firm, Cohmad Securities Corp., is on the same floor of a New York building as Madoff's, according to securities filings.

Jaffe is active with a number of charitable organizations in Boston where the Shapiros have directed their giving. He is an overseer of Beth Israel Deaconess Medical Center and a member of the President's Council at Brandeis, according to a biography on the website of the Dana-Farber Cancer Institute. His wife, Ellen, is a trustee at the MFA.

People who know Robert Jaffe said that he, too, was fooled by Madoff. Messages left at the Jaffe home were not returned.

One Boston businessman who invested in Madoff's fund said it was marketed as an exclusive investment opportunity, where only the wealthy and well connected could gain access. The businessman said it took a full year of lobbying to become a client of Madoff, and only with the input of other large investors who helped persuade Madoff to accept his money.

"You wouldn't imagine Ponzi artists would make it so hard to invest," the businessman said, speaking on the condition of anonymity because, like many wealthy Madoff clients, he did not want his losses publicized.

For years, Madoff produced double-digit returns to his investors - wealthy individuals, endowments, foundations, and hedge funds - with his active-trading strategy.

"The word on the street in Palm Beach was that Madoff was a genius," said Frederic A. Sharf, an MFA trustee who has had a home in Palm Beach for more than 30 years, but did not invest with Madoff.

Not everyone was convinced of Madoff's genius. A former Boston investment professional, Harry Markopolos, was quoted in news accounts saying he repeatedly tried to get the SEC to investigate Madoff, first contacting the agency's Boston office more than a decade ago. The SEC yesterday said it conducted two inquiries of Madoff in the last several years and didn't find major problems.

It was the market's recent crash that finally brought him down.

Madoff got into trouble when clients recently asked to withdraw $7 billion from the firm and he had to come up with the cash, according to complaints filed against him by the Securities and Exchange Commission and the US attorney's office in Manhattan. On Wednesday, Madoff told senior executives at his firm that he had been running a Ponzi scheme. Madoff, who was arrested at his Manhattan apartment Thursday, confessed his con to the FBI after his two sons turned him in, and told investigators he had "paid investors with money that wasn't there." He said he expected to go to jail.

Yesterday, a federal judge issued an order freezing the remaining assets in Madoff's firm and appointed a receiver who will try to recover client losses.

Daniel Horwitz, Madoff's attorney, did not return a call seeking comment. In a statement Thursday, Horwitz said Madoff would "fight to get through this unfortunate set of events."

The Shapiro foundation sought yesterday to assure the institutions it supports that it will follow through on any promised giving. "Over the long term, we fully anticipate that the foundation will continue to grow and be a strong supporter of the region's nonprofits," the foundation said in a statement.

The Shapiros have been generous to a number of Boston hospitals and universities. Construction is scheduled to start next week at Boston Medical Center on the Shapiro Ambulatory Care Center, a nine-floor, $135 million facility paid for in part with $15 million from the Shapiros.

In March, the foundation pledged $27 million to DanaFarber/Brigham and Women's Cancer Center in Boston. At Brandeis, which received $22 million from the Shapiros to build the campus center building, spokesman Dennis Nealon said the school was monitoring the situation.

"Like everyone, we're watching these events unfold," Nealon said.

Fine, whose firm makes products for footwear and flooring, yesterday confirmed that - like the Shapiros - he was an investor with Madoff.

Carl Shapiro, 95, and Madoff have been friends for decades. Shapiro was among the original investors in Bernard L. Madoff Investment Securities, according to several people who know them both.

And Madoff's chief recruiter of clients in Boston, Robert Jaffe, is married to one of the Shapiros' daughter's, Ellen. Robert Jaffe, a socialite who golfs at Pine Brook Country Club in Weston and at Palm Beach Country Club, drew many clients in the clubby wealthy Jewish circles in which he travels, according to clients and people who know him.

Jaffe, a former Boston branch manager for brokerage Cowen & Co., operated a company whose sole purpose was to market Madoff investment products, according to a Madoff investor and a Boston investment professional who has known Jaffe for years. Jaffe's firm, Cohmad Securities Corp., is on the same floor of a New York building as Madoff's, according to securities filings.

Jaffe is active with a number of charitable organizations in Boston where the Shapiros have directed their giving. He is an overseer of Beth Israel Deaconess Medical Center and a member of the President's Council at Brandeis, according to a biography on the website of the Dana-Farber Cancer Institute. His wife, Ellen, is a trustee at the MFA.

People who know Robert Jaffe said that he, too, was fooled by Madoff. Messages left at the Jaffe home were not returned.

One Boston businessman who invested in Madoff's fund said it was marketed as an exclusive investment opportunity, where only the wealthy and well connected could gain access. The businessman said it took a full year of lobbying to become a client of Madoff, and only with the input of other large investors who helped persuade Madoff to accept his money.

"You wouldn't imagine Ponzi artists would make it so hard to invest," the businessman said, speaking on the condition of anonymity because, like many wealthy Madoff clients, he did not want his losses publicized.

For years, Madoff produced double-digit returns to his investors - wealthy individuals, endowments, foundations, and hedge funds - with his active-trading strategy.

"The word on the street in Palm Beach was that Madoff was a genius," said Frederic A. Sharf, an MFA trustee who has had a home in Palm Beach for more than 30 years, but did not invest with Madoff.

Not everyone was convinced of Madoff's genius. A former Boston investment professional, Harry Markopolos, was quoted in news accounts saying he repeatedly tried to get the SEC to investigate Madoff, first contacting the agency's Boston office more than a decade ago. The SEC yesterday said it conducted two inquiries of Madoff in the last several years and didn't find major problems.

It was the market's recent crash that finally brought him down.

Madoff got into trouble when clients recently asked to withdraw $7 billion from the firm and he had to come up with the cash, according to complaints filed against him by the Securities and Exchange Commission and the US attorney's office in Manhattan. On Wednesday, Madoff told senior executives at his firm that he had been running a Ponzi scheme. Madoff, who was arrested at his Manhattan apartment Thursday, confessed his con to the FBI after his two sons turned him in, and told investigators he had "paid investors with money that wasn't there." He said he expected to go to jail.

Yesterday, a federal judge issued an order freezing the remaining assets in Madoff's firm and appointed a receiver who will try to recover client losses.

Daniel Horwitz, Madoff's attorney, did not return a call seeking comment. In a statement Thursday, Horwitz said Madoff would "fight to get through this unfortunate set of events."

The Shapiro foundation sought yesterday to assure the institutions it supports that it will follow through on any promised giving. "Over the long term, we fully anticipate that the foundation will continue to grow and be a strong supporter of the region's nonprofits," the foundation said in a statement.

The Shapiros have been generous to a number of Boston hospitals and universities. Construction is scheduled to start next week at Boston Medical Center on the Shapiro Ambulatory Care Center, a nine-floor, $135 million facility paid for in part with $15 million from the Shapiros.

In March, the foundation pledged $27 million to DanaFarber/Brigham and Women's Cancer Center in Boston. At Brandeis, which received $22 million from the Shapiros to build the campus center building, spokesman Dennis Nealon said the school was monitoring the situation.

"Like everyone, we're watching these events unfold," Nealon said.

Globe reporters Geoff Edgers, Kathy McCabe, Casey Ross, and Rob Weisman and Globe correspondent Hinda Mandell contributed to this report.

Beth Healy can be reached at bhealy@globe.com; and Steven Syre at syre@globe.com.





Globe reporters Geoff Edgers, Kathy McCabe, Casey Ross, and Rob Weisman and Globe correspondent Hinda Mandell contributed to this report.

Beth Healy can be reached at bhealy@globe.com; and Steven Syre at syre@globe.com.

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