Madoff scandal may take toll on Somerville organizations

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Madoff scandal may take toll on Somerville organizations

By Ben Johnson

No one can yet say where the consequences of Bernard Madoff's $50 billion investment fraud will end. Indeed, most of Madoff's major investors are only now beginning to weigh their heavy losses from this multi-billion dollar Ponzi scheme - the largest such scheme to ever be committed by a single person.

But while major foundations victimized by Madoff start to plan for an uncertain future, one thing is certain: this scheme might ruin countless smaller organizations that rely on funding and grants from the bigger foundations Madoff has jeopardized.

Two such smaller organizations that may face future troubles from the Madoff scandal reside in Somerville.

Youthbuild U.S.A. is a national non-profit organization dedicated to bettering low-income communities by employing local youth in rebuilding and renovating properties in their community. There are more than 225 Youthbuild centers and programs in the United States, including one located in Somerville.

Founded in Harlem in 1978, Youthbuild U.S.A., then called the Youth Action Program, began its mission by using local youth to renovate East Harlem tenements. By the early 1990's, the program had been replicated in 14 cities and in 1994, Youthbuild received their first federal grant of $40 million from the US Department of Housing and Urban Development.

The continued success and growth of Youthbuild U.S.A. relies on grants and donations from major organizations, including JEHT - a major private funder of Youthbuild, who has recently suspended all grants due to the Madoff scandal.

JEHT, an acronym for Justice, Equality, Human Dignity and Tolerance, was a philanthropic foundation established in 2000. According to its website, JEHT's mission was to "support programs that promoted reform of criminal and juvenile justice systems, ensured U.S. adherence to international law, and work to improve the voting process."

This mission statement has since been eclipsed by the Madoff Scandal. As of January 2009, JEHT's loss of heavy investments entrusted to Bernard L. Madoff investment securities, has forced JEHT to close its doors and suspend all grant making.

In October of 2004 and December of 2006, JEHT made two-year grants to Youthbuild U.S.A. totaling $625,000. How the suspension of any future grants towards Youthbuild U.S.A. will affect the organization have yet to be announced.

Another Somerville based organization that may soon feel the consequence of the Madoff scandal is the Somerville Arts Council. Serving as the local cultural council for the city of Somerville, the Somerville Arts Council relies on the contributions of local businesses, corporation and foundations to fund its various art programs.

Approximately 45% of the Arts Council's budget is derived from such sponsored donations.

One such sponsor of the Somerville Arts Council is The Carl and Ruth Shapiro Family Foundation, another philanthropic organization that has fallen victim to the Madoff scandal.

With assets over $320 million, it is projected that the Shapiro Family Foundation may have lost $145 million to Madoff. Carl and Ruth Shapiro have declined to comment about their investments and close ties to Madoff. It has been reported Carl Shapiro considered Madoff to be a friend.

The foundation did release a statement explaining that the organization would not be awarding any new grants or capitol pledges in 2009. But the statement did say that the foundation will honor its current grant commitments and that it remains "deeply committed to playing a continued role as a philanthropic supporter of important programs in Greater Boston."

The Carl and Ruth Shapiro Family Foundation sponsor a Somerville Arts Council program - "Books of Hope," a creative writing workshop for Somerville teens in which they write, edit and publish original works.

The Shapiro Family Foundation has promised to help sponsor "Books of Hope" from July 2008 to June 2009. After that timeframe, the foundation will likely be unable to continue its sponsorship.

How the small, Somerville-based organizations like Youthbuild U.S.A. and the Somerville Arts Council will ultimately be affected by the rippling consequences of Madoff's ponzi scheme is unknown. Although their continuation is not directly threatened, if future funding becomes scarce there may be an exodus of non-profit Somerville organizations.

With a shaky economy causing most Americans to pinch pennies, the Madoff scandal could not have come to light at a worse time.

Madoff was arrested on December 11th 2008, after admitting to his sons that the asset management arm of his firm was "one big lie," based on investment fraud. He is now living under house arrest awaiting his indictment, which is expected to occur sometime this month.

In a more lucrative time, philanthropic foundations like the Shapiro's and JEHT may have been very willing to help the smaller organizations survive through an economic recession. Now, due to Bernard Madoff, it seems it must be every philanthropist for himself.