Setting such a large part of financial resources in a single institution is at the very least the height of irresponsibility. At worst it is unmitigated greed.

I agree that there has been extremely lax oversight in the financial arena. People like Mr. Madoff should be punished to full extent of the law for every single illegal activity conducted. However, it is our responsibility as trustees of the donor gifts to be sure we are wisely looking after those gifts.

When we decide to participate in “investments” that appear too good to be true, with returns and promises that so consistently and completely buck the trends, how are we much different in motive than the likes of Mr. Madoff?

We should not be allowed to hide behind the cloak of “doing good works” with less than sound investment strategies.

The room buzzed with excitement as everyone considered what $1 million dollars would do for the projects in various parts of the world. Being new, I leaned over to the individual next to me — the director of administration — and quietly said, “Gee, I know I’m new here, but where I come from in San Diego we would look at that as a Ponzi scheme. Am I missing something here?”

The man sighed and muttered back, “No, you’re not missing a thing. You and I are the only ones in the room who think we’re going to get bit in the butt on this.”

Long (and very interesting) story short: We did get bit in the butt. And when the story broke the following May on the front page of the Wall Street Journal, I took the paper into the administrator’s office and laid it on his desk with a soft warning: “We’re on Page 8. I want all media inquiries running through my office. No one talks to the president or the CEO. And no one comments to the media except me. Period. Oh, and I probably should have bet you dinner and drinks on this happening.”

John Bennett is out of prison now. According to Arlin M. Adams, a Philadelphia attorney appointed by a judge to look for the lost money in the New Era scheme, about 95 percent of the $354 million Bennett collected from churches, colleges and cultural institutions was eventually recovered.

I thought people would have learned from that. But apparently not. I guess organizations and individuals will bypass due diligence (and there was plenty of it available with New Era) when the payout is big enough. And the talk is smooth.

Gregory C. Wallace

Closing:
The Chais Family Foundation
Robert I. Lappin Charitable Foundation
JEHT Foundation
Arthur I. and Sydelle F. Meyer Charitable Foundation

Heavily effected and/or in danger of closing:
Mort Zuckerman’s charitable trust
Wunderkinder Foundation
The Elie Wiesel Foundation for Humanity
Sen. Frank Lautenberg’s Family Charitable Foundation
Philoctetes Center for the Multidisciplinary Study of the Imagination
Yeshiva University
The Gift of Life Foundation
The MorseLife Foundation

However, there are limits to the sympathy one should have for individuals and organizations that fail to exercise due diligence when hiring a financial advisor, and who fail to adhere to reasonable investment strategies and investment policies.

Let’s also examine those investors who chose Mr. Madoff’s services for “other people’s money” (i.e., charitable and trust ivnestments) but not for their own investment assets. Where is the “duty of care” inherent in a trustee relationship?

I have written much in the past on the term “charity fraud” being like that of “train robbery.” Just as train robbery rarely, if ever, invovles the actual theft of a train , so, too, charity fraud usually involves misrepresentation by principals as being a charitable entty, or people associated with a charity stealing from the charity.