Running Charities Ethically - Behind the Tabloid Stories

I couldn't resist this one and my apologies to my friends at Hadassah.

Did anyone notice the headline "Ex-Hadassah CFO says she had affair with Madoff?"

Yes, the affair part is probably why people are looking at this story. But, when I read these pieces, I am always left wondering: "Are they out of their minds?"

I saw the story on the JTA (Jewish Telegraphic Agency) website. I figured they would report fairly without much embellishment on the lurid parts.

Here is the link to their coverage: http://jta.org/news/article/2009/08/13/1007227/ex-hadassah-cfo-says-she-had-affair-with-madoff

I was looking to see how much Hadassah might have lost when I stumbled on to a few tidbits. Yes, they are reported to have lost $40 million in funds invested with Madoff. They thought those funds had grown to $90 million.

Here is what shocked me into writing this blog post. "Hadassah believed the value of the portfolio had grown to $90 million, not including $130 million that it had pulled out over the years."

Not including the $130 million it had pulled out over the years?? That doesn't make sense to me. Maybe they had invested more than $40 million but had taken back some principal? That number can't be correct.

But the article goes on to say: "Both Weinstein and Hadassah have said that the first $7 million the organization invested with Madoff in 1988 came from a donor who insisted the money be handled that way. Hadassah invested another $33 million with Madoff by 1996, the year after Weinstein left the organization."

The point I saw was that Hadassah admitted publicly that they followed a donor's requirement to invest money with Madoff. That is incredible. Yes, I am sure it happens all the time but it isn't allowed! It puts into question whether the gift was really a completed gift since Hadassah allowed the donor to control the investment after the gift. If I were someone in the IRS tax-exempt section, with time on my hands, I would start wondering about their practices.

Additionally, if Hadassah really withdrew $130 million from initial investments of $40 million, if I were the receiver over the Madoff disaster, I would want some of that money back.

Lastly, the article ends by saying: "Hadassah is "moving on" from Madoff, the spokesperson said, noting that the organization recently received a $1 million gift and is close to securing two more." Something doesn't sound right with that last statement. I would hope that three $1 million dollar gifts to Hadassah are not so rare as to really console them over their Madoff losses. Well, according to the article, they made off like bandits with Madoff.