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Hospitals, schools feel impact of swindler
By Tom Moroney, John Lauerman and Brian K. Sullivan |
January 18, 2009, Sunday
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Print Edition
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CARL Shapiro's name is chiseled into Boston's largest academic and medical centers, testament to the roughly US$80 million that he showered on the city in the past decade. Now it comes with a Bernard Madoff-sized asterisk.
Shapiro, a 95-year-old philanthropist, lost US$545 million to Madoff, ranking him among the biggest individual victims of the world's largest Ponzi scheme, data compiled by Bloomberg shows.
Now Boston, Carlo Ponzi's adopted hometown, is bracing for the financial fallout.
"As a percentage of the population and significance of the charities involved, Boston was hardest-hit," said Mark T. Williams, a professor at Boston University School of Management and a former Federal Reserve bank examiner.
"Shapiro is Mr Boston," Williams said. "If Mr Boston is hit, what do you think that does to Boston?"
Just as in Madoff's base of New York, the alleged swindler targeted Boston's wealthy Jewish families. Shapiro was atop the list. His 47-year-old namesake foundation, at 75 Park Plaza, lost US$145 million because of Madoff. Shapiro and his wife, Ruth, are personally on the hook for about US$400 million.
Cultural programs
The foundation doled out most of its funds for new hospital buildings and cultural programs in Boston and Palm Beach, Florida, where the Shapiros also own a home. Harvard-affiliated Brigham and Women's Hospital opened the Carl and Ruth Shapiro Cardiovascular Center last year. The foundation also pledged US$27 million to the Dana-Farber/Brigham and Women's Cancer Center as well as US$15 million to Boston Medical Center for an ambulatory care center.
The foundation says it plans to "fulfill all of its current obligations."
He and his wife are the largest donors to Brandeis University in Waltham, 16 kilometers northwest of downtown Boston, giving more than US$80 million to the nonsectarian Jewish-sponsored institution. The school didn't invest with Madoff, according to spokesman Dennis Nealon.
For Shapiro, the financial pain may also have been personal. The first televised reports of Madoff's scam were "a knife in the heart," the Palm Beach Post quoted Shapiro as saying. Shapiro gave Madoff US$250 million 10 days before his arrest, the Wall Street Journal reported, citing unidentified sources. Madoff promised Shapiro he would get it back quickly and with interest, but never did, the newspaper said. The Shapiros have hired New York lawyer Steven F. Molo of Shearman & Sterling to represent them, the Boston Globe reported, citing a family spokesman.
Institutions throughout Boston say they're worried about future donations from groups that lost money by investing with Madoff. Several Harvard University-affiliated hospitals, the Massachusetts Institute of Technology, Tufts University, the Elie Wiesel Foundation for Humanity and a US$40 billion state pension fund were exposed to Madoff through donations or investments.
Tufts said it lost US$20 million by investing with Madoff through Ascot Partners LP, the New York fund run by J. Ezra Merkin. Merkin also faces a lawsuit from New York University, which said it had at least US$24 million in losses after Merkin and his funds invested with Madoff.
"We knew the economy was in bad shape," said George McCully, president of the Boston-based Catalogue for Philanthropy, which focuses on donor education. "But to have something like this come along, to have a guy in the for-profit sector cheat and steal others in the philanthropic sector, adds insult to injury."
The US$958 million Picower Foundation in Florida, which gave MIT a US$50 million grant to fund the Picower Institute for Learning and Memory, plans to close because of losses at the hands of Madoff. Wiesel's group lost US$15.2 million.
Other institutions tied to Madoff include the Robert I. Lappin Charitable Foundation of Salem, Massachusetts, which was forced to close, ending trips for local students and teachers to Israel. Maimonides School, an Orthodox Jewish day school in Brookline, Massachusetts, lost US$5 million, according to school board Chairman Jeffery Swartz in a letter to parents.
Hedge fund Tremont Group Holdings Inc, part of Massachusetts Mutual Life Insurance Company, invested US$3.3 billion with Madoff. MassMutual itself may have US$10 million at risk, according to a company statement.
Shapiro made his fortune in the clothing industry as founder of Kay Windsor Inc in New Bedford, Massachusetts, according to the Website of his foundation. He sold it to the Vanity Fair Corp in 1971 and remained with the company until his retirement in 1976, according to the site.
For Boston-area charities, the future remains murky, Williams said. "The bigger story going forward is, who will be able to step up to the plate and fill the void?"
Shapiro, a 95-year-old philanthropist, lost US$545 million to Madoff, ranking him among the biggest individual victims of the world's largest Ponzi scheme, data compiled by Bloomberg shows.
Now Boston, Carlo Ponzi's adopted hometown, is bracing for the financial fallout.
"As a percentage of the population and significance of the charities involved, Boston was hardest-hit," said Mark T. Williams, a professor at Boston University School of Management and a former Federal Reserve bank examiner.
"Shapiro is Mr Boston," Williams said. "If Mr Boston is hit, what do you think that does to Boston?"
Just as in Madoff's base of New York, the alleged swindler targeted Boston's wealthy Jewish families. Shapiro was atop the list. His 47-year-old namesake foundation, at 75 Park Plaza, lost US$145 million because of Madoff. Shapiro and his wife, Ruth, are personally on the hook for about US$400 million.
Cultural programs
The foundation doled out most of its funds for new hospital buildings and cultural programs in Boston and Palm Beach, Florida, where the Shapiros also own a home. Harvard-affiliated Brigham and Women's Hospital opened the Carl and Ruth Shapiro Cardiovascular Center last year. The foundation also pledged US$27 million to the Dana-Farber/Brigham and Women's Cancer Center as well as US$15 million to Boston Medical Center for an ambulatory care center.
The foundation says it plans to "fulfill all of its current obligations."
He and his wife are the largest donors to Brandeis University in Waltham, 16 kilometers northwest of downtown Boston, giving more than US$80 million to the nonsectarian Jewish-sponsored institution. The school didn't invest with Madoff, according to spokesman Dennis Nealon.
For Shapiro, the financial pain may also have been personal. The first televised reports of Madoff's scam were "a knife in the heart," the Palm Beach Post quoted Shapiro as saying. Shapiro gave Madoff US$250 million 10 days before his arrest, the Wall Street Journal reported, citing unidentified sources. Madoff promised Shapiro he would get it back quickly and with interest, but never did, the newspaper said. The Shapiros have hired New York lawyer Steven F. Molo of Shearman & Sterling to represent them, the Boston Globe reported, citing a family spokesman.
Institutions throughout Boston say they're worried about future donations from groups that lost money by investing with Madoff. Several Harvard University-affiliated hospitals, the Massachusetts Institute of Technology, Tufts University, the Elie Wiesel Foundation for Humanity and a US$40 billion state pension fund were exposed to Madoff through donations or investments.
Tufts said it lost US$20 million by investing with Madoff through Ascot Partners LP, the New York fund run by J. Ezra Merkin. Merkin also faces a lawsuit from New York University, which said it had at least US$24 million in losses after Merkin and his funds invested with Madoff.
"We knew the economy was in bad shape," said George McCully, president of the Boston-based Catalogue for Philanthropy, which focuses on donor education. "But to have something like this come along, to have a guy in the for-profit sector cheat and steal others in the philanthropic sector, adds insult to injury."
The US$958 million Picower Foundation in Florida, which gave MIT a US$50 million grant to fund the Picower Institute for Learning and Memory, plans to close because of losses at the hands of Madoff. Wiesel's group lost US$15.2 million.
Other institutions tied to Madoff include the Robert I. Lappin Charitable Foundation of Salem, Massachusetts, which was forced to close, ending trips for local students and teachers to Israel. Maimonides School, an Orthodox Jewish day school in Brookline, Massachusetts, lost US$5 million, according to school board Chairman Jeffery Swartz in a letter to parents.
Hedge fund Tremont Group Holdings Inc, part of Massachusetts Mutual Life Insurance Company, invested US$3.3 billion with Madoff. MassMutual itself may have US$10 million at risk, according to a company statement.
Shapiro made his fortune in the clothing industry as founder of Kay Windsor Inc in New Bedford, Massachusetts, according to the Website of his foundation. He sold it to the Vanity Fair Corp in 1971 and remained with the company until his retirement in 1976, according to the site.
For Boston-area charities, the future remains murky, Williams said. "The bigger story going forward is, who will be able to step up to the plate and fill the void?"
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