On Dec. 11, 2008, one of the worst events to rock the organized Jewish world was revealed on the front pages of the nation’s newspapers. Few outside of the financial world had ever heard of him before that day. But when news broke that Bernard Madoff’s Wall Street investment firm was a Ponzi scheme and that some of the Jewish community’s richest and most respected individuals, as well as philanthropies and educational institutions, had been the victims of a gigantic fraud, the impact was devastating.
More than $64.8 billion had disappeared when the impact of the 2008 financial crisis finally undid Madoff’s decades-long scheme and forced his firm into collapse, although most of that was actually the fictional profits his clients thought he had earned them.
Madoff was once the toast of the Jewish philanthropic world. He died this week in the hospital at the federal prison in Butner, N.C., still as widely reviled a figure as he was once his crime was exposed. Last year after his condition was judged to be fatal, his lawyers asked for early release to live out his last months outside of jail. But the same judge who had sentenced him to 150 years in prison denied the request, citing hundreds of his victims who had written to the court demanding that he be kept imprisoned.
Madoff’s death should cause us to ponder what it is that enables a person to commit fraud on such an immense scale. It’s also an appropriate moment to assess the broader consequences of a crime that caused many to wonder whether at the time whether his actions would trigger a wave of anti-Semitism rooted in traditional tropes about Jews and money, and how the Jewish organizational world would recover from the blow it suffered at his hands.
Though the hurt he did to so many cannot be overestimated, it’s equally true that Madoff’s misdeeds turned out to be nothing more than a particularly egregious true crime story, not a turning point in American Jewish history. And though many of those groups, institutions and individuals never entirely recovered from what he did to them, neither was his swindle enough to topple the organized Jewish world, which, to this day, still has far greater problems to cope with than the thievery of a financial trickster.
For those whose savings had been squandered, the anguish he caused lives on with their anger—perhaps all the greater because they hadn’t been taken in by a common criminal or a sleazy Internet scammer. Madoff was a pillar of the New York financial world and a former president of the Nasdaq stock exchange. More than that, he was also a major player in Jewish philanthropy, a treasurer of Yeshiva University and chairman of its business school, and active in many other communal institutions.
Indeed, Madoff recruited his marks by networking within the Jewish community. At Jewish country clubs in New York, Florida and Minnesota, he convinced people that he was doing them a favor by letting them give him their money as if it were an exclusive club. He also utilized his connections with legitimate Jewish Wall Street operators like Ezra Merkin, who, according to a report in The New York Times, directed more than $1 billion of funds from fellow congregants at Manhattan’s Fifth Avenue Synagogue into Madoff’s hands.
It was precisely because Madoff was so well-connected and active in the Jewish philanthropic world that so many institutions entrusted him with their money. The list of Jewish groups that woke up to discover their assets were a mirage was staggering. They included Yeshiva University, Hadassah, the American Technion Society as well as smaller organizations like the Robert Lappin Foundation, the Elie Wiesel Foundation for Humanity, New York’s Ramaz School and Boston’s Maimonides School.
Adding to the pain is the fact that some of those who thought of themselves as victims—thanks to Madoff’s false claims about the gains their investments had made—were actually net winners since they had withdrawn some of their money over the years. Madoff had never failed to honor a withdrawal request until the collapse of the Lehman Brothers firm set off a surge of demands that forced him to finally confess his crimes.
Hadassah was one such “winner” since it had withdrawn about $100 million from him over the years, a sum far in excess of the $40 million principle they had invested. Irving Picard, a court-appointed trustee, has spent all these years seeking to “claw back” some of those fictional profits to make restitution to those who lost everything. In a settlement, Hadassah paid $45 million into that fund, which was not an indication of wrongdoing.
To date, Picard has recovered some $14.4 billion of the approximately $20 billion that investors gave Madoff and redistributed to net losers. That means that some of those who were scammed were made whole, at least in terms of their initial investment, even if they all thought that Madoff’s supposedly sound judgment had earned them far more in fictional profits. Sadly though, many victims sold off their claims to speculators for pennies on the dollar in order to survive the post-2008 crisis, long before restitution was made.
Those Jewish institutions who were hit hard staggered, though most, including Hadassah, have survived and eventually can be said to have fully recovered. Of the small groups, some were wiped out, but the Robert Lappin Foundation, which had done so much for Jewish education, adapted and learned to fundraise rather than merely existing on their principal donor’s largesse since he had lost most of his money as well.
If any good came out of all this, it’s that many small groups, especially the boutique philanthropies that have grown by leaps and bounds in recent decades, which had handled their money in a somewhat cavalier fashion managed to change their ways. Savvier investors and institutions with more checks and balances set up in their operations had stayed clear of Madoff because they felt his numbers never added up. They were ultimately proved correct.
Just as important, the fears that revulsion over Madoff would set off a revival of anti-Semitism in the United States proved overblown.
In the wake of the 2008 collapse, Americans were searching for scapegoats. Smearing Jews as inveterate fraudsters who steal the money of unsuspecting gentiles is one of the primary themes of classic anti-Semitism that has been repeated throughout the history of modern Europe.
Though the Anti-Defamation League published a full accounting of Madoff-inspired attacks on Jews, their report on the issue didn’t amount to much since it was largely limited to stray comments posted on websites. Perhaps it is because it was known that Madoff had stolen more from his fellow Jews than anyone else. But if anti-Semitism has grown in the last 12 years, it’s not because Americans believe that Jews are stealing their cash. Rather, it’s because many have either succumbed to leftist, anti-Zionist and critical race theory lies about Jews and Israel being white oppressors or because they bought into more traditional right-wing conspiracy theories about Jews running the world.
Bernie Madoff might have proved that Jews are just as vulnerable to scammers, especially when they appear so respectable, as anyone else. But he also demonstrated that for all of the justified concerns we have about anti-Semitism, even the most notorious crimes committed by Jew won’t undermine the position of the rest of the community—and that Americans recognize that scammers can come from across the religious spectrum. That’s small comfort for those who were hurt, financially and communally. But it also says something good about America that we shouldn’t ignore, even as we recall such villainy.
Jonathan S. Tobin is editor in chief of JNS—Jewish News Syndicate. Follow him on Twitter at: @jonathans_tobin.