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Ripples Of Scandal Felt Far And Wide

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The Associated Press

Published: December 21, 2008

NEW YORK - In the nonprofit legal center Steven Schwartz runs from a converted furniture store in Northampton, Mass., the e-mail was very good news: By week's end, a check for $243,000 would be on its way.

The money couldn't come soon enough. The downturn in the economy had put Schwartz's group - working to improve treatment of teen offenders with mental illnesses - under very tight budget pressure. At least the check was a promise he could count on.

By that Thursday, though, events were unfolding 160 miles away that would upend those assumptions. In a federal courtroom in lower Manhattan, a Wall Street wizard stood before a judge, charged with running a $50 billion fraud that targeted scores of wealthy and powerful investors.

The name of the accused, Bernard L. Madoff, meant nothing to Schwartz.

The only thing they had in common, it turned out, was the money.

In the days since Madoff's Dec. 11 arrest, the tale has repeatedly been told of wealthy victims who, perhaps naively, invested their trust in a man who promised financial miracles.

But the scale of the Madoff scandal can just as well be measured in its still-widening ripples, reaching far-flung people and causes - from a group helping just-released inmates find jobs in Rhode Island to another working to provide fresh food in poor neighborhoods in Detroit and Oakland, Calif.

Their future is now in jeopardy - a painful reminder of the financial web linking very different worlds.

An August Figure

Signing up companies for office space in Manhattan skyscrapers made Norman F. Levy a very rich man.

In the hotly competitive but tight-knit world of New York commercial real estate, Levy worked across more than seven decades brokering leases in midtown's towers. When he died in 2005 at 93, he was hailed as an elder statesman of the trade.

"Your spirit and love of life have touched and changed all who knew you," one friend of 40 years wrote in a paid death notice for Levy that ran in The New York Times.

The friend was Bernard Madoff.

The real estate broker and the money manager were separated by 26 years, but they and their families had formed a friendship reinforced by shared interests, social circles - and trust.

No Reason For Distrust

For more than 30 years, the Levys also entrusted their personal investments to Madoff. When they chartered the Betty and Norman F. Levy Foundation - which reported assets last year of $244.4 million - they again put their trust in their longtime friend.

Francis Levy, a novelist, and his sister, Jeanne Levy Church, had no reason to think otherwise.

When Norman Levy died, they took the helm of the family philanthropy, leaving the funds invested with Madoff.

The Levy Foundation continued donations to longtime favorite charities. But its biggest checks went to a new set of organizations created by Norman Levy's children.

In 2000, Jeanne set up the JEHT Foundation, whose name is an acronym for Justice, Equality, Human dignity and Tolerance - originally to work on criminal justice reform, an area where funds are scarce. Last year, the Levy family financed JEHT to the tune of $29.9 million.

More recently, the family formed another group, the Fair Food Foundation, based in Ann Arbor, Mich., which set out to find ways to get fresher, healthful food to residents of poor city neighborhoods starting with Detroit and Oakland, Calif.

Through Schwartz's program in Massachusetts, JEHT offered a three-year grant for work in Connecticut, Texas, Alabama and elsewhere to get states to reconsider treatment of teen offenders with mental health problems.

The Money Was All Gone

Robert Crane, the director of the JEHT Foundation, was working late that Thursday evening when his cell phone rang. His benefactors, Jeanne and Kenneth Levy Church, were on the line.

The couple told him they'd just come across a story online about the arrest of a New York money manager. All of JEHT's money was invested with Bernie Madoff. If it was gone, so was the foundation.

On Monday morning Crane sent an e-mail to people at nearly 150 groups around the country that count on his foundation for $25 million to $30 million in funding each year. The checks they were expecting would not be coming, he told them, and JEHT would close by February.

The Fair Food Foundation also announced it would close.

It's a strange paradox, Schwartz and others in his situation say. All the attention swirling around Madoff has been about his wealthy lifestyle and the ultra-rich investors in places like Palm Beach and Hollywood and New York who lost their shirts. But few seem to understand the repercussions.

"It's very ironic that the very wealthiest in the country can have such a severe impact on kids on the low end of the totem pole," said Mark Steward, whose Missouri Youth Services Institute has relied on funding from the Levy family.

EDUCATION FOUNDATION WIPED OUT

The unfolding scandal surrounding the alleged Ponzi scheme run by Bernard L. Madoff claimed as a victim one of the largest educational foundations in the country, which has funded groundbreaking brain research at the Massachusetts Institute of Technology and diabetes research at Harvard Medical School.

The Picower Foundation, which announced late last week it was closing, has given $268 million to groups such the Picower Institute for Learning and Memory at the Massachusetts Institute of Technology, Human Rights First, the New York Public Library and the Children's Health Fund since it was established in 1989 by Barbara Picower and her husband, the investor Jeffry M. Picower, in Palm Beach.

Listed previously at $1 billion, the foundation's assets were managed by Bernard L. Madoff, Barbara Picower said in a statement, and his "act of fraud has had a devastating impact on tens of thousands of lives as well as numerous philanthropic foundations and nonprofit organizations."

The foundation is listed as the 71st-largest in the nation by the Council on Foundations.

Between 2004 and 2007, it gave away about $70 million.

A wire report

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