Local Toll Runs High In Madoff Collapse
Losses to Nonprofits, Personal Fortunes May Top $1 Billion

By Megan Greenwell
Washington Post Staff Writer
Sunday, December 21, 2008; C01

Bernard L. Madoff's alleged multibillion-dollar fraud has ruined personal fortunes and shrunk charitable endowments across the Washington region, with estimates of the financial toll locally ranging from the hundreds of millions of dollars to more than $1 billion.

The casualties include a retired couple who invested their substantial life savings with Madoff and told their rabbi this week that they will have to sell their house and might move in with one of their children; a dozen clients of a prominent D.C. law firm, some of whom lost upward of a million dollars; and clients and friends of a financial manager who conservatively estimates they lost a billion dollars combined.

By most accounts, Washington area residents lost far less than the thousands of people in New York, Los Angeles and Palm Beach, Fla., thought to have been taken in by Madoff's alleged Ponzi scheme, which he has said cost investors $50 billion. Real estate deals, charitable funds and personal fortunes, mostly in the region's Jewish community, were seriously damaged here as well, according to people with direct knowledge of the losses, who said the full extent probably will not become clear for months.

"When someone does this and has such a devastating impact on so many individuals and on the community as a whole, it really is an earthquake," said Stuart Weinblatt, a rabbi who leads Congregation B'nai Tzedek in Potomac and has spoken to several people who lost all or part of their savings. "It's shaken the very foundations."

Only a handful of area nonprofit groups -- and no individuals -- have publicly acknowledged losing money. Among Jewish philanthropists, some were willing to discuss friends and clients, but few would discuss their own situations.

"Who wants to go on the record to say they were duped?" said Gary A. Tobin, a San Francisco academic who studies Jewish philanthropy and says he has been told about substantial losses in the Washington area Jewish community. "For Jews, this is like a family betrayal, a dirty little secret in the community that's now out there for everybody to watch. It's embarrassing, it's shameful, it's sad."

The Jewish Federation of Greater Washington said last week that about 8 percent of its long-term savings were in a Madoff account. The endowments of 15 area schools, synagogues and other nonprofit groups were managed by the fund, including Hillel groups at George Washington University and the University of Maryland, the Jewish Community Center of Greater Washington and the Jewish Council for the Aging. All of the fund's member groups expect to lose 8 percent of their endowments.

"When everybody gets over the initial shock based on the amounts of money involved, the second predominant feeling is one of total uncertainty," said Abbe D. Lowell, a partner with D.C. law firm McDermott Will & Emery and a board member and general counsel for the Jewish Community Center. "No one seems to grasp what this all means yet."

One of the region's largest Jewish family foundations, the Charles I. and Mary Kaplan Foundation, earned almost $3.2 million in interest dividends from a Madoff account last year, according to the group's tax filings. It is unknown whether the group invested with Madoff at the time of his arrest, because 2008 records are not available.

Irene Kaplan, the previous president of the Jewish Federation of Greater Washington and vice president of the Kaplan Foundation, declined to comment when reached at her Potomac home. Attempts to contact the other three officers of the foundation, who are also members of the Kaplan family, at their homes and offices were unsuccessful.

In 2006, according to tax records, $29.2 million of the foundation's $30.1 million endowment was invested with Madoff.

Lowell said his law firm has at least 10 or 12 clients who had invested with Madoff. Some, he said, fear they have lost more than $1 million.

"This is generational wealth that has been destroyed," said a local financial manager, who asked not to be named so as not to identify his clients. He said that many local residents who lost money have been successful business managers for many years. Their children's "inheritances are going to be affected. They're going have to rethink life."

Board members of several Jewish nonprofit agencies, some of which had invested money with Madoff, said they expect to lose some of their most generous donors, at least in the short term.

"The fear among the agencies and people who provide services is that many of the people who supported them are no longer going to be able to do that," said Misha Galperin, chief executive of the Jewish Federation. "The ability of many Jewish organizations to provide the vital services they're providing is certainly going to be affected."

Unlike a handful of organizations across the country, no nonprofit groups in the Washington region have announced plans to close as a result of Madoff's alleged fraud. Still, an 8 percent loss in endowment funds will have serious ramifications for the Jewish Federation's member groups, leaders said. The federation had cut pension contributions and senior salaries and required employees to take furloughs because of a shortage of funds caused by the ongoing financial crisis.

"The demand for free meals and employment counseling and transportation assistance has gone up very significantly in the last six months, and this just compounds that," Galperin said. "Some of our longtime supporters are now the ones who need support."

Rabbis and nonprofit group leaders say they have fielded calls from people who lost lifetime savings in a day when Madoff was arrested Dec. 11. At B'nai Tzedek, Weinblatt spent the past week wrestling with how to preach about the Talmudic response to the crisis while counseling families that lost their fortunes.

He said he spent part of Wednesday evening at the home of a couple who were living off the interest their investments brought but have been left with almost nothing. They told him they might move in with one of their children.

"The thing I shared with this woman is that the Talmud says that all we ever truly have is that which we give away," Weinblatt said. "There was some anger, obviously, but they took a little comfort in all the people they've been able to help."

Staff writers Debbie Cenziper and Michelle Boorstein and staff researcher Meg Smith contributed to this report.