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Foundations help nonprofits hurt in Madoff affair

Resource type: News

Associated Press |


NEW YORK (AP) – Nonprofits that are struggling because their donors lost money with Bernard Madoff are getting a bailout — but not from the government. Richer foundations are stepping in to help.

Human Rights Watch, The Center for Constitutional Rights and others are already slated to receive more than $1 million in help from philanthropies and donors who share their interests.

And more money is on the way. Large foundations are considering new grant programs in the wake of financial crisis and the exposure of Madoff’s alleged $50 billion Ponzi scheme.

“We are talking with other donors about possible ways to mitigate the losses suffered by our grantees,” said Laura Silber, director of public affairs for the Open Society Institute, a grant-making foundation founded by billionaire George Soros. “Many were already reeling because of the financial crisis, and that was only compounded by the Madoff scheme.”

Legions of people who give lots of money to nonprofits have watched their investments wither in the past year, forcing them to cut back on giving. Then came the Madoff mess.

“We have never seen anything like we have seen this year,” said Michele Alexander, director of development at Human Rights Watch, which is dedicated to defending and protecting human rights internationally.

Madoff faces trial and has been confined to his Manhattan apartment under house arrest. Prosecutors say he duped investors for years, using new money to pay off old clients and create a mirage of consistent returns.

Human Rights Watch did not invest directly with Madoff, but like many others it was hit by Madoff-related losses at the Betty and Norman F. Levy Foundation, a large backer of social causes.

The Levy Foundation gave nearly $30 million in 2007 to the JEHT Foundation, which supports a variety of causes, and JEHT gave $250,000 to Human Rights Watch, according to JEHT financial documents.

JEHT President Robert Crane was not available for comment but said in a statement last month that “hopefully others will look closely at (JEHT’s) work and consider supporting it going forward.”

The JEHT Foundation — its name stands for justice, equality, human dignity and tolerance — will close this month, leaving many nonprofit groups with large gaps in their budgets.

“Many of these nonprofits were four levels removed from Madoff. They didn’t have any connection to him or do anything wrong,” said Lucy Bernholz, president of the philanthropy consulting firm Blueprint Research & Design in San Francisco. “But they sure got badly backswiped by him.”

In order to plug some of the financial holes, the liberal activist group organized an end-of-year fundraising drive for four organizations that lost money with Madoff.

Those chosen had worked with MoveOn in the past and weren’t selected based on need, said MoveOn communications director Ilyse Hogue.

A solicitation sent to MoveOn’s nearly 5 million members Dec. 29 noted that if Madoff’s nonprofit victims “can’t replace the funding that came from investment accounts that Madoff stole, they may be forced to start cutting important projects or, in some cases, even lay off staff,” the e-mail said.

MoveOn raised more than $635,000 in three days for The Brennan Center for Justice, Human Rights Watch, Advancement Project and the Center for Constitutional Rights. The average donation was less than $60.

Both the Open Society Institute and another foundation, The Atlantic Philanthropies, offered to match up to $300,000 each. So a total of $1.2 million will go to the four nonprofit groups.

Atlantic Philanthropies, which supports causes related to aging, disadvantaged children, population health and human rights, is considering how best to respond to the financial troubles at many nonprofits, spokeswoman Katie Zutter said.

The money raised though the drive will help.

The Center for Constitutional Rights was halfway through a $300,000 grant from JEHT that was earmarked in part for legal work involving detainees at Guantanamo Bay, said Kevi Brannelly, the center’s director of development.

Since news of Madoff’s alleged scheme hit, the center has taken calls from foundations asking what they can do to help.

“It has been inspiring the way that foundations and individual donors, across the political spectrum, have come to the aid of affected organizations,” Brannelly said.

Copyright 2008 – The Associated Press. All rights reserved.