NEW YORK - In a Connecticut town, local officials scrambled to get a handle on damage to pension funds held for its police officers and firefighters. A Massachusetts charity announced it was shutting down. In New York, a distinguished economist feared he had lost his $2.2 million nest egg.
Damage continued to ripple from the massive fraud allegedly engineered by storied Wall Street money manager Bernard Madoff Monday, even as investigators worked to unravel the scheme’s working and its reach.
While details remained sketchy, the sudden collapse of Madoff’s firm began revealing an impact far beyond the world of the ultra-wealthy and well-connected who were the mainstay of his client base. And the firm’s extensive dealings with charitable foundations and other groups suggests the fraud may take a toll in unexpected places.
“It’s devastating to people and communities and lives,” said Deborah Coltin, executive director of the Robert I. Lappin Charitable Foundation, a Salem, Mass., organization that sponsors Jewish educational program and is being forced to close its doors.
The 70-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they’ve been wiped out, and it is thought many more have yet to come forward.
Late Monday, a federal judge directed that proceedings to liquidate the assets of Bernard L. Madoff Investment Securities LLC be moved to bankruptcy court.
The biggest victims include international banking institutions HSBC Holdings PLC of Britain, Royal Bank of Scotland Group PLC and Man Group PLC, Spain’s Grupo Santander SA, France’s BNP Paribas, and Japan’s Nomura Holdings. All reported that they had fallen victim to Madoff’s alleged Ponzi, or pyramid, scheme.
The alleged victims who sunk cash into the veteran money manager’s investment pool include real estate magnate Mortimer Zuckerman, and a charity of movie director Steven Spielberg. Irwin Kellner, a well-known economist for MarketWatch.com, filed a lawsuit Friday against Madoff in U.S. District Court in Long Island, seeking repayment of more than $2.2 million he invested with the money manager.
But the list of people and organizations allegedly taken by Madoff reached into the ranks of the little guy, too.
When local officials in Fairfield, Conn., heard of Madoff’s arrest “it set off every bell,” said Paul Hiller, the town’s chief fiscal officer.
The town’s employees board and police and fire board — which cover 971 workers — had $41.9 million invested with Madoff, said Paul Hiller, Fairfield’s chief fiscal officer.
Town officials immediately notified their investment fund to liquidate. “At that point, it was too late,” he said.
Without the Madoff funds, the town’s pension funds remain safe, officials said, but the loss means they’ve lost their cushion.
Others, though, have no such comfort zone.
Officials at the New York-based JEHT Foundation, a nonprofit focused on juvenile justice and fair elections, said it was freezing all its grants and would shut down at the end of January. The group gets all its fundings from a couple, Jeanne and Kenneth Levy-Church, whose personal investments were managed by Madoff.
“The impact is really quite deep because we’re talking about $25 to $30 million in funding to organizations that are no longer going to be getting that money,” said Robert Crane, the president of the foundation.
New Jersey Sen. Frank Lautenberg, one of the wealthiest members of the Senate, entrusted his family’s charitable foundation to Madoff. Lautenberg’s attorney, Michael Griffinger, said they weren’t yet sure the extent of the foundation’s losses, but that the bulk of its investments had been handled by Madoff.