Charity Governance

AS IS TRUE WITH MANY THINGS IN LIFE, SIZE DOESN’T MATTER: NATIONAL COMMITTEE FOR RESPONSIVE PHILANTHROPY'S STUDY DRAWS THE WRONG CONCLUSION

DATELINE:  July 25, 2009, Chicago

The National Committee for Responsive Philanthropy (NCRP) released a study claiming losses by charities in the Madoff Ponzi scheme are explained by small and  homogeneous boards.  When we see anyone talking about diversity and foundation boards these days, we see a hidden agenda.  So we want to set the record straight:  There is... 

BRANDEIS UNIVERSITY IS ON THE RIGHT SIDE OF DISPUTE WITH DONOR’S DESCENDANT

DATELINE: May 12, 2009, Chicago

One thing is for sure, Brandies general counsel Judith R. Sizer is certainly earning her salary this year.  Sumner Kalman, the great nephew of Julius Kalman, has filed suit in Suffolk County probate court in Boston claiming that Brandeis is not honoring the terms of a gift made by Julius Kalman circa 1956.  John Hechinger, Brandeis Plan to Raze Building Sparks Donor Suit, Wall Street Journal (May 13, 2009). At the time, Brandeis built a science building and named it after Mr. Kalman, who bequeathed the funds for the building.

As happens with the passage of time, the building...

TALKING PAST THOSE WHO WERE ABSENT: A PANEL DISCUSSION ABOUT BRANDEIS’S ROSE MUSEUM

DATELINE: May 3, 2009, Chicago

Yesterday we attended Artropolis, the annual international art show, now held at Chicago’s Merchandise Mart.  As in past years, we came to see the art, but this year we were intrigued by one of the panel discussions.  Entitled Museums on the Line: Cutbacks, Closures and Opportunities, the panel included (i) Michael Rush, director of the Rose Museum of Art at Brandeis University; (ii) Anthony Hirschel, director of the Smart Museum at the University of Chicago; (iii) Mary Lucier, an American installation and video artist whose works have been exhibited at the San Francisco Museum of Modern Art (1995), the Los Angeles Museum of Contemporary Art (1988), Whitney Museum (1986), and many others.  Heather Pesanti, a curator at the Buffalo’s Albert-Knox Art Gallery, was an unscheduled but welcome addition to the panel.

The discussion was both fascinating and enlightening, but the panel’s composition was...

YESHIVA UNIVERSITY GETS RELIGION

DATELINE: April 14, 2009, Chicago

On January 1, 2009, Janet Frankston Lorin of Bloomberg reported that Ira M. Millstein, the corporate governance guru from Weil, Gotshal, advised Yeshiva University with respect to conflicts of interest and investing with members of the university’s board of trustees.  Millstein Letter Helped Keep Yeshiva Money on Path to Madoff.  Bloombergclaimed to have seen a letter from Millstein in which he said that Yeshiva had “followed procedures adequate to prevent either the appearance or the reality of a conflict of interest.”  According to Bloomberg, this cleared the way for the fateful investment in J. Ezra Merkin’s fund that invested its funds with Bernie Madoff.  Merkin served on Yeshiva’s investment committee.  In his letter, Millstein reportedly said, “There is no reason why the board or its committees should institute a blanket rule prohibiting members (or major donors) from doing business with Yeshiva.”  We previously pointed out that there are plenty of reasons for a blanket prohibition.

Another Wall Street corporate law firm, Sullivan & Cromwell, have now given their own verdict on Millstein’s advice.  As is typical, Sullivan & Cromwell was retained following the revelation that Yeshiva University lost somewhere around $110 million in the Madoff scandal—cash-out-of-pocket was somewhere around $14 million.  There charge was to develop governance policies that met the gold standard.  Sometime around the end of March, the Yeshiva board of trustees adopted a new conflicts-of-interest policy which was developed with the assistance of Sullivan & Cromwell.  Noach Lerman, Board of Trustees Adopts New Rules to Limit Conflict of Interests, Yeshiva Commentator (April 1, 2009).  The policy...

THOU SHALL NOT INVEST AN ENDOWMENT’S ASSETS BASED ON LOCKER ROOM TALK: SENATOR GRASSLEY SPEAKS

DATELINE: March 12, 2009, Chicago

On Tuesday, Senator Charles Grassley, ranking member of the Senate Finance Committee, spoke at some sort of conference or event sponsored by a Washington, D.C. law firm.  His remarks are up on his Web site and they largely cover ground that Senator Grassley has sown before.  There, however, is...

JACK SIEGEL SPEAKS TO CHARITY REGULATORS ABOUT MADOFF: LET’S GO TO THE VIDEO TAPE

DATELINE: March 3, 2009, Chicago

On January 23, 2009, Jack Siegel spoke to those attending the Fraud in the Charitable Sector conference co-sponsored by the National Attorneys General Training and Research Institute and Columbia Law School.  Siegel’s speech focused on the implications of the Madoff scandal for charities and charity regulators.

 

To view a video of the speech, click here.

 

Siegel gave a second presentation on how to use various governance and financial documents to assist in the investigation of fraud.  That session was not filmed.

IT WAS FUN WHILE IT LASTED: UNIVERSITY INVESTMENT POLICIES ARE GOING TO CHANGE

DATELINE:  March 1, 2009, Chicago

 

The Pennsylvania Attorney General should open an immediate investigation into the investment practices of the University of Pittsburgh and Carnegie Mellon University.   The Pittsburgh Post Gazettereported last week that combined, the two institutions had invested a $114 million through Westridge Capital Management. Jonathan D. Silver, Pitt, CMU Money Managers Arrested in Fraud: FBI Says They Misappropriated $500 Million for Lavish Lifestyles.  The proprietors of that investment firm, Stephen Walsh and Peter Greenwood were charged in Manhattan federal court with securities fraud, wire fraud and conspiracy.  The two were sued in civil court by the SEC  and the Commodity Futures Trading Commission, on allegations that the two had misappropriated more than $535 million and fraudulently solicited $1.3 billion from investors since 1996.  The University of Pittsburgh and Carnegie Mellon have brought a civil suit against the Westridge, Walsh, and Greenwood.

 

So what was the alleged scheme?  Apparently it was another Ponzi scheme.  It seems the two just...

“OUR AUDIT CONFORMED TO ALL PROFESSIONAL STANDARDS”

DATELINE:  February 19, 2009, Chicago

Yesterday’s Wall Street Journal carries an article that was inevitable.  Penned by WSJ reporters Ianthe Jeanne Dugan and David Crawford, the article examines the lawsuits that have been filed against the auditors who were unfortunate enough to have some nexus with Bernie Madoff and his investors.  Accounting Firms That Missed Fraud at Madoff May Be Liable.  You might think the article focuses on Friehling & Horowitz, the three-person firm that supposedly audited Madoff....

ALWAYS INSIGHTFUL: CHARITYGOVERNANCE DISCUSSES JEOPARDY INVESTMENTS AND MADOFF

DATELINE: February 11, 2009, Chicago

The New York Times is running a story today about the possibility of the IRS asserting excise tax penalties against private foundations and their directors over foundation investments with Bernie Madoff.  Lynnley Browning, For Investing with Madoff, Private Foundations Could Face Tax Fines.  Readers who want to know more should click here for our January 9, 2009 post, including references to revelant regulations, case law, and penalty provisions.

Have fun.

 

 

THE LIST: CHARITY-RELATED VICTIMS OF BERNARD MADOFF

DATELINE: February 5, 2009, Chicago

The bankrutpcy court released a 163-page list of Bernie Madoff's victims.  We have reviewed the list and compiled what appear to be (by name) charities and charitable trusts that lost money in the Madoff scandal.  The list does not provide the amount of losses.

There are hundreds of trusts on the list and those trusts may have a charitable component.  Unless the word "charity" was included in the name, we did not include the trust on the list.  It appears that the list is limited to those who invested directly with Madoff.  A number of feeder funds are listed.  We know that there are charities invested with those funds that are not included on the list released today.

Probably the most interesting aspect of the 163-page list is the number of pension funds listed.  Our impression is that ERISA imposes tougher standards of pension trust fiduciaries than are often applied in practice to charitable fiduciaries.  It will be interesting to watch any litigation involving breach by pension fiduciaries of their duties. 

In light of recent developments, Brandeis University is probably the most interesting name on the list.  Keep in mind, however, that we don't know whether the investment is for $1,000 or $10 million.  Also, the investment may be in donor-restricted endowment fund which required that it be invested with Madoff, so don't draw the wrong conclusions.

Here is our list taken from the larger one...