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Ripples of Madoff scandal spread everywhere
2008-12-20
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. Muzi.com News 10084989-1 (muzi.com)The money couldn't come soon enough. The sharp 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. Muzi.com News 10084989-2 (muzi.com) By that Thursday, though, events were unfolding 160 miles away that would upend those assumptions and assurances. 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. Muzi.com News 10084989-3 (muzi.com) The name of the accused, Bernard L. Madoff, meant nothing to Schwartz and why should it? He'd never heard of the money manager with the beachfront mansion and the 55-foot yacht. They'd certainly never met. There was no reason to think they had anything in common. Muzi.com News 10084989-4 (muzi.com) Except, it turned out, the money. Muzi.com News 10084989-5 (muzi.com) 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. Muzi.com News 10084989-6 (muzi.com) 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. Muzi.com News 10084989-7 (muzi.com) Their future is now in jeopardy -- a painful reminder of the financial web linking very different worlds. Muzi.com News 10084989-8 (muzi.com) ___ Muzi.com News 10084989-9 (muzi.com) Signing up companies for office space in Manhattan skyscrapers made Norman F. Levy a very rich man. Muzi.com News 10084989-10 (muzi.com) 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 whose zest for the deal was matched by his generosity with both friendship and money. Muzi.com News 10084989-11 (muzi.com) "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. "You taught me so much. I'll cherish our relationship forever." Muzi.com News 10084989-12 (muzi.com) The friend was Bernard Madoff. Muzi.com News 10084989-13 (muzi.com) 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. Muzi.com News 10084989-14 (muzi.com) Levy and Madoff were active in some of the same organizations, like New York's Yeshiva University. They donated their money to many of the same causes -- groups including the Lincoln Center Theater and Gift of Life, a South Florida charity that tries to save Jewish leukemia victims by matching them with bone marrow donors. Muzi.com News 10084989-15 (muzi.com) In the summer, both families headed to the Hamptons. When Norman F. Levy died, he was staying at his daughter's house fronting the Atlantic in Montauk, just a few sprawling lots away from the mansion owned by the Madoffs. Muzi.com News 10084989-16 (muzi.com) 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 -- as the vehicle for their charitable giving, they again put their trust in their longtime friend. Muzi.com News 10084989-17 (muzi.com) "My father believed in Bernie Madoff," Norman Levy's son, Francis -- who declined to comment for this article -- said in a recent interview with FOX Business News. "The one thing he said about Bernie (was), "If there's one honorable person, it's Bernie." Muzi.com News 10084989-18 (muzi.com) ___ Muzi.com News 10084989-19 (muzi.com) Francis Levy, a novelist, and his sister, Jeanne Levy Church, had no reason to think otherwise. Muzi.com News 10084989-20 (muzi.com) When Norman Levy died, they took the helm of the family philanthropy, leaving the funds invested with Madoff, whose offices were housed in the same Third Avenue tower as the foundation. Muzi.com News 10084989-21 (muzi.com) 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 to champion causes they embraced. Muzi.com News 10084989-22 (muzi.com) 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. Muzi.com News 10084989-23 (muzi.com) Levy Church, and her husband, Kenneth, "felt that they were fortunate in their life to have this remarkable amount of money and they felt they wanted to use it for less fortunate people," said Robert Crane, president of the JEHT Foundation. Muzi.com News 10084989-24 (muzi.com) Francis Levy co-founded the Philoctetes Center, a group dedicated to fostering discussions of everything from literature to economics. In 2007, the Levy Foundation financed Philoctetes with $950,000. Last year, Francis Levy invited his family's longtime friend, Madoff, to appear on a panel at the center to talk about the workings of Wall Street. Muzi.com News 10084989-25 (muzi.com) More recently, the Levy Churches formed another group, the Fair Food Foundation, based in Ann Arbor, Mich., which set out to find ways to get fresher, healthy food to residents of poor city neighborhoods starting with Detroit and Oakland, Calif. Muzi.com News 10084989-26 (muzi.com) None of the Levys' foundations are well-known to the general public. But they got an enthusiastic reception from groups across the country that were hungry for funding. Muzi.com News 10084989-27 (muzi.com) At the walk-in counseling office run by Rhode Island Family Life Center in a poor neighborhood in South Providence, a JEHT grant of $500,000 over two years paid staffers who help inmates just released from prison find housing and jobs. In 2007, the group provided services to 1,000 people. Muzi.com News 10084989-28 (muzi.com) A New Orleans group, Advocates for Environmental Human Rights, used a grant from JEHT to pursue a lawsuit charging "environmental racism" in the predominantly black Louisiana town of Mossville, where the soil and water are polluted by 14 surrounding factories. Muzi.com News 10084989-29 (muzi.com) And in 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, encouraging them to send some home with therapy or provide it in detention centers. Muzi.com News 10084989-30 (muzi.com) The JEHT grant accounted for 26 percent of the Center for Public Representation's annual budget. Its importance became even more clear this fall when a state tax on real estate transactions that provides nearly as much of the group's funding dropped sharply with the collapse of the housing market, Schwartz said. Muzi.com News 10084989-31 (muzi.com) Still, Schwartz's staff of 11 was so certain of JEHT's backing that they moved ahead with new projects, spending about $25,000 in advance. Muzi.com News 10084989-32 (muzi.com) "We just trusted that we would get the money, and so rather than suspend the work until the check was in hand ... we do the work and expected the check will follow," Schwartz said. Muzi.com News 10084989-33 (muzi.com) ___ Muzi.com News 10084989-34 (muzi.com) 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. Muzi.com News 10084989-35 (muzi.com) "Are you sitting down?" they asked. Muzi.com News 10084989-36 (muzi.com) The couple told him they'd just come across a story online about the arrest of a New York money manager whose name soundly vaguely familiar to Crane. All the Levy Church's money was invested with Bernie Madoff. If it was gone, so was the foundation. Muzi.com News 10084989-37 (muzi.com) On Monday morning Crane sent an e-mail to people at nearly 150 groups around the country that count on his foundation for $25 to $30 million in funding each year. The checks they had been expecting would not be coming, he told them, and JEHT would close by the end of January. Muzi.com News 10084989-38 (muzi.com) Francis Levy's group, the Philoctetes Center, also announced it could not continue without a cash infusion. The Fair Food Foundation, announced it would close, delivering what its president, Oran Hesterman called "a stinging blow" to activists working to improve nutrition in poor neighborhoods. Muzi.com News 10084989-39 (muzi.com)
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