Another Revisit to Madoff and His Charity Stakeholders – Hadassah and Yeshiva University: Now A Perplexing Tale of Three Forms 990 – Part II – Installment 23

February 14, 2010Articles White Collar Defense & Compliance Blog

This is the twenty-third in a series of installments on this blog that are discussing issues arising in the aftermath of the long global Ponzi scheme of Bernard L. Madoff (“Madoff”). Installments 3 through 8, Installment 10 and Installments 14 through 22 of this series focused on the concerns of charities that were investors with Madoff and similar schemes. All potential stakeholders should consult professional advisors to have their positions evaluated.

This Installment presents in tabular form and expands Installments 14 and 22 relative to the comparison as to how Hadassah and Yeshiva have disclosed publicly their respective investments with Madoff. Defined terms and links not otherwise contained herein are included in Installments 14 and 22. Readers are encouraged to consult the earlier blog posts as a background for this Installment.

As stated in Installments 14 and 22, it is my view that Yeshiva provided significantly greater disclosure and transparency relative to Madoff and related matters through its Form 990 filing than Hadassah did in its Forms 990. As a result I believe that Yeshiva has been more successful than Hadassah in using the Form 990 reporting process proactively to build new credibility.

The following table updates the tabular information contained in Installment 14 based upon the December Hadassah Form 990 that was first discussed in Installment 22.

A COMPARISON OF HADASSAH AND YESHIVA FORMS 990

(Information in the Hadassah and Yeshiva columns is from the Hadassah Forms 990 and the Yeshiva Form 990, unless otherwise noted; readers may access Forms 990 by visiting Guidestar after making a free online registration. The table below should be read in conjunction with the definitions, links and discussion in Installments 14 and 21 of this series.)

CATEGORY HADASSAH YESHIVA
Fiscal Year End May 31, 2008 and December 31, 2008 June 30, 2008
Dates of Form 990 April 3, 2009 for Form 990 for the fiscal year ended May 31, 2008 (“May Form 990”) and November 16, 2009 for Form 990 for the fiscal year ended December 31, 2008 (“Dec Form 990”) May 14, 2009 (“Yeshiva Form 990”)
Final Due Date for Form 990 Filing with IRS, Including All Allowed Extensions April 15, 2009 for May Form 990 and November 16, 2009 for Dec Form 990 May 15, 2009
Office Where Financial Books are Kept 50 West 58thStreet New York, NY 10019 500 West 185thStreet New York, NY 10033
Paid Preparer of Form 990 Alan Kluger KPMG LLP 345 Park Avenue

New York, NY 10154-0102

Alan Kluger KPMG LLP 345 Park Avenue

New York, NY 10154-0102

Potential Conflicts of Interest Involving Madoff The Henriques/Strom Article reported the allegation by former CFO of Hadassah, Sheryl Weinstein, that she had an affair with Madoff while she was CFO at a time that Hadassah was investing with him. Madoff was a Trustee and Treasurer of Yeshiva while Yeshiva was investing indirectly with Madoff. J. Ezra Merkin, a principal of a putative feeder fund for Madoff, was a Trustee while Yeshiva was investing through him with Madoff.
Resolution of Potential Conflicts of Interest Involving Madoff The Henriques/Strom Article reported that Sheryl Weinstein left Hadassah in 1997. Madoff and Merkin each resigned in all fiduciary capacities from Yeshiva in December 2008.
Extent of Form 990 Disclosure of Assets Exposed for Loss as a Result of Madoff–related Investments No disclosure of the extent of potential asset loss from Madoff-related investments was included in any note in the May Form 990, although the financial statements audited by KPMG for the fiscal year ended May 31, 2008 (and the fiscal year ended December 31, 2008), disclosed in a lengthy footnote that Hadassah wrote off, as of May 31, 2008, $88,725,362 of carrying value of Madoff-related investments. Disclosure was made in the December Form 990 in a lengthy footnote (substantially similar to those in the financial statements audited by KPMG for the years ended May 31, 2008 and December 31, 2008) that Hadassah wrote off, as of May 31, 2008, $88,725,362 of carrying value of Madoff-related investments. Disclosure was made in the Yeshiva Form 990 that Yeshiva wrote off, as of June 30, 2008, $95,290,000 of carrying value of Madoff/Merkin-related investments.
Disclosure of Exposure Potential for Recovery of Assets by Bankruptcy Trustee for Madoff No disclosure was made in either the May Form 990 or the Dec Form 990 (or the financial statements audited by KPMG for the years ended May 31, 2008 and December 31, 2008) of actual dollar amounts of cash contributions and cash withdrawals made by Hadassah in connection with Madoff-related investments. (The Ain Article and the Henriques/Strom Article reported that Hadassah withdrew more than $130 million from Madoff accounts over the years and a potential for seeking of recovery of withdrawals by the trustee for Madoff.) The Dec Form 990 (as did the financial statements audited by KPMG for both the years ended May 31, 2008 and December 31, 2008), but not the May Form 990, states that Hadassah management was unable to determine whether, or the extent to which, distributions to Hadassah from Madoff-related investments are recoverable by the trustee for Madoff. A lengthy descriptive paragraph is contained in the Yeshiva Form 990 about Madoff, Merkin and Madoff/Merkin-related investments. There is a disclosure in the Yeshiva Form 990 of actual dollar amounts of cash contributions and cash withdrawals made in connection with Madoff/Merkin-related investments.

The Yeshiva Form 990 states that management of Yeshiva was unable to determine whether, or the extent to which, distributions to Yeshiva from Madoff/Merkin-related investments are recoverable by the trustee for Madoff.

Miscellaneous Disclosure Matters relating to Forms 990 The Dec Form 990 states that Hadassah does not make its governing documents or conflict of interest policy available to the public; in the Dec Form 990 for a related Hadassah organization, however, there is a summary of procedures for resolving potential conflicts of interest involving trustees and officers. The Dec Form 990 states that the financial statements of Hadassah are available upon request. The May Form 990 is signed “[u]nder penalties of perjury” by, and after examination to the best knowledge and belief of, the National Treasurer of Hadassah, who is identified as being uncompensated and appears to be a volunteer. The Dec Form 990 does not disclose the officer who signed, but the same National Treasurer signed the Dec Form 990 for a related Hadassah organization. Public disclosurehas been made by Yeshiva that it is revising its conflicts of interest policy in the aftermath of the Madoff scandal. The Yeshiva Form 990 is signed “[u]nder penalties of perjury” by, and after examination to the best knowledge and belief of, the VP and CFO of Yeshiva, who is a compensated full-time employee.

[To be continued in Installment 24]