Madoff and Charities: The Lautenberg Foundation Files its Past Due 2008 Form 990-PF – Installment 41

November 15, 2010Articles White Collar Defense & Compliance Blog

This is the forty-first in a series of installments on this blog that are discussing some of the issues arising in the aftermath of the Ponzi scheme perpetrated by Bernard L. Madoff (“Madoff”). Many of the Installments in this series have focused on specific problems and concerns respecting public charities and private foundations that were victims of this and similar schemes.

Installment 40 of this series discussed the fact that The Lautenberg Foundation, a private charitable foundation (the “Foundation”) formed by Senator Frank R. Lautenberg was almost one year past due in filing its 2008 Form 990-PF (the “2008 Form 990-PF”) with the Internal Revenue Service (the “IRS”). Apparently the 2008 Form 990-PF has now been filed with the IRS as of November 10, 2010, as the Foundation’s accountant provided a copy on the following day. The due date after, all available extensions, for the Foundation’s 2009 Form 990-PF (the “2009 Form 990-PF”) is November 15, 2010.

The 2008 Form 990-PF reveals some interesting information as follows:

The 2008 Form 990-PF reflects a fair market value of assets for the Foundation as of December 31, 2008, of $1,001,517, as compared to a fair market value of assets for the Foundation as of December 31, 2007 of $15,000,792, as reported in the Foundation’s 2007 Form 990-PF, a decline of $13,999,275, or 93.3%.

Statement 3 to the 2008 Form 990-PF states that the Foundation recognized a “Madoff Theft Loss 95%” of $13,225,367 in “Revenue per Books” and “Net Investment Income.”

Statement 8 to the 2008 Form 990-PF reflects the following as to the reason for the late filing and the potential for penalties for late filings as raised in Installment 40 of this series:

This return is being filed late due to the uncertainty caused by the majority of the Foundations [sic] assets being loss [sic] to Bernard L. Maddoff [sic] in December 2008. We respectfully request that all late filing penalties be abated.

Statement 9 reflects the following Corporate Stock holdings of the Foundation, among others, as follows:

Bernard L. Madoff Investment Securities LLC
Book Value: 696,072
Fair Market Value 400,000

The Foundation was continuing to carry on its books as of December 31, 2008 a value of $400,000 for the Madoff-affiliated securities firm. Query: in light of the fact that the filing of the 2008 Form 990-PF was made in November 2010 almost two years after the Madoff arrest and the wealth of information available about the Madoff bankruptcy/liquidation proceeding (the “Madoff Proceeding”), was the value reflected an anticipated amount recoverable or already recovered in the Madoff Proceeding by the Foundation?

The 2008 Form 990-PF reflected that the Foundation made charitable contributions aggregating $330,445 during 2008. It is unclear whether such contributions were made in whole or in part from cash distributions received by the Foundation from Madoff during 2008 before his arrest in December. Query: could any or all of such amounts be subject to “clawback” by Irving Picard, the Trustee in the Madoff Proceeding, as pointed out in Installment 40?

When the 2009 Form 990-PF for the Foundation is available, some of these issues may be further clarified.

[To be continued in Installment 42]

This blog post was also featured on CriminalDefenseLawyer.com.