University Business - February 2009 - (Page 12)

BEHIND the NEws Yeshiva Hit Hard by Madoff Scam Other Higher Ed Institutions Affected The growing lisT of vicTims that have been burned by the fraud scandal involving wall street financier Bernard l. madoff, who is charged with orchestrating a $50 billion Ponzi scheme, has reached higher education. The impact involves institutional funds that were invested in his firm, Bernard l. madoff investment securities, through J. ezra merkin, chairman of lender gmAc financial services, a close acquaintance. The institution likely hit the hardest, both professionally and personally, is Yeshiva University (n.Y.). madoff had more than a business relationship with Yeshiva. A New York Times article reported he had been on the board of trustees since 1996, and the university granted him an honorary degree in 2001. Also in 2001, madoff made a major donation to the university’s sy syms school of Business after becoming chairman of the board the year before. he is no longer associated with the institution. merkin was a trustee on Yeshiva’s board and served as chairman of the investment committee; he also stepped down from his positions. A December 16, 2008, letter from Yeshiva President richard m. Joel explains the university had no investments directly with madoff. instead, officials were told that substantially all the assets of Ascot Partners, a fund managed by merkin in which officials had invested a small part of the university’s endowment funds for 15 years, are invested with madoff. SOUND BITE U Bernard Madoff is linked to financial losses impacting institutions such as Yeshiva and Tufts universities. The letter also stated that Yeshiva’s investment was valued at about $110 million, which represents 8 percent of its endowment. Taking into account the Ascot loss, their endowment is currently estimated to be approximately $1.2 billion, down from $1.7 billion on January 1, 2008. “Although this decreased endowment must factor into our long-term fiscal plans, it will have minimal impact on day-to-day operations,” Joel wrote. Yeshiva was not the only institution affected. Tufts University (mass.) is reported by The Boston Globe to have lost $20 million through an investment in a fund tied to madoff. in a letter dated December 19, 2008, Tufts President lawrence s. Bacow explained that in 2005 the university’s investment committee authorized an investment with Ascot Partners, which in turn invested the entire sum with madoff securities. The value of the investment totaled slightly less than 2 percent of the university’s endowment. Bacow wrote in a letter to students, faculty, parents, and alumni that the write-off will not significantly affect the university’s operations and that the institution will work to recoup “as much of our investment as possible. … You have my word that we will look closely at our experience in this case so that we can strengthen our investment process for the future.” on the university’s website, a Q&A offers explanations on what occurred and how Tufts’ endowment was affected. other institutions that have reportedly been hit by the scandal include: • Bard College (n.Y.), which reuters reports as having lost about $3 million. merkin’s Ariel fund had invested school money with madoff without the knowledge of institutional officials. • New York Law School, which through its endowment entity invested $3 million in Ascot in 2006. The investment is now worthless, according to a filed lawsuit, cites a Wall Street Journal blog post. • New York University, which has suffered a $24 million loss after entrusting the money to two of merkin’s hedge funds. An official rejected merkin’s suggestion to invest some of the university’s money with madoff, according to the New York Daily News. nYU has filed a lawsuit against merkin. —Michele Herrmann ‘T his is a time when schools like ours, private liberal arts colleges that don’t have a big name, are in a potentially dangerous realm. —Stephen MacDonald, president of Lebanon Valley College (Pa.), about decreased applications ‘ 12 | February 2009 AP PhoTo/KAThY willens

Table of Contents for the Digital Edition of University Business - February 2009

University Business - February 2009
Editor's Note
College Index
Company Index
Advisory Board
Behind the News
Sense of Place
Independent Outlook
Wireless Windfall
Share and Share Alike
Achieving the Turnaround
Internet Technology
What's New
End Note

University Business - February 2009