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Israel to Rescue Cash-Strapped Hadassah Still Ailing From Madoff

Feb. 13 (Bloomberg) -- Israel’s finance minister pledged to bail out Hadassah Medical Center, which has filed for bankruptcy amid allegations of mismanagement that hobbled its recovery from the loss of millions to Bernard Madoff.

The hospital, which operates two facilities in Jerusalem, has amassed a deficit of 1.25 billion shekels ($360 million), Health Minister Yael German said yesterday. Many of its doctors and nurses have been on strike since last week over unpaid salaries, and most non-emergency procedures have been canceled.

“Hadassah won’t close, we won’t let it fall,” Finance Minister Yair Lapid said in an Israel Radio interview today. “The government will put in money, but on condition that when the money is used up, the hospital will be financially robust.”

The hospital’s finances have been compromised by feuds between American and Israeli board members, a bloated staff and inflated salaries paid to some senior employees, government officials have said. Because it is privately owned, it is also at a disadvantage compared with state-run hospitals when negotiating reimbursement from health maintenance organizations, German told parliament yesterday, according to a transcript e-mailed by her spokeswoman.

“The Hadassah crisis was not created today, not last week, not a year ago,” German said.

Madoff pleaded guilty in 2009 to running a $65 billion Ponzi scheme that paid off early clients with money from new investors. The charity that backs the Jerusalem hospital, Hadassah, the Women’s Zionist Organization of America Inc., received $7 million in 1988 from a French donor who said it should remain with Madoff. In 2009, the charity said it had $90 million invested with Madoff at risk of being lost.

To contact the reporter on this story: David Wainer in Tel Aviv at dwainer3@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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