Madoff's Trickle-Down Victims

As foundations are rocked by the Madoff scandal, philanthropic programs face unnatural and untimely deaths

Kids in Texas jails seem like unlikely victims in Bernard Madoff's alleged $50 billion Ponzi scheme, a world away from the country clubs of Palm Beach, Fla., where Madoff recruited many investors. But youth offenders in the Lone Star State and others—where conditions in juvenile centers have caused a scandal—are likely to suffer as a consequence of the fraud Madoff is accused of perpetrating.

They're losing an advocate in Bob Fleischner, a Massachusetts attorney who was instrumental in the ongoing legal battle to end solitary confinement for Texas' youth offenders. Fleischner, the assistant director of the Northampton (Mass.) Center for Public Representation, learned in an e-mail Monday morning, Dec. 15, that a three-year, $700,000 grant to support the group's youth justice work would be discontinued immediately because the donor money had been invested with Madoff.

Few of the people who benefited from the foundation's funding had heard of Bernard Madoff before last week, or imagined that his alleged fraud could unravel their good work. But unless other donors step in to fill the void, Bob Fleischner will no longer be flying to places like Texas, Michigan, and Alabama to advocate for locked-up juveniles. "These kids aren't going to have any clue that [Madoff] had anything to do with this," he says.

The funding for Fleischner's program was for three years, the first of which was 2008. Funding for the next installment, for 2009, was due this month, and with all the paperwork in order, there was no inkling of what was about to happen. "We were told a week ago that our next check had been authorized and was in the mail, and it never came," Fleischner said on Dec. 18.

A Foundation Collapses

The check, for some $243,000 to fund the program in 2009, was to be from the JEHT Foundation, a six-year-old New York City-based philanthropy focused on juvenile and criminal justice, human rights, and election reform. Robert Crane, president of JEHT, told grantees on Dec. 15 that the foundation's sole donors, Jeanne and Kenneth Levy-Church, had invested substantial sums with Madoff, and that with the loss of their support, the foundation would cease all grants and shut down in January.

The foundation, formed from the real estate fortune of Jeanne Levy-Church's father, Norman Levy, supported hundreds of advocates like Fleischner, who must now see if they can find other funding. "We're talking to the states where we've been working and hoping that we can continue to do at least some of this work," says Fleischner, one of 14 staff members at the Center for Public Representation. The JEHT grant to support juvenile justice work made up 20% of the organization's budget.

Other foundations have been snared in the Madoff case, including the Robert I. Lappin Foundation in Salem, Mass., which funded mainly Jewish causes and closed the day after Madoff's arrest. The Jerusalem-based Chais Family Foundation, which also supports Jewish causes internationally, also shut down because funds were exposed to Madoff. But groups depending on JEHT said the foundation—which has made about 500 grants during its lifetime—was rare in its willingness to fund innovative efforts to reform state juvenile justice systems, a cause few philanthropies tackle. "The number of foundations nationwide working in this area you can probably count on one hand," says Mark Soler, executive director of the Center for Children's Law & Policy, a Washington-based advocacy group that is losing $170,000 in grants from JEHT and the related Rockit Fund, a nonprofit that supports lobbying and was also backed by the Levy-Church family.

"We consciously chose areas where there was need and not a lot of support," says Crane, JEHT's president and CEO. He says the foundation was the largest funder of criminal justice work in the country. The group has disbursed more than $100 million in grants since 2002 and had planned a budget of $45 million for 2009. But with no endowment, JEHT was funded solely through grants by the Levy-Churches, who called Crane hours after Madoff was arrested Dec. 11.

JEHT's Legacy

JEHT's commitment to funding innovative programs means that its influence may live on, even as the foundation vanishes, according to some grantees. "They had a huge impact in an incredibly short time," says Betsy Clarke, president of the Illinois Juvenile Justice Initiative. Looking ahead, grantees said their organizations could use projects previously funded by JEHT as pilots to prove a model worked and then leverage their results to obtain other grants.

Roger Werholz, the Kansas state secretary of corrections, credits a $4.7 million grant from JEHT with a 45% drop in recidivism over the last decade by helping the state change its approach to offenders. "A lot of what JEHT initially funded has now been built into our budget," he says. "I think the impact for states like us is going to be the ability to try things in sort of a risk-tolerant atmosphere. That's gone away."

For the close-knit world of nonprofits—some had already pared back because of the downturn—the people now in danger of losing services are turning out to be the collateral damage of the Madoff bombshell. "What I've seen in my business is the incredible power one person has to make an incredible difference," says Abby Anderson, executive director of the Connecticut Juvenile Justice Alliance, which got about a quarter of its funding through JEHT. "This is the flip side of that.&quot

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