In the one Ponzi fraud I've known about first hand and in all the others I've only read about the perps were never interested in enriching anyone but themselves. The curious thing about Madoff is that real charities got real money - some over many years. An as yet undetermined number of billions may have been stolen but at the same time charities scored in the hundreds of millions - some over many years. This puts the blessed use of tainted money in a whole new light.
The court appointed trustee charged with clawing back as much as he can for redistribution to the rightful claimants is flinging lawsuits around and now it is possible the feds will step in with both civil and criminal complaints. Oy! Everyone assumes a lot, if not most, of the pilfered pelf will never be recovered. Theoretically at least the charities who were the recipients of stolen money may have some exposure even if they had no way of knowing it. Most of them have probably spent whatever they got from the Picowers, J. Ezra Merkin, David Levy, Stanley Chais, et al.
Nonetheless many charities (including a few of my clients) unwittingly received and spent stolen money to perpetuate their noble cause - and the people and organizations that benefited might not have been served without that money. And unlikely as it might be suppose a charity knew how some money they got came to be and went ahead and used it anyway on the principle that there is a greater good. That couldn't happen. People just don't behave that way. Do they?
Friday, May 22, 2009
Thursday, May 14, 2009
Money and Sausage
The old joke about sausage is you don't want to know how it's made. The same applies to fortunes. Best not to how they were made.
When the Picower Foundation collapsed the day after Bernard Madoff's arrest. I felt really terrible. Through a client I had met Barbara Picower a few times. I found her intelligent, savvy and truly dedicated to dispensing the Foundation's money with wisdom and compassion. On my recommendation she hired one of my 2007 grad students. This particular client was hit with a seven-figure loss now and the loss of future gifts as well; and others with whom I am or were involved got hit too.
How could a billion dollars just go poof and the nez plus ultra Foundation offices on the 39th floor of 9 West 57th Street be shuttered overnight? I found this passing strange. Then earlier this week attorney Irving Picard the court-appointed trustee responsible for hunting down Madoff's assets so they could be returned to the investors Madoff screwed brought a "claw back" action against the Picowers, charging them personally with being "complicit in [Madoff's] fraudulent activity." As the Wall Street Journal reported, Picard said the Picowers had to know it was impossible for 14 funds they had invested with Madiff could each have returns of over 100% a year.
He is seeking the return of several billion dollars from the Picowers. How much was distributed by the Foundation we don't know yet. But we do know real charities got real money over time. How much will be clawed back is anyone's guess. Mine is not much. Word on the street is that Picard is bringing a second claw back suit against another major philanthropist - in the same Palm Beach social network as the Madoffs and the Picowers. I'll write about that one too but not until the law suit is brought (if it is) and the name is public.
The Picowers' high profile lawyer is William Zabel, former chairman of Human Rights First, trustee of amFAR and secretary of - oops - the JEHT Foundation which also crashed the day after the Madoff arrest. Mr. Zabel said the Picowers were "victims" and not "complicit." As in Casablanca when Captain Renault (Claude Rains) says to night club owner Rick Blaine (Humphrey Bogart) " I'm shocked, shocked to find that gambling is going on in here!"?
So if Picard is right and prevails we will know how the Picower fortune was - if not made - certainly enlarged. The current trial of Anthony Marshall charged with bilking the estate of his allegedly demented mother Mrs. Vincent Astor is interesting counterpoint. Forebear John Jacob Astor was not a paragon of probity. When you look at old fortunes you can conclude that it takes about three generations to bleach out the stains. By then nobody cares about how the money was made - only where it's going.
But sausage is of the moment. Pass the mustard and sauerkraut please.
When the Picower Foundation collapsed the day after Bernard Madoff's arrest. I felt really terrible. Through a client I had met Barbara Picower a few times. I found her intelligent, savvy and truly dedicated to dispensing the Foundation's money with wisdom and compassion. On my recommendation she hired one of my 2007 grad students. This particular client was hit with a seven-figure loss now and the loss of future gifts as well; and others with whom I am or were involved got hit too.
How could a billion dollars just go poof and the nez plus ultra Foundation offices on the 39th floor of 9 West 57th Street be shuttered overnight? I found this passing strange. Then earlier this week attorney Irving Picard the court-appointed trustee responsible for hunting down Madoff's assets so they could be returned to the investors Madoff screwed brought a "claw back" action against the Picowers, charging them personally with being "complicit in [Madoff's] fraudulent activity." As the Wall Street Journal reported, Picard said the Picowers had to know it was impossible for 14 funds they had invested with Madiff could each have returns of over 100% a year.
He is seeking the return of several billion dollars from the Picowers. How much was distributed by the Foundation we don't know yet. But we do know real charities got real money over time. How much will be clawed back is anyone's guess. Mine is not much. Word on the street is that Picard is bringing a second claw back suit against another major philanthropist - in the same Palm Beach social network as the Madoffs and the Picowers. I'll write about that one too but not until the law suit is brought (if it is) and the name is public.
The Picowers' high profile lawyer is William Zabel, former chairman of Human Rights First, trustee of amFAR and secretary of - oops - the JEHT Foundation which also crashed the day after the Madoff arrest. Mr. Zabel said the Picowers were "victims" and not "complicit." As in Casablanca when Captain Renault (Claude Rains) says to night club owner Rick Blaine (Humphrey Bogart) " I'm shocked, shocked to find that gambling is going on in here!"?
So if Picard is right and prevails we will know how the Picower fortune was - if not made - certainly enlarged. The current trial of Anthony Marshall charged with bilking the estate of his allegedly demented mother Mrs. Vincent Astor is interesting counterpoint. Forebear John Jacob Astor was not a paragon of probity. When you look at old fortunes you can conclude that it takes about three generations to bleach out the stains. By then nobody cares about how the money was made - only where it's going.
But sausage is of the moment. Pass the mustard and sauerkraut please.
Monday, May 11, 2009
I AGREE TO JOIN GM'S BOARD! (Call me)
Today's Wall Street Journal reports search firm Spencer Stuart has been engaged to hunt up new board members. GM is now owned by three entities two of which are in a category of nonprofit organizations: the US government and the UAW. As we say in New York I "know from" nonprofits and I know about governance as well.
By losing staggering amounts of money and being nonprofitable for several quarters one might propose that GM is a nonprofit though it didn't plan to be. GM resembles all too many nonprofits in three important ways:
I know nothing about cars north of the steering column. But: as an adjunct faculty member at the Milano management unit of New School University we and the part-timers at NYU were unionized by the UAW a couple of years ago. But Ron Gettelfinger I won't be in your pocket.
And I pay taxes; that makes me an owner!
Finally there is really nothing inherently different about the roles and responsibility of a business board of directors vs. a charity board of trustees.
Also I promise to fly coach and use my own miles to upgrade to business.
So give me a call. I'd be happy to come in for an interview. Do I have to wear a tie?
By losing staggering amounts of money and being nonprofitable for several quarters one might propose that GM is a nonprofit though it didn't plan to be. GM resembles all too many nonprofits in three important ways:
- It now states its budget in terms of its deficit.
- Its board fits the dictionary definition:" ... a board is a long thin wooden object."
- Management has been inept.
I know nothing about cars north of the steering column. But: as an adjunct faculty member at the Milano management unit of New School University we and the part-timers at NYU were unionized by the UAW a couple of years ago. But Ron Gettelfinger I won't be in your pocket.
And I pay taxes; that makes me an owner!
Finally there is really nothing inherently different about the roles and responsibility of a business board of directors vs. a charity board of trustees.
- Stewardship of assets.
- Oversight of management.
- Accountability.
- Transparency.
- Commitment to stakeholders.
Also I promise to fly coach and use my own miles to upgrade to business.
So give me a call. I'd be happy to come in for an interview. Do I have to wear a tie?
Tuesday, May 5, 2009
GEORGE A. BRAKELEY JR.
George A. Brakeley Jr., died on May 1st in Naples, FL, at the age of 93.
It's good that none of you checked out that day. George would not have countenanced the competition; he was a tad challenged limelight-wise.
George Brakeley was an innovator in philanthropy and fund raising, a leading spokesman for the consulting profession, and a founder of the the American Association of Fund-Raising Counsel (now the Giving Institute Etc.). His career began with John Price Jones, Inc., of New York City, which was known at his retirement in 1983 as Brakeley, John Price Jones (today Brakeley Briscoe, Inc.). He also founded firms bearing his name in Canada and on the West Coast.
Those, friends, are the facts. George is on my very short list of true greats in this business.In his prime he sucked the air out of a room. He was patrician, snobbish, elegant, commanding and brilliant. He was a consummate name-dropper, a curmudgeon at the best of times and he could be a nasty SOB at times. My kind of guy. I'm sorry to say he mellowed in his later years and the last time I saw him seven or eight years ago was at an all day retreat in Stamford, under the aegis of the Association of Fundraising Professionals (AFP) chapter there - which he had helped find its sea legs after a less than great start.
What makes George one of the greats - along with guys like Maury Gurin and Harold Oram was his take on the business. He was tough, intuitive and a great teacher not by patience or example but just because he knew. You either got it (and him) or you didn't.
He was mannered but never dainty. He didn't just eat half a grapefruit. He picked it up and squeezed all the juice out and he did it gracefully. That was George. Grace and purpose.
PURGE THE URGE TO MERGE ...
-- With thanks to Ed Schoenberg who between sets at this morning's squash match asked me about what was going on in the nonprofit world.
Right now there is a lot of talk about nonprofit mergers. I hear this stuff most whenever the economy tanks and I generally get a few inquiries as I have recently.
For all the chatter, when the sun comes up on the next bull market I believe we'll see that there were almost no nonprofit mergers of any significance or any new paradigms to re-define the nonprofit mindset. And when mergers do rarely occur they don't work. I'd love for someone to give me an example of a true, successful nonprofit merger.
Some years back the schools of medicine at NYU and Mt. Sinai (New York) decided to merge. No doubt the outside MBAs, the business folk on both boards and top managers in both institutions rationalized the upsides. What they didn't reckon on was the doctors who - at both institutions - vitriolically opposed the jointure. And that was that.
You might think that with the same mission of treating, healing and curing the ill or the hurt - and with the potential economies of scale this was a natural. But you'd be wrong. In the "real" world a business looks at a merger in terms of share price, potential earnings, ROI and so on. Usually the stockholders or bondholders on the boards of two companies see the synergies and even in a forced marriage (viz. Chrysler's parlous finances and Fiat's crappy cars) the union is consummated or whatever cars do. Profit and self interest lubricate the process.
But charities are mission-driven. Most of the time this lends the cloak of nobility to whatever else might be going on - and though that is often irreproachable I think the mission drive is a real disincentive for merger. Some years ago two literacy groups came to me - coincidentally within a week or two of each other. Also by coincidence I knew the founder of each. Trust me if I say that to a layperson their programs were mutually indistinguishable and the missions were identical: teach inner city kids to read. I immediately proposed consideration of a merger. There was a skunk-at-the-picnic reaction and my proposal went nowhere.
Another time we were hired by a consortium of prestigious but impecunious historically black colleges and universities. We did an extensive study, recommended a merger or at least some form of consolidation or takeover. Despite the horrendous financial exigencies and the rather insignificant differences in their student bodies or educational programs except for one of the schools, a seminary, the idea of any relationship beyond the neighborhood they shared was off the table immediately, opposed by each president and thus by their boards.
Despite the need the different church bodies that had founded each school could not overcome their doctrinal differences and the presidents quickly calculated the prospects of early retirement. Presidents of HBCUs seldom retire. They almost always go out toes up so between their bishops and their boards business didn't stand a chance. On the other hand we went on to work separately over time for four of the five.
Takeovers don't happen much either usually because the acquiring entity has little or no dowry, and unlike a company can't just go out and print stock certificates (or money, like the government). But I was involved in one. Years ago Harold Oram was hired by the Parsons art school (where believe it or not I studied as a child but-we-won't-go-there). Parsons was up to here in debt, exsanguinating and indeed about to expire. At the same time we were working for The New School under president Jack Everett. Who knew he was looking for an art school as a way to expand offerings? Harold did the deal: Jack and his board took Parsons over for its debt. The head of Parsons an avocational jazz musician and also a gifted craftsman was so pleased (and maybe relieved) he hand-made an absolutely exquisite harpsichord for Harold. It sat in his living room for years, never touched.
Right now there is a lot of talk about nonprofit mergers. I hear this stuff most whenever the economy tanks and I generally get a few inquiries as I have recently.
For all the chatter, when the sun comes up on the next bull market I believe we'll see that there were almost no nonprofit mergers of any significance or any new paradigms to re-define the nonprofit mindset. And when mergers do rarely occur they don't work. I'd love for someone to give me an example of a true, successful nonprofit merger.
Some years back the schools of medicine at NYU and Mt. Sinai (New York) decided to merge. No doubt the outside MBAs, the business folk on both boards and top managers in both institutions rationalized the upsides. What they didn't reckon on was the doctors who - at both institutions - vitriolically opposed the jointure. And that was that.
You might think that with the same mission of treating, healing and curing the ill or the hurt - and with the potential economies of scale this was a natural. But you'd be wrong. In the "real" world a business looks at a merger in terms of share price, potential earnings, ROI and so on. Usually the stockholders or bondholders on the boards of two companies see the synergies and even in a forced marriage (viz. Chrysler's parlous finances and Fiat's crappy cars) the union is consummated or whatever cars do. Profit and self interest lubricate the process.
But charities are mission-driven. Most of the time this lends the cloak of nobility to whatever else might be going on - and though that is often irreproachable I think the mission drive is a real disincentive for merger. Some years ago two literacy groups came to me - coincidentally within a week or two of each other. Also by coincidence I knew the founder of each. Trust me if I say that to a layperson their programs were mutually indistinguishable and the missions were identical: teach inner city kids to read. I immediately proposed consideration of a merger. There was a skunk-at-the-picnic reaction and my proposal went nowhere.
Another time we were hired by a consortium of prestigious but impecunious historically black colleges and universities. We did an extensive study, recommended a merger or at least some form of consolidation or takeover. Despite the horrendous financial exigencies and the rather insignificant differences in their student bodies or educational programs except for one of the schools, a seminary, the idea of any relationship beyond the neighborhood they shared was off the table immediately, opposed by each president and thus by their boards.
Despite the need the different church bodies that had founded each school could not overcome their doctrinal differences and the presidents quickly calculated the prospects of early retirement. Presidents of HBCUs seldom retire. They almost always go out toes up so between their bishops and their boards business didn't stand a chance. On the other hand we went on to work separately over time for four of the five.
Takeovers don't happen much either usually because the acquiring entity has little or no dowry, and unlike a company can't just go out and print stock certificates (or money, like the government). But I was involved in one. Years ago Harold Oram was hired by the Parsons art school (where believe it or not I studied as a child but-we-won't-go-there). Parsons was up to here in debt, exsanguinating and indeed about to expire. At the same time we were working for The New School under president Jack Everett. Who knew he was looking for an art school as a way to expand offerings? Harold did the deal: Jack and his board took Parsons over for its debt. The head of Parsons an avocational jazz musician and also a gifted craftsman was so pleased (and maybe relieved) he hand-made an absolutely exquisite harpsichord for Harold. It sat in his living room for years, never touched.
Friday, May 1, 2009
If You Don't Ask You Won't Get
The Center on Philanthropy at the University of Indiana the research and development partner of the Giving USA Foundation (of which the Oram firm is a member) has prepared a SPECIAL BULLETIN on on the American Recovery and Reinvestment Act of 2009. The link is below.
http://www.magnetmail.net/images/clients/GIVINGINST/attach/SpecialBulletin2009FINAL.pdf
We owe thanks to the Center's acting director Patrick Rooney and his associate Melissa Brown for this opportune work and thanks also go out to graduate student Melanie Miller, who turned the writing and research around in less than a week.
Subscribe to:
Posts (Atom)