Deborah Coltin learned Friday morning that the $8 million foundation she has led for a decade, which supported a wide range of Jewish programs on the north shore of Massachusetts, did not actually exist.
The foundation had invested its endowment with Bernard L. Madoff, a storied name on Wall Street. Every year, Madoff paid out several hundred thousand dollars to the foundation. But on Thursday, Madoff was charged with securities fraud after confessing to his sons that his business was a Ponzi scheme, according to a complaint filed by the Securities and Exchange Commission. The returns paid to investors came from money invested by other people. And there was almost nothing left.
It may be the largest fraud in the history of Wall Street. Madoff is charged with stealing as much as $50 billion -- in part to cover a pattern of massive losses as he cultivated a reputation as a financial mastermind and prominent philanthropist.
Coltin, executive director of the Robert I. Lappin Charitable Foundation, spent Friday in mourning, taking condolence calls and trying to understand what happened.
"I laid off five people today," she said. "... It's just very, very sad."
The roster of Madoff's victims has grown exponentially in the past few days. It includes prominent hedge funds and the firm of Fred Wilpon, the owner of the New York Mets.
Madoff also tapped Minnesota investors, including some from the Hillcrest Golf Club of St. Paul and Oak Ridge Country Club in Hopkins, investors told the Wall Street Journal. One of them estimated that investors from the two clubs may have lost more than $100 million combined.
In the Twin Cities, Maddoff's firm was long represented by Mike Engler, a respected businessman and investment counselor, who died in 1994.
Among other victims, the town of Fairfield, Conn., had nearly 15 percent of its pension fund with Madoff.
But the damage appears to be deepest in the world of Jewish philanthropy, where Madoff was a leading figure. The North Shore-Long Island Jewish Health System said it lost $5 million. The Julian J. Levitt Foundation, based in Texas, lost about $6 million. Yeshiva University, a New York institution where Madoff served on the board, was still calculating its losses.
Madoff, 70, made his fortune as a middleman between buyers and sellers of stock. He helped pioneer electronic trading as an alternative to the New York Stock Exchange, where buyers and sellers meet in person, and he became chairman of Nasdaq, the first electronic stock exchange.
Madoff built himself into a brand. He came to Wall Street with money saved as a Long Island lifeguard and built a family business employing many relatives, including his sons, and refused to sell the business or take it public. He advertised his integrity.
By the late 1970s, Madoff began attracting investors. Some he knew personally. Others belonged to clubs he was a member of, including the Palm Beach Country Club in Florida.
The key attraction was Madoff's remarkably successful track record. One of his hedge funds averaged a 10.5 percent annual return over the past 17 years.
"Mr. Madoff lured investors to entrust him with substantial sums of money -- in some cases massive amounts of money -- with the false promise of great interest returns," said Mark Mulholland, a New York lawyer who filed a class-action lawsuit Thursday against Madoff.
The SEC said it is not clear when Madoff started using new investments to create the appearance of profits. But the alleged ruse was finally exposed by the global financial crisis.
On Wednesday, he called his sons to his apartment, saying "he wasn't sure he would be able to hold it together" at the office, the SEC said. There he confessed: The business was "a giant Ponzi scheme" -- "all just one big lie," the SEC documents said.
Outside analysts had raised concerns about Madoff's firm for years. The company made its own trades and held the shares it bought, unusual practices that kept its activities hidden. Madoff also avoided filing SEC disclosures; the firm said that at the end of every reporting period it sold its holdings and held only cash -- a highly unusual tactic.
Madoff, though a pioneer of electronic trading, refused to provide clients online access to their accounts.
"This was extremely secretive, even for the non-transparent world of hedge funds," said Jake Walthour Jr., of Aksia, a New York consulting firm that advised clients not to invest in Madoff's funds.
But a large number of investors apparently could not resist.