Jewish groups reeling over Madoff scheme

In his Shabbat sermon this morning, Rabbi Alexander Davis expects to draw a parallel between the strange and sad story of Bernard Madoff -- accused of running a massive pyramid scheme -- and the dreidel, a child's four-sided top, a Hanukkah tradition.

"There are times when our lives spin out of control like the dreidel," said Davis, of Beth El Synagogue in Minneapolis, in an interview Friday. "We may fall down, but then we get up and start spinning again."

Indeed, nine days after Madoff's arrest, the Twin Cities Jewish community is still spinning from the revelation that Madoff -- a respected Wall Street money manager, former chairman of Nasdaq and generous donor to Jewish causes -- may have bilked them of hundreds of millions of dollars.

The alleged financial fraud, pegged at $50 billion nationwide, the largest in U.S. history, has struck hard at local foundations, charities and schools that rely on wealthy Jewish families for support. At least one local foundation may have been wiped out, while others are still assessing potential losses.

The ripple effect of the scandal could be felt for years to come, as pools of capital that institutions relied on for money have either evaporated or been severely diminished.

Beyond financial losses, there are also emotional scars. The scandal has stirred feelings of anger, resentment, and even a sense of shame, among some Twin Cities Jews who feel they have been exploited, say local Jewish leaders.

The Madoff tale is particularly hurtful, they say, because it involved a Jew preying on people who trusted him. Hadassah, the Women's Zionist Organization of America, invested $90 million with Madoff.

Total losses to the Jewish community in the Twin Cities are still unknown, but some local attorneys representing investors with Madoff say at least $300 million has evaporated. Many affected were members of the predominantly Jewish Oak Ridge Country Club in Hopkins, where Madoff's name and reputation spread by word of mouth.

Speaking through tears, Violet Werner described how the foundation created by her late husband, Harvey Werner of Minnetonka, who owned a trucking company, will likely have to shut down.

"The whole thing is just the most horrible scam I've ever heard of," said Werner, who lives in Palm Beach, Fla. "This money went to help people in need and to people who do wonderful work. I'm so sad I can hardly speak."

Contributions dry up

Werner said her accountant is looking into the extent of the foundation's losses, but she has been told that the foundation can no longer make contributions because much of its assets were tied up with Madoff.

Werner said that she and her husband learned about Madoff about 30 years ago through the late Mike Engler, a partner in the long-defunct Engler & Budd securities firm. It was Engler, she said, who was recommending Madoff to members of the Oak Ridge Country Club. Werner, who is a member of the club, said that she has been told recently that "as many as 100 people" may have invested with Madoff through Engler and his circle.

Wade Miller, general manager of the Oak Ridge Country Club declined comment, noting that the club had a policy of not discussing its members' personal financial affairs. He declined to comment when asked if the club had invested with Madoff. Ron Zamansky, president of the club, also declined to comment.

"There are certain causes that were my favorites -- like the Jewish Federation of Minneapolis," she said. "I pledged them money and I can't give to that now. It's so horrible."

Officials with the Minneapolis Jewish Federation declined to answer questions about the Madoff scandal, but in a prepared statement said the federation had no assets invested with Madoff's funds.

"However, there are individuals and organizations inside and outside of our local community who are severely affected by this, including foundations, universities, and other organizations with significant Jewish donors," the federation said in the statement. "The enormity of this crisis is still unfolding."

Financial advisers and attorneys who represent local investors allegedly bilked by Madoff said his returns were not spectacular. But they were consistently positive even during down markets, which appealed to many elderly people who wanted to preserve their money, these advisers said.

Most generous hurt

As director of the Talmud Torah Foundation of Minneapolis, Rabbi Ettedgui plays a key role in raising funds to support scholarships and educational programs. But Ettedgui said he "feels uncomfortable calling certain donors," because he's not sure who might have invested with Madoff. "The people who are hurt by this also happen to be those who are the most generous," he said. "It ties our hands a bit."

Ettedgui noted that some people in the Jewish community feel "a sense of shame" that Madoff was considered a pillar of the Jewish community. "He brings disrespect to our people," he said. "It's like stealing from your own family."

Others took issue with the idea that an entire community should feel embarrassment over the actions of one person. Some argued that the focus on Madoff's Jewish background was misguided.