Thursday, January 29, 2009

Crisis and response

Way back in 2008 Bernard Madoff managed to wipe out several foundations. The theft he (allegedly) committed reduced several foundations' asset sheets to zero, left a lot of nonprofits with unfulfilled pledges from donors or unpaid grants on their books, and caused a lot of people a lot of hurt. He also caused a lot of people to look more closely at their own behavior, some to demand more regulation of nonprofits, a few to wonder "where were the regulators?" some to point fingers, others to "pick themselves up, dust themselves off" and start again. I've written on the Madoff-ripoff, its effects and responses at some length here, here, here, here, and here. Twitter feeds for Madoff are here.

Yesterday, The Jewish Funders Network announced a $5 million loan fund for organizations in crisis. In addition to the JFN effort, MoveOn, OSI, and Atlantic Philanthropies raised money for organizations hit by Madoff, as did a purely volunteer effort called TheyNeedUsNow.

Nicholas Kristof wrote about Madoff today - and published this list of 147 foundations who lost money in the scheme - in many cases, they lost ALL their money .

The New York Times
also ran a story yesterday about how the "ebbing economic tide" is revealing many other mini-Madoffs, something I remarked upon back in one of my early posts on this - Madoff may be big, but he's not alone. The Times also had a story on the proposed sell-off of the Rose Art Museum collection as a means to raise funds for Brandeis University, which - like peer universities has seen its endowment plummet in recent months - and may also have suffered from Madoff exposure.

It may still be too early to tell what all this adds up to - not just in terms of dollars, organizations, and good work lost, but in other important ways. Some areas worth watching over time include:
  • What is the longer-term damage to the "network" or "infrastructure" of organizations that do work on women's issues, progressive causes, and within the Jewish world? - three sometimes overlapping but usually distinct sub-sectors particularly hard hit by Madoff. Can these networks recreate themselves in stronger ways?
  • How are/will/should investment decision protocols and processes change at nonprofit organizations (including endowed foundations)? Will these change by virtue of "lessons learned" or will it take regulation?
  • How will donors react to this event in the longer-term? Will they ask different questions, seek more specific information from nonprofits, be scared away from giving, or reach more deeply into their pockets to help organizations hurt by others' crimes?
  • MoveOn took on a new role in working with Atlantic and OSI - will it expand this kind of work? What about online social networks in general - twitter, blogs, and facebook all sprouted #Madoff related sites - what might this event show us in terms of news, nonprofits, scandal and social media?
With all the bad economic news over the past months, the Madoff scandal might seem like long-ago history to some (sort of like Lehman Brothers, remember them?). To whole communities however - communities of donors, of nonprofits, and of individual activists or issues - Madoff's impact is still present and ongoing. As in natural disasters, there are both short-term and long-term needs and responses. The Madoff ripoff, a truly man-made disaster, will require the same kind of timeline and attention.


Adin said...

Lucy, thank you for writing this post. I fear that your analogy to natural disasters is very true; the need in these communities is obviously being felt now. But the fallout will continue for many months and a declining sense of urgency will not help these communities recover quickly.

PS This is a great blog post and not something that can be captured succinctly in 140 characters (my quiet vote for your continued blogging).

Anonymous said...


Nice post. "both short-term and long-term needs and responses. The Madoff ripoff, a truly man-made disaster, will require the same kind of timeline and attention."

There is a small but growing group of us crafting a network response to a network failure. I outlined the problem and started to lay a groundwork for a reponse at

It is not just one (even as large as the scale of fraud here) of the effects but ALSO the wave of compounding reactions (FROM US) that is the greatest threat to our capacity as a sector.

The combined effects of lots of individual groups all defaulting to immediate "survival logic" creates an amplifier effect destroying our own capacity.

Who is looking at not saving the groups, or replacing the revenue Madoff destroyed (both good goals) but who is looking at combined effects and how to best restructure the combined network of what is left in the wake of his fraud?

this is going to hard but how is philanthropy reacting to cascading failure. They are not.