NEW YORK — Wall Street financier Bernard L. Madoff's alleged $50-billion Ponzi scheme appears to have extended deeply into Southern California's Jewish community, with millions of dollars in losses tallied Monday by charitable organizations, Hollywood executive Jeffrey Katzenberg and a foundation bankrolled by director Steven Spielberg.
The Jewish Federation of Greater Los Angeles and the Jewish Community Foundation of Los Angeles were on a growing list of victims emerging in the wake of Madoff's arrest in New York.
For The Record
Los Angeles Times Saturday, December 20, 2008 Home Edition Main News Part A Page 2 National Desk 2 inches; 71 words Type of Material: Correction
Madoff scandal: An article in Section A on Tuesday about the effect of Bernard L. Madoff's alleged Ponzi scheme on Southern California's Jewish community quoted the chief executive of the Jewish Community Foundation of Los Angeles as saying that Cambridge Associates, a paid financial advisor, provided input into the foundation's decision in 2004 to invest with Madoff. The foundation had hired Cambridge Associates after the initial decision to invest with Madoff.
The Southland-based Chais Family Foundation, dedicated to Jewish causes, was reported to have shut down after losing money invested with Madoff.
Federal authorities say Madoff, a legendary Wall Street figure, confessed last week to running a years-long Ponzi scheme, a fraud in which early investors are paid artificially high returns using money put up by later investors.
The more than 30 organizations and individuals around the world identified so far as victims of the alleged deception are a diverse lot. But the disclosures by Southland Jewish organizations suggest a so-called affinity scam, in which members of a perpetrator's ethnic or religious group are targeted.
The losses at the charitable organizations came to light as they began notifying their boards of directors, donors and recipients.
"In a word, it's a catastrophe -- by far the biggest Jewish story of the year," said Rob Eshman, editor in chief of the Los Angeles-based Jewish Journal.
The Jewish Federation of Greater Los Angeles said it lost $6.4 million -- about 11% of its endowment -- as a result of Madoff's alleged fraud.
"People here are very sad, they're very shocked. They're trying to understand what exactly did happen," said John R. Fishel, the federation's president.
Los Angeles real estate financier Richard Ziman, a member of the group's board, called Madoff's alleged crimes astounding.
"There is no greater shanda than stealing from friends, family and those who gave him such trust and confidence," Ziman said, using a Yiddish term for disgrace. "It makes this country look as though we have allowed the unregulated world of investment to take control."
The organization, which says it funds humanitarian, social service and Jewish educational programs in Southern California, Israel and other parts of the world, didn't have a direct relationship with Madoff. Rather, it invested its $60-million endowment through the Jewish Community Foundation of Los Angeles, a nonprofit asset manager for local charities and philanthropists.
"No one I know knew Madoff," Fishel said.
Stanley P. Gold, the chairman of the federation's board, was in London on Monday and couldn't be reached for comment. Gold is chief executive of Shamrock Holdings Inc., a privately owned Burbank investment company.
The federation's loss represented more than a third of the $18-million Madoff-related loss disclosed by the Jewish Community Foundation. The investment was held in a common portfolio of endowments of a number of charities and synagogues. As a result of the bear market and the Madoff debacle, that portfolio's value has dwindled from $280 million at the beginning of the year to about $205 million, the foundation said. It added that the assets it managed on behalf of individual donors were not invested with Madoff.
The common portfolio's investments are managed by a volunteer committee of financial professionals, with advice from paid consultant Cambridge Associates, said Marvin I. Schotland, the foundation's chief executive.
Schotland said several members of the committee, whom he declined to identify, had recommended investing with Madoff in 2004. The decision to do so was made after "robust discussion" and with input from Cambridge, he said.
Representatives of Cambridge couldn't be reached for comment.
Schotland said he couldn't recall exact details of how Madoff's investment style was described, except it was complex, unique and "generated positive returns in most situations."
Among the best-known local victims were Katzenberg and the Wunderkinder Foundation, a charity funded by Spielberg. Katzenberg sustained losses on an investment with Madoff, a person familiar with the matter said without providing details.
A founder of DreamWorks SKG along with Spielberg and music entrepreneur David Geffen, Katzenberg was traveling Monday and couldn't be reached for comment.
A spokesman for Spielberg confirmed that Wunderkinder had invested with Madoff but declined to disclose the amount of any losses.
In 2005, the foundation received more than 70% of its dividend and interest income from Madoff's firm, according to a tax filing.