Five Years Later, Madoff Scandal Echoes Through the Jewish Community, and Beyond
The lingering effects of his massive Ponzi scheme on a century-old youth group, a Boston philanthropist, and small investors
But in the years since, Lappin has managed carry on doing the work he almost lost. Today, his foundation’s doors are again open in a beautiful old green house with stained-glass windows, a faithful replica of a 250-year-old company store of a textile mill, couched in the Boston suburb of Salem among the witch wax works museums and the psychics.
Lappin, who will be 92 years old in a few months, was wearing sunglasses and a denim shirt under a soft gray sweater. His white hair was gathered in a ponytail. I met him and Debbie Coltin, his longtime director. “It was like Sept. 11,” Coltin said. “You remember where you were.” She’d been at her husband’s office holiday party and hadn’t heard the news about Madoff’s arrest until she got a message from Lappin saying that he needed to speak to her urgently. “I woke up early, and came into work at 6:30,” Coltin told me. “I remember my colleague asked me, ‘Is our money with Madoff?’ We were literally wiped out. Wiped out. Wiped out!” She banged the desk she was sitting behind. “Mr. Lappin called and said to me, ‘You understand that you don’t have a job?’ ”
But a donor—who wished to remain anonymous—gave Lappin $100,000 so the foundation could continue its flagship program Y2I, short for “Youth to Israel,” which sends teenagers from the Massachusetts North Shore to Israel. The money allowed that summer’s cohort to travel and bought Coltin time to figure out what to do next, though she and other staffers worked on a volunteer basis for months. “It was devastating,” she said. “But what was more devastating personally was the job. It wasn’t just a job, this was my life.”
The foundation’s money was entirely invested with Madoff, who Lappin remembers as “kind of a strange guy, because he avoided people.” He invested through a portfolio manager but later met Madoff with his family at the Breakers. Lappin’s own personal fortune was depleted from $22 million to $2 million. The substantial trust funds he had created for his grandchildren were gone.
But Lappin says that when he and his wife returned to Salem the Sunday after he got the news, he realized that something else was missing: the assets from the 401k plans of his employees at the foundation and in his real-estate business. “That really haunted me, because some of them were up in years, and the 401K plan was their entire nest egg,” he said. “So, I thought about that, and that caused me to lose sleep. So, then I made a decision and after I made that decision I was OK. The decision was that I was going to find a way to restore their assets.” With the help of his children and what was left of his own depleted funds, Lappin restored the pensions of some 60 employees, to the tune of $5,145,000.
Lappin was born in Salem in 1922; his father had emigrated from Jerusalem, where he had been training to become a rabbi but lost faith and moved to the United States to become a peddler of household wares. “He walked around Salem and Peabody and Beverly and Marblehead, and then he did well and got a horse and a wagon,” Lappin told me. The horse, he remembers, was called Queenie. Eventually, Lappin’s father moved into real estate, as did Lappin, who started out manufacturing vacuum cleaners and floor polishers. In 1948, as Israel was established, he began donating to the United Jewish Appeal and became president of the Massachusetts North Shore Federation in 1967. In 1972, he decided to create his own foundation to develop Y2I—a kind of precursor to Birthright. (Coltin went on the second trip, in 1973.)
In the past five years, Lappin has managed to recover a quarter of his lost fortune as the real-estate market has recovered. But because the foundation took out more money from its Madoff accounts than it initially put in, it wasn’t eligible for the government-supervised compensation program. The foundation, which also underwrites the PJ Library and other family programs, now relies on Coltin’s fundraising efforts to stay afloat. “Debbie saved us,” Lappin told me. “She said, ‘I’ll go to the community, we’ll raise money.’ So I said, ‘Have you ever done that before?’ And she said, ‘No, but I’m going to do it.’ ” “We did it,” Coltin corrected softly. “I’ve got to tell you, it’s taken some of the fun out of what we do,” Lappin said. “Neither of us enjoy that part of it, but we’re doing it, we have to do it.”
Young Judaea, Cut Free From Hadassah in Post-Madoff Cuts, Finds New Life
In December 2008, the women’s group Hadassah announced it had invested, and lost, $90 million with Bernie Madoff—a seemingly astronomical sum that represented almost a tenth of the organization’s total assets. The revelations came at a time when Hadassah, like most nonprofits, was already feeling the effects of the credit crisis, and one of the first moves the organization made was to make dramatic cuts in funding to Young Judaea, a century-old organization providing Zionist youth camps and gap years in Israel that had been wholly dependent on Hadassah since 1967.
The group had already endured cutbacks, letting staff go and shutting most of its U.S.-based youth clubs in 2005 after Hadassah reduced YJ’s budget by $6 million to $2.8 million as part of a system-wide review. But in the wake of the Madoff revelations, YJ also sold two of its buildings: its youth hostel in the Givat Masua neighborhood of Jerusalem and a community center for immigrants called Merkaz HaMagshimim in the German Colony, consolidating both facilities in Jerusalem’s Baka neighborhood. (Merkaz HaMagshimim subsequently closed in 2011.) In 2009, several senior staff members resigned, including the group’s longtime U.S. director, Ramie Arian. A year later, YJ’s Israel-based director of 10 years, Keith Berman, who logged record enrollment numbers by creating 12 individualized tracks at YJ, left to launch Aardvark Israel, a more affordable gap-year Israel program, taking with him YJ’s former assistant director Debbie Goldsmith and three other YJ staff. (Berman declined to speak with Tablet about his departure from YJ).
It seemed to some at the time that one of the oldest pillars of Zionist youth education was about to be destroyed. But today, a year after Hadassah turned over control of the organization to a group of alumni and parents, YJ is on its way to a revival of sorts. Granted $7 million in transitional funding from Hadassah, to be disbursed over three years, the group has hired a new director, Simon Klarfeld.
Klarfeld is charged with the monumental task of building a nonprofit from the ground up. Klarfeld says the new, nimbler, YJ is evolving to cater to the changing needs of Jewish American youth, who unlike their predecessors are less likely to be interested in spending a year hanging out in Israel than in finding real work. Klarfeld plans to redirect the group’s resources away from travel to its five-month WUJS internship program, which pairs young Jewish college students with major Israeli companies in areas like finance, healthcare, hospitality, and media, which currently draws about 45 participants each year. “There is more of a need for it because people aren’t finding jobs right after college,” said Klarfeld.
Meanwhile, YJ’s five affiliated summer camps—which serve as feeders for YJ’s Israel programs—have become wildly popular, particularly at the Texas and Midwest locations, a surprising turn which may help resuscitate the gap-year program. For Camp Young Judaea Midwest in Wisconsin—which lost 20 percent of its budget and its supporting staff in 2008—the shift has been dramatic. Last year, CYJM staff struggled to accommodate a 70-camper waiting list. “It was very sudden that this became a popular destination,” said camp director Noah Gallagher. “We are kind of at a turning point. This year, we will be likely have to turn campers away for lack of space.”
Gallagher credited a recent increase in prominent and influential community members sending their kids to YJ camps, the fruit of a concerted effort that was made to cultivate relationships with community leaders—and Jewish celebrities, of a sort: In 2012, Israel’s prime minister Benjamin Netanyahu sent his son Avner to CYJM, which generated much excitement.
Today, YJ is at the halfway point through the transition period and, while the financial future of the century-old youth program is still uncertain, Klarfeld is optimistic. “In the long-term we have incredibly passionate alumni,” he said. “The impact its had on people’s lives, it’s amazing to see. If we can harness that energy, the long term future for Young Judaea is unbelievably bright.”
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The country and the world came to a standstill then. Can his death inspire a similar momentum for change?