Uncle Bernie as Metaphor

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22 Responses

  1. Leah says:

    I have a question and I am putting it out here for those who would like to answer it. I have been hearing much these days about the “evil at the end of days.” I have heard from rabbonim that this evil will come to it’s fullest height(capacity) and it must fizzle out and then soon Moshiach will come (amongst other criteria obviously as well.)
    So, my comment is, of course, I am deeply saddened and upset for those who are the innocent bystanders- the people who are suffering because of the now lack of funds that would have payed for the recipients use of the goods provided by these charitable organizations as well as those who invested unknowingly etc. My question, however is, does anyone think that this greed that is connected to the whole behavior of the Madoff scheme is an example of “the evil at the end of days.” and perhaps Hashem is bringing this whopper of an example to the forefront of the world to be heightened as well as for it to be destroyed?
    Once again, my question is not meant in any way shape or form to place this in the “lap” of Hashem and as well it does not underestimate the pain of those suffering due to direct correlation of this huge issue.

  2. Bob Miller says:

    Donors to charitable/religious/educational institutions have a right to expect these to invest with due diligence. Why/how Madoff went wrong matters, but why these organizations fell massively for a fraudulent pitch matters much more—whether they dealt directly with Madoff or through trusted intermediaries. The victimized institutions (and all others) need to know the answers and make the needed changes to prevent more incidents like this one.

  3. Chaim Fisher says:

    I find it very, very sad that Rabbi Rosenblum does not mention the one glowing fact about the Maddof scandal that touches us all where it hurts: Chillul haShem.

    Rabbi Rosenblum is no stranger to this call either. Innocent Chashidishe bochurim got shamed in detail on these same pages in 250 words of criticism a few months ago over their “Chillul haShem” of being tricked into being donkeys for drugs in Japan, when they knew neither the law nor their victims nor their crime.

    This man, who knew the law intimately, who knew his victims like his family, and who knew his crime like the back of his hand–why does he escape the Rosenblum judgement of Chillul haShem, unlike those unfortunate bocherim, who perhaps–according to great Rabbis I spoke with about it–were never actually mechallel haShem?

    We will pay for years for Madoff’s wrong. Antisemites will claim that Jews suck the money out of the world, and say, “And that guy who took out so many billions, Madoff, he’s one of them!” And there he was on the board of the major MO institution in the world, and leading their business school.

    It is a Chillul haShem. And hiding eyes from it only makes it worse.

  4. Ori says:

    Leah: My question, however is, does anyone think that this greed that is connected to the whole behavior of the Madoff scheme is an example of “the evil at the end of days.” and perhaps Hashem is bringing this whopper of an example to the forefront of the world to be heightened as well as for it to be destroyed?

    Ori: At the risk of sounding heartless, I don’t think so. Compared to some of evils in the last hundred years, Madoff barely registers.

  5. Leah says:

    Ori,
    I hear you on the last one hundred years-meaning: the Holocaust, massacres, pogroms etc. Yet, it seems that the sheer magnitude of the people affected as well as the $ amount influences me to think it to be well up there with “huge.”
    The anti-semitism this scandal created and the rifts in the Jewish communities also leads me to think this is tremendous.

  6. dovid says:

    “Compared to some of evils in the last hundred years, Madoff barely registers.”

    Really? Is $50 billion small potatoes by you? I don’t think there has been in the history of humanity one person, almost single-handedly able to swindle this much money.

  7. dovid says:

    Bob Miller, I would like to take your idea one step further. We give money for various causes. Some of them we know well and are endorsed by people of sterling character, etc. How do you feel about giving to organizations that have top-of-the-line PR, glossy advertisements, but all you know about them is what they told you about? Do individual tzedaka donors have the right to know with certainty about the kashrus of these organizations? Someone asked in the mikva (it’s not the right place to schmooze, but it’s done.) whether anyone knows FOR A FACT what so and so org. does? We all got their fancy ads in the mail, and their messages are all over in the radio. No one could answer with certainty. Charitable organizations need to open their books and become accountable to its donors. It’s our obligation to make sure our tzedaka money is used for the intended purpose. Maybe they should be audited. Is it too much to ask for? I don’t think so. Let me tell you a story that happened about two wks after the Madoff affair hit the news. Someone asked me to procure for him a commercial loan to enable him to buy an industrial property. I asked him the standard questions. His answers got my head spinning. He wanted to pay for the property with a $4MM loan plus a receipt to the seller certifying that he, the buyer received $5MM donation from the seller to his charitable organization. The seller would use the receipt to reduce his taxable income. The transaction is not illegal. Still, the story looked fishy to me. The “donor”/seller was an Indian. The charitable org. was Jewish. There is nothing illegal about this either. I very badly wanted to get to the bottom of the story. In short, this is the fraud that he was trying to pull. A $5MM charitable donation results in a tax reduction of approx. 20% to 35% of the face amount of the donation, depending on the seller’s tax rate. Let’s assume his tax rate is 30%. That means the receipt is worth to him approx. $1.5MM. Thus, he is selling the property for the cash equivalent of $5.5MM ($4MM loan plus the value to seller of the receipt). If the seller could get more than $5.5MM, he would sell it for more and not get involved in this arrangement. Thus, the property is worth up to $5.5MM. The ”charitable org.” had the property appraised at $9MM. Now, this is fraud because it was being sold for $5.5MM. Using a fraudulent appraised value, the buyer (”charitable org.”), using the seller, was ripping off the IRS. I knew one has to be registered and approved by IRS in order for donors to be able to deduct their contributions. I went to IRS’s website. They have a tab dedicated to charitable organizations where they list all organizations approved by them. And yes, you guessed right. This fellow and his organization were not listed. I told him that I had three lenders that wanted to do the loan but they wanted a copy of the document certifying that his organization is an IRS approved charity. The “rabbi” went off my radar. He stopped answering my e-mails and telephone calls. Another small detail. Of the three tel. numbers he gave me, two were not listed and the third one was the tel. number of a first aid and CPR company in MA. His org. is located in in NY. Now, supposed he gets the loan and he acquires the property. Seller submits his tax returns with his income reduced by the $5MM donation. IRS does a little research and if they don’t miss it, they discover that the charitable organization” is not on their approved list and deny the Indian fellow his tax deduction. Who is going to pay for it? You and me, in bad PR (“all Jews are swindlers.”) and lost future business.

  8. Ori says:

    Dovid: Really? Is $50 billion small potatoes by you? I don’t think there has been in the history of humanity one person, almost single-handedly able to swindle this much money.

    Ori: It’s huge for a single swindler. Until quite recently, there simply wasn’t that much excess wealth that wasn’t needed immediately and could be “invested”(1) in this kind of con.

    However, evil isn’t restricted to con-men. Take Syria, for example. For all practical purposes, it is owned by the Assad family. Even ignoring the killings and torture so they could stay in power, and looking just at property, it has a GDP of about $40 billion. That is the value it produces in a single year. Most of the countries in the world are in this situation, even today.

    It’s true the Assads need people to co-operate with them, but so did Madoff. He didn’t keep $5×10^10(2) as home under a mattress. It has to have been invested somewhere.

    (1) The Hebrew word, which literally means “make sink”, is more appropriate here.

    (2) Hope you don’t mind I use scientific notation. It feels more appropriate for this size of sum.

    Dovid: His org. is located in in NY. Now, supposed he gets the loan and he acquires the property. Seller submits his tax returns with his income reduced by the $5MM donation. IRS does a little research and if they don’t miss it, they discover that the charitable organization” is not on their approved list and deny the Indian fellow his tax deduction. Who is going to pay for it? You and me, in bad PR (“all Jews are swindlers.”) and lost future business.

    Ori: Are you allowed (legally) to contact the seller and mention that he might want to check with the IRS’s Web site if a donation would be considered tax deductible? That would be good PR.

  9. Bob Miller says:

    Regarding the comment by dovid — January 7, 2009 @ 10:22 pm:

    The question remains of how any ordinary person can find out if the charity he might donate to is legitimate in all respects. If we each have to be our own Sherlock Holmes, who has the time? And if Jewish communities or organizations propose methods to bring accountability and transparency up to some minimum standard, do they have the clout to insure implementation?

    I’m reminded of situations regarding kashrus. Rabbis who know that a certain kashrus supervisor or organization does not meet accepted standards can’t put their judgment in print for fear of lawsuits. As a result, there is a kashrus rumor mill ripe for misuse, whether accidental or intentional.

  10. Leah says:

    Bob Miller,
    Whew! What a little research does for the payoff in the long run. I have been reading on another website, Aish, about the need to aquire witnesses, do research etc….. when doing business with another whether it is a loan or investments. With this scandal it seems to be an obvious eye opener as to why.
    It would appear that transparency is needed as you mention with regards to the $ and the goings on of a business.

  11. dovid says:

    “how any ordinary person can find out if the charity he might donate to is legitimate”

    Put the onus on the person asking for the donation. You don’t have the time and resources to check his credetials.

    “bring accountability and transparency up to some minimum standard”

    It can be done. Given that charitable organizations compete for a limited amount of available tzedaka funds, those that have good reputation (not PR but reputation) and reliable credentials will win. As a point in case, Tzidkas Yosef Naftali spends $0 on advertisement. It is endorsed by the Who’s Who in EY and America. They have been getting much of my maasser because I have the peace of mind that $100 donated is $100 received by a qualified family.

    The downside of such scrutiny is that there are cases of individuals that undergo genuine financial hardship that could fall through the cracks. We may ignore or reject their requests for help because of a prior bad experience.

  12. dovid says:

    Ori: Are you allowed (legally) to contact the seller and mention that he might want to check with the IRS’s Web site if a donation would be considered tax deductible? That would be good PR.

    I don’t think so. Brokers are like attorneys in this respect. They have a fiduciary obligation towards their client or prospective client. I may choose not to work with him. But to warn the other party, I am certainly not allowed to do. I am surprised though, you are not asking whether I consulted a rav.

  13. dovid says:

    “Did he start off as a successful trader, who at some point suffered losses, which rather than admit he tried to cover-up by taking in ever escalating amounts of new money? If that’s the case, his is a cautionary tale about the danger of pride.”

    This appears to be the case. An article on Madoff indicates that there are investors who actually made money. “… said one caller, whom he declined to name, invested $1.8 million with Madoff more than a decade ago, then cashed out nearly $3 million worth of “profits” as the years went by. On paper, he still had $4 million invested with Madoff when the scheme collapsed”.

  14. Bob Miller says:

    Many have pointed out that certain activities of the US Government, particularly in relation to Social Security, have the same elements as a Ponzi scheme. This is why the retirement of Baby Boomers threatens the Social Security system—too few new people are putting $ in, too many older people are taking $ out, plus the government is always skimming $ out of the fund for other uses.

  15. Leah says:

    Interesting to note that some times if I want to know if an organization is legit or if a new business venture is legit I will simply look online and type in the name/names. Sounds too simple, yet in this day and age many people are loose with their fingers-not only their lips. So, if someone may be interested in finding out if an organization or the like is pilfering funds or just even questionable one could say maybe the internet is a good place to start. Why do I only say start?
    It’s obviously not the do all and tell and as well so many times you may end up reading the emotional drivel of someone who has had a negative experience with a particular organization or a person who works for that organization. The issue I use the internet for is to see if major news comes up under the name and then I will take that info and ask my rav if he is aware of such and such. Sounds too simple,yet I have avoided problems this way and am glad.

  16. Bob Miller says:

    Regarding the comment by Leah — January 10, 2009 @ 8:04 pm:

    Apparent dirt on some person or group on the Web may even be motzi shem ra, that is, a deliberate lie meant to damage someone else. Where there’s smoke, there may be fire—or maybe not! This is why taking the apparent information to one’s Rav, as Leah does, is so essential. However, on the spot, the Rav may be unable to determine whether the allegation is true or false. The Rav has to be willing and competent to do some investigation as needed.

  17. Reb Yid says:

    Check out Frank Rich’s NYTimes column today (Sunday), entitled “Eight Years of Madoffs”, a frightening tale (documented in a near final draft by the Office of Inspector General for Iraq Reconstruction, and a Bush appointee, to boot) of the Ponzi scheme against US taxpayers that makes L’Affaire Madoff pale in comparison….

  18. Ori says:

    Dovid: I may choose not to work with him. But to warn the other party, I am certainly not allowed to do. I am surprised though, you are not asking whether I consulted a rav.

    Ori: I didn’t even think of consulting a rav, probably because I’m Heterodox. But is it possible for Halacha to require you to help a Jew commit fraud, either by your action or inaction?

  19. dovid says:

    “But is it possible for Halacha to require you to help a Jew commit fraud, either by your action or inaction?”

    It might appear to you that I am backtracking, but I am not. Everything I wrote above is true. The “rabbi” and his organization do look bad, but I didn’t catch them commiting fraud. Am I supposed to give him the benefit of the doubt? I don’t think so. I asked him to show me evidence that he is a bona fide charitable organization. He chose to cut contact with me. Would I give him of my maasser money? No. And now, I will copy and paste the answer of the rav to my questions. My e-mail to him was pretty much the same as my Jan. 7 comment. Here is the rav’s answer:
    While the story does sound “interesting “ – your sole concerns should be 1. Can you arrange the loan 2. Will it be repaid 3.Do you have any legal liability or responsibility – if the answers are yes , yes , no then everything else is not your business – if the answers are different then beware – Gut Voch

    In other words, if I am reasonably confident I can procure the loan despite this iffy story, or else I should let him try elsewhere, AND I am reasonably confident borrower can and is willing to repay the loan, (otherwise I become a party to the swindle if this is what it is), AND I won’t be legally liable if it turns out borrower is indeed a swindler, then there is no halachic objection to my procuring the loan.

  20. dovid says:

    “help a Jew commit fraud, either by your action or inaction”

    I may not actively help a Jew transgress Halacha or commit an act regarded by the law of the land as a crime (cheating at taxes, stealing, killing, etc.). How about passively? That’s a sticky question that I defer it to a rav.

  21. Ori says:

    Dovid: I may not actively help a Jew transgress Halacha or commit an act regarded by the law of the land as a crime (cheating at taxes, stealing, killing, etc.). How about passively? That’s a sticky question that I defer it to a rav.

    Ori: What did the rav say? Or if you haven’t asked one, what to do Rabbis on this board say?

  22. dovid says:

    Ori: What did the rav say?

    Here is the rav’s answer: While the story does sound “interesting “ – your sole concerns should be 1. Can you arrange the loan 2. Will it be repaid 3.Do you have any legal liability or responsibility – if the answers are yes , yes , no then everything else is not your business – if the answers are different then beware – Gut Voch

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