New York City – Yeshiva University sharply lowered its estimated loss from investing with Bernard Madoff, saying it now appears to have had just $14.5 million tied up with the disgraced financier instead of $110 million.
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The university attributed the vast difference to “fictitious” numbers provided to it by Ezra Merkin, the former chairman of Yeshiva’s investment committee who served as middleman between the school and Mr. Madoff.
The university said in a prepared statement that it had $14.5 million invested with Mr. Madoff at the time of his arrest. The administration had thought that figure had grown to $110 million, thanks to Mr. Madoff’s investing acumen. However, “it now appears that any ‘profits’ above the $14.5 million were fictitious,” said Yeshiva’s vice president for business affairs and chief financial offer, J. Michael Gower.
While the university faces a much less severe loss than previously estimated, it still doesn’t possess the $110 million administrators were counting on. The university will likely have to restate its $1.2 billion endowment, a person familiar with the matter said.
Two weeks ago, Moody’s Investors Service warned that it might cut Yeshiva’s credit rating. The ratings agency also raised concerns about governance at Yeshiva, where Mr. Madoff served as treasurer of the board of trustees and chairman of its business school until his alleged $50 billion Ponzi scheme came to light earlier this month.
Moody’s analyst Kimberly Tuby couldn’t be reached for comment on whether the new loss estimate would change her firm’s assessment of Yeshiva’s financial health.
The fact that Yeshiva’s losses appear to be much less severe than initially feared raises the possibility that other customers of Mr. Madoff are in the same situation. Conversely, investors who thought they had big investment gains may find those profits never really existed.
In the meantime, Mr. Merkin faces a date in court next week with another unhappy client, New York University, which says it lost $24 million investing in Mr. Madoff’s funds via Mr. Merkin and is seeking a temporary restraining order. A hearing is scheduled Tuesday afternoon in New York State Supreme Court.
Maybe if everyone else revised the losses it would maybe amount to 50 million. If thats the case he will get a slap on his back and move on with his life.
Fishy!! Where is the balance of the 110 million- YU doesn’t possess it and it wasn’t lost by Bernie- there seems to be alot more unanswered questions here_
Thats all? Fourteen Mil? That’s pocket change!
JUST!!??
Ahh, what I could do with that money… and where is MY government bailout? Why should I have to choose between my mortgage and my groceries?
To # 1 I think it will be more the $50MM but I think your on the rite track.
“Two weeks ago, Moody’s Investors Service warned that it might cut Yeshiva’s credit rating.”
That’s why they suddenly redid their figures. They can’t say how much they lost.
YU may be setting the stage for taking on Merkin. I believe his fees at Ascot were 1.5% of what was under investment. If he told YU he had $110 million then his fees were about $1.6 million annually. If really there was only $14.5 million then his fees were supposed to be under $200,000 for each year. They’ll have a basis for demanding excess fees back for every year of overstatement. Potentially they could be asking Merkin (or his insurance) for an 8 digit figure.
Now that they have 95 million more than they thought they had last week, maybe they can share some of it with the Rubashkin bail-out.
How can they just “readjust” figures from 110 to 14 – thats a 90% reduction!!!! Next time I promise to pay someone $100 & give them only $10 – “I had to ‘readjust’ my accounting.”
They are just as bad as their investments.
I am sure all others claims to inflated wealth are just as inflated as this one.
Actually, if you readjust Madoff’s $50Billion to the same proportions as YU have – Madoff only lost $3.5Billion! – not such a big ganeff after all!
Shame on yeshivah for holding all this money when Jews all over the world are starving or loosing their homes.
thats funnny. joel send out an email last week asking for donations!
I would like to know what Y.U. does with or needs 1.2 Billion. Why would any G-d fearing person give to an organization that is sitting on such an incredible amount of money while the whole world is hurting.
Any yeshiva or business institution that is not even sure how much they have or lost at any given time ought to get rid of their accountants. It seems that accountants are doing a lousy job if they have no clule about their business.
It is the same loss depending how you look at it.
They thought they had $100MM with Madoff. Let’s say they originally invested $15M.
They thought earnings built it up to $100MM. Reality was there were no earnings, and the original $15M investment is lost. Now they are saying they “only” lost $15M.
They are sort of right, if you see what I mean. The earnings of $85M was also “lost”, but really never was there and was not “out of pocket”.
6 of one, 1/2 dozen of another.
The actual loss is the amount of checks that they wrote. However, they also had “opportunity loss” had the $14 M been invested in a real investment it could have returned a compounded return of 5-10%/year depending on the nature of the investment (ie “safe” treasuries vs “risky” equities)
Some people here need to better understand endowments. The purpose of an endowment, as opposed to a regular donation, is to provide for perpetual giving. The whole reason people give endowments is to assure that the money is given over time. Endowments distribute 5% or more per year of their proceeds and need to grow just to stay even. As an example, a billion dollar endowment means a distribution per year of $50 million or more. And each year the endowment needs at least $50 million either from investing or donations just to stay even for the following year.
Simply, YU does not have $1.2 billion to spend at once except perhaps in the most dire need for its survivial. And maybe not even then.
Second, when an endoment shrinks that means the budget shortfall reflected by that shrinking has to be made up in some other way. YU thought it has $110 million. So they expected each year to receive about $6 million from Merkin (and Madoff though they didn’t know it). Now that money is gone. So they have to either find another source for that $6 million – from donations or tuition increases – or they have to cut $6 million from the budget. That’s probably around 50 jobs. The point: If YU gave away that money or part of it then the next year, YU’s budget would be in major trouble and every year thereafter YU would suffer.
The third thing people here need to understand is that endowments often have conditions attached by the giver. Say a person gives $5 million for a Chair (or two) in Gemorrah (leading to annual distribution of $250,000). YU can’t take that money and spend it on a science chair nor can they give it away. The gift had terms and they must be honored likey any contract.
Fourth, people need to understand that there are fiduciary duties. The people appointed to run YU owe a duty to YU to make sure its run well. They can not just give away money because they feel charitable towards something that has nothing to do with YU. If they did, they’d open themselves up to lawsuits (and rightfully so).
Finally, one such person wrote that Jews all over the world are starving or losing their homes. Have you given every penny you possibly could earn to those charities? Since the fact that something is a charity implies that it provides a social good, it makes far more sense for you and every other person to give up everything nice you have before a charitable cause such as YU should give up a penny. And for that matter, non-Jews feel bad and die when they starve and lose their homes as well. As someone above wrote, the whole world is hurting.
dont forget that YU is not just a yeshiva- it has 11 other schools- law school (cardozo) med school (einstein), psyc school (ferkuff), etc. it needs this money just as much as other schools do. in fact the college had to let go of some (secular) professors because of budget cuts.
well those earnings never existed so just 15 million
$14M compounding at 10%/yr will double every 7 years or so. That means $28M after 7 years, $56 M after 14 years and $112M after 21 years . Madoff scam was running for close to 30 years so the numbers make sense depending on how much they invested and how long ago.
To # 25
“YU does incredible service to the community”.
Yeah Sure! Like sanctioning their own on campus Gay Club.
Excellent Service!
We really need that.
So if the Tzaddik Merkin gave YU fictitious numbers was he in cahoots with Madoff? Maybe he should be indicted too?
To #30 .
Unfortunately, I don’t think I’m getting your question.
YU most take no less then 5% of their endowment every year. Whatever their prior disbursements were they were based on the assumption there was $110 million invested which Merkin told them was there and not $0 as actually was there or $14 million which was what YU put in years ago. In truth, if YU took money out of Ascot each year its possible they over time got a good chunk of their $14 million back and unknowingly spent it all. But its also possible they (meaning the group run by Merkin) liked their ‘returns’ with (the very same) Merkin and therefore were taking more of the 5% (or more) annually from elsewhere in their investments. I don’t know.
Madoff was supposedly giving returns of 10%+ every year (and Ascot would therefore would have been doing that as well minus additional fees). That is how YU thought they has $110 million from an original $14 millon but really had zero.
Merkin was taking 1.5% fee off of whatever was under management of Ascot … and that would have included the $110 milllion that everyone supposed YU had. In fact, YU had $14 million invested the first year and $0 every year thereafter since Madoff had stolen it.
Any money YU got earlier would have been from people lower down on the Ponzi scheme or from any portion of Madoff’s money that actually was invested. But YU didn’t know that.
Madoff is a thief and there are serious questions for Merkin. But beyond that negligence is the only thing YU trustees might have done wrong (based on what’s been disclosed) and I stress ‘might.’
Most likely they did remove some profits and they are subtracting those distributions from the ‘amount lost’. E.g. Say they invested 70Million 8 years ago. They thought they are earning 12% a year (8.4 million) and they take back 7 million in distributions each year. According to their chesbon they have more than roughly 82 million (70 original plus 1.4 million of growth each year).
With the new chesbon they say we put in 70 Million 8 years ago and took out 7 million a year for 8 years (56 million). The actual loss was 14 million.