The Trust Deficit

from The Chronicle of Philanthropy’s Conference Notebook

‘Trust Deficit’ Erupts After Madoff Investment Scandal

In a session billed as “CSI for foundations,” speakers at the Council on Foundations meeting in Atlanta dissected the Bernard Madoff investment scandal, which resulted in the deaths of 51 foundations and left 143 others “seriously injured,” according to Jeffrey R. Solomon, president of the Andrea and Charles Bronfman Philanthropies, in New York.

Mr. Solomon said Bronfman Philanthropies considered investing with Mr. Madoff but did not after its chief financial officer investigated and discovered four factors he found troubling:

  • The returns looked too good to be true.
  • Mr. Madoff’s group did not welcome an office visit.
  • The group would not disclose how the investments worked, and wouldn’t answer the chief financial officer’s questions.
  • The auditors for the effort were “two guys at a strip mall,” Mr. Solomon said.

He added, “Having procedures in place and simply doing the kind of due diligence does result, in this case, in avoiding the problem.”