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Tufts loses $20 million in Madoff scandal

Published: Friday, December 19, 2008

Updated: Monday, December 22, 2008 23:12

Should Tufts' losses in the Madoff scandal affect donations to the university?

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Related: Tufts has array of legal options in wake of Madoff losses

After $20 million in losses from an alleged Ponzi scheme, legal experts say it might be time for Tufts to dig in its claws. Full story

After $20 million loss in Madoff scandal, Tufts maintains it met investing standards

In the wake of Tufts’ announcement on Friday that it had lost $20 million of its endowment in Wall Street mogul Bernard Madoff’s alleged $50 billion Ponzi scheme, the university maintains that its investment met due diligence standards. Full story

Tufts may have lost $20 million of its endowment in Bernard Madoff's alleged $50 billion Wall Street fraud scheme, according to an e-mail sent by University President Lawrence Bacow to the Tufts community this afternoon. (Click to read the full e-mail on The Hill blog)

The university invested the money in 2005 with Ascot Partners, a hedge-fund firm that then invested the entire sum with Madoff's securities firm, Bacow said. The school has written off the total amount, which is equal to nearly 2 percent of the endowment, and its disappearance "will not significantly affect … operations," Bacow added.

The university will participate in investigations of the fraud and will attempt to recover its losses, he said.

Madoff was arrested last Thursday and charged with securities fraud for allegedly running a fraudulent advisory business and losing investors billions of dollars. The arrest came a day after the 70-year-old former Nasdaq chairman told his sons details of what he called "basically, a giant Ponzi scheme," according to a complaint filed in court.

Madoff attracted clients with promises of strong, consistent returns, but he allegedly just paid out income with the principals of newer investors. The scheme may have lasted decades.

Tufts joins a long list of large banks, charities and wealthy individuals who may have taken a hit in the scandal. At least one other institution of higher learning has reported falling victim; Yeshiva University, where Madoff served on the institution's board, said it might have lost over $100 million.

From Bacow's e-mail:

"It is personally painful for me to communicate this information to you. We deeply appreciate the trust and confidence that each donor places in the university. We also have an obligation to our students and faculty to manage these resources wisely for their benefit. You have my word that we will look closely at our experience in this case so that we can strengthen our investment process for the future."

Check TuftsDaily.com over break for continued updates.

 

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12 comments Log in to Comment

Your Name Here
Wed Dec 24 2008 22:10
It's time for the Attorney General of the state of Massachusetts to investigate Stern. His hands are not clean.
current undergrad
Tue Dec 23 2008 13:21
If Tufts was going to invest all of the money into Madoff's fund, they shouldn't have been investing through Ascot, a fund of funds, in the first place. Not only are they one step further removed from the people managing the investment (which means less transparency, less control over the money, and zero authority for Tufts to directly contact the people actually making buying and selling decisions), but the school would also be accepting a lower return than if they were to direct invest with Madoff (assuming he was profitable). Either way you look at it, this looks like a poor investment. It seems as if we're paying our Tufts endowment managers to pay other people (i.e. funds of funds) to manage our money, who in turn pay other people (hedge fund managers) to manage our money. But hey, at least we're not down 20% or 22% like Harvard or Yale.
Former Tufts Donor
Sun Dec 21 2008 19:23
So Stern (Tufts Board) is a principal of Cypress? Isn't that a conflict of interest or did the audit subcommittee make an exception to this? And why did Tufts proceed with the investment when it raised so many red flags? What happened to our institutional investment guidelines and due diligence process - the same that prevented Duke, Yale and Harvard from investing in Madoff?
Not an idiot
Sun Dec 21 2008 02:07
Way to not diversify your investments... Put it all in one firm? Wtf. Just Tufts's luck to lose $20 million. Oh... no biggie.
2012 student
Sat Dec 20 2008 17:58
the fact of the matter is that many smart, financially-savy people got duped by madoff because he implemented a genius, albeit amoral, plan. alums, to refrain from donating to Tufts would be to perpetuate and to worsen the financial problems Tufts faces due to this recession, something current and future students can ill afford.
2001 Alum (again)
Sat Dec 20 2008 17:29
Agreed with Tufts parent. This is the Tufts' endowment committee's fault, which reflects pretty poorly on the University. Jim Stern's decision to invest through is friend Merkin's firm (Ascot) needs to be quickly investigated by the University. Further, based upon feedback from a friend who invests some of Tufts' endowment, TU's due diligence process is less than adequate.
Your name
Sat Dec 20 2008 17:22
lol
Tufts parent and alum spouse
Sat Dec 20 2008 15:15
It's the fault of Tufts' endowment financial committee for not questioning Ascot's returns.
Current student
Sat Dec 20 2008 14:22
Alums -- why blame the university? Tufts was duped by this guy, as were MANY other people. It's his fault, not Tufts'.
1990 Alum
Sat Dec 20 2008 13:27
That's the last time Tufts gets a penny from me. You might as well flush the money down the toilet. Idiots.
2001 Alum
Sat Dec 20 2008 12:34
Embarrassing and inexcusable.
Your name
Fri Dec 19 2008 23:58
From NYT:
"Tufts did not actually send a check to Bernard L. Madoff Investment Securities. Rather, it invested in Ascot Partners, Mr. Merkin’s partnership. Mr. Merkin had been a major investor in a company whose board included James A. Stern, the chairman of the Tufts investment committee and a principal in a major private investment firm in New York called the Cypress Group."
http://www.nytimes.com/2008/12/20/business/20madoff.html?pagewanted=4&adxnnl=1&partner=rss&emc=rss&adxnnlx=1229748942-DapZ5uBdx69ofw7jwPB0Kw

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