Comments by J. C. Spencer

We are witnessing the exposure of deceit and corruption that is resulting in the greatest economical shift in the history of the world. Brain research at MIT and diabetes research at Harvard Medical School have been hit by the Madoff scandal. Just when you thought the healthcare crisis could not get worse, it just did. I have contended that we must move from the sickness industry to the wellness industry. We must change our focus from treating symptoms to discovering the cause and correcting that.

At The Endowment for Medical Research, we are expanding our training about How to Lower Healthcare Costs. If you can improve brain function, and we have proven that we can, you have just addressed over 600 diseases without focusing on a one of them. Glycomics, the science of sugars, is the future of medicine. To lower healthcare costs and get greater results than before, we must think outside the pill box.

Now today�s story:

- - - - - - - - - - - - - - - - -

Major foundation falls to Madoff plot

By Jeffrey Krasner and Tracy Jan

Globe Staff / December 19, 2008

The unfolding scandal surrounding the alleged Ponzi scheme run by Bernard L. Madoff yesterday claimed as a victim one of the largest educational foundations in the country, which has funded groundbreaking brain research at the Massachusetts Institute of Technology and diabetes research at Harvard Medical School.

The Picower Foundation of Palm Beach sent an e-mail to ��colleagues and friends�� late yesterday saying it was a victim of Madoff�s alleged scheme and that it would soon shut down. With assets of more than a half-billion dollars, it is believed to be the largest charity to have been hit by the unfolding scandal.

��It is with great sadness that I write to inform you that the Picower Foundation has ceased all grant-making, effective immediately, and will close its doors in the coming months,�� wrote Barbara Picower, president of the foundation. ��The foundation�s endowment was managed by Bernard L. Madoff, who, as you well know, was arrested on Dec. 11 for securities fraud.��

The Picowers could not be reached for comment last night at their Palm Beach home. Jeffry Picower is a lawyer originally from New York.

A portrait of the Picowers hangs in the Picower Institute for Learning and Memory at MIT. They gave the center $50 million in 2002, which was, at the time, the largest grant from a single foundation the university had ever received.

Madoff had served on the board of a medical research institute in New York that the Picowers had funded.

In its 2007 tax return, the Picower Foundation said the market value of its investment portfolio was $952 million. It is unclear from the foundation�s statement whether the foundation lost all its money or just enough to force it to cease operations.

��Either I or one of our program staff will contact grantees to bring closure to active grants,�� Barbara Picower wrote. The foundation ��deeply regrets that in such a harsh economic climate, we will be unable to support the profoundly important programs and organizations that have helped us promote excellence in education, innovation in medical research, and the protection of human rights.��

The Picower Foundation also gives MIT $200,000 a year to fund scholarships for graduate students, in the name of Norman B. Leventhal, the famed Boston developer and philanthropist. Leventhal was a director of Picower Foundation until this year.

The foundation gave $1.5 million for diabetes and metabolism research to Dr. Jeffrey Flier, dean of Harvard Medical School. Flier said he had a premonition on Monday that the foundation was in trouble. He and other scientists associated with the research were due to go to New York to present their results to one another and Barbara Picower. But on the way to New York, they received an e-mail from Barbara Picower saying she couldn�t attend the meeting. She didn�t give a reason.

��This was surprising because the date of the meeting was organized around her schedule,�� Flier said. ��The first immediate thought I had was: �Oh, God. This is going to relate to the Madoff story.� But we didn�t know that.��

Flier said, ��I suspected there would be some problems, but I had no idea it was of the magnitude that would lead them to close their doors.

��It�s unbelievable. The biggest tragedy will be for all the good they would have done.��

His research funded by the foundation ��is over,�� he said, unless he finds another funder.

Flier�s colleague, Dr. Barbara B. Kahn, chief of the division of endocrinology, diabetes, and metabolism at Beth Israel Deaconess Medical Center, said the foundation�s closure is a major loss for biomedical research.

��I think it�s tragic for the Picower Foundation and for the public that a single individual could undermine these wonderful philanthropic organizations that support excellent causes such as biomedical research.��

Yesterday, authorities put tighter bail restrictions on Madoff, 70. He will be under house arrest at his New York apartment and will be required to hire a security firm to provide video monitoring of his apartment door. He will also be monitored by the FBI. The conditions, set by a magistrate, are intended to prevent ��harm or flight.��

Madoff and his wife had already given their passports to authorities. He had also put up three properties as collateral on $10 million in bail.

Just how so many nonprofit organizations wound up with Madoff handling such a significant share of their money, and thus were left so vulnerable to his problems, is a topic of growing concern among investment advisers to foundations and similar tax-exempt groups.

Some recommend that these organizations keep no more than 5 percent of their money invested through a single outside manager, for instance, though in practice the goal can be hard to achieve for smaller foundations.

��Under most circumstances you don�t put your eggs in one basket,�� Marion Fremont-Smith, a retired partner of the law firm of Choate Hall & Stewart who teaches nonprofit management at Harvard�s Kennedy School, said in an interview earlier this week. Others have questioned how nonprofit groups could come to expect their money would earn double-digit returns in any market condition.

Milton Valencia and Ross Kerber of the Globe staff contributed to this report. Tracy Jan can be reached at [email protected]; Jeffrey Krasner can be reached at [email protected]. � Copyright 2008 Globe Newspaper Company.

Further references:
http://news.google.com/news?hl=en&ncl=http://www.thecrimson.com/article.aspx%3Fref%3D526002