FEBRUARY 12, 2009 Madoff Scandal's Deep Impact On Funding for Health, Science
By ELIZABETH BERNSTEIN Wall Street Journal http://online.wsj.com/article/SB123439995182175299.html Mark Bear has spent the past year and half searching for a way to restore eyesight to people with amblyopia, a developmental disorder that affects vision. His research -- and other neurobiological studies being conducted by nine of his colleagues at the Massachusetts Institute of Technology -- was paid for by a $2 million-a-year grant from private donors. But now, that financial support has completely dried up. The funders -- Barbara and Jeffrey Picower -- announced in late December that their charitable foundation's endowment was managed by Bernard Madoff, alleged mastermind of one of the biggest financial frauds in history. In an email sent to grant recipients, Mrs. Picower said the foundation was ceasing all grant making immediately and would close its doors in a few months. "This is a huge setback," says Dr. Bear, director of the Picower Institute for Learning and Memory at MIT, which was funded by the Picowers in 2002 with a $50 million grant. The alleged Ponzi scheme that bilked investors out of an estimated $50 billion is sending shock waves throughout the medical and scientific communities -- with far-reaching implications for everything from diabetes research to palliative care. Philanthropy experts say that the negative effect of the Madoff scandal on health care could ultimately affect millions of people. "Long-term, it's billions of dollars of funding that won't get made" because the endowments of so many foundations have dried up, says Melissa Berman, president and CEO of Rockefeller Philanthropy Advisors in New York. The losses come at a particularly troubling time, as the economy is battering both existing endowments and new fund-raising efforts. With new donors hard to come by, nonprofits are worried they will need to put projects on hold, scale down future plans and lay off staff. Research institutions say they have little hope of finding more government funding: Grants from the National Institutes of Health have remained relatively flat for the past five years. "We could be inches away from that breakthrough that could change the lives of millions of people, and Madoff pulled the rug out from underneath us," says Jim Surmeier, chair of physiology at Northwestern's Feinberg School of Medicine and a member of a Picower-funded research consortium on Parkinson's disease. Many individuals who lost significant sums with Mr. Madoff were generous donors to health-care causes who funded buildings at hospitals, long-term programs at charities and high-risk research. Jerome Fisher, the founder of the Nine West shoe-store chain, lost millions in the Madoff scam. He and his wife Anne pledged $50 million to the University of Pennsylvania last June for a new biomedical research center aimed at converting laboratory discoveries into medical therapies. In 2005, Leonard Feinstein, co-founder of the national retail chain Bed Bath & Beyond Inc., and his wife, Susan, gave an unspecified amount to the North Shore-Long Island Jewish Health System to help build a $50 million addition to its research institute, which the institution then renamed in honor of the Feinsteins. Mr. Feinstein invested with Mr. Madoff. Real-estate magnate Mortimer Zuckerman pledged $100 million to New York's Memorial Sloan-Kettering Cancer Center in 2006; the organization used the money to build a new research center. Mr. Zuckerman says his charitable trust -- which had some of its money in a fund that invested with Mr. Madoff -- lost $30 million, or 10% of its total value. A $100 Million Loss Carl Shapiro, the founder and chairman of apparel company Kay Windsor Inc., and his wife, Ruth, personally lost $400 million in the Madoff scam, as well as an estimated $100 million or more of their foundation's endowment. They have been generous donors to health-care causes over the years, including many Harvard-affiliated hospitals in Boston. Last year, for example, they made a $27 million pledge to Dana-Farber/Brigham and Women's Cancer Center in Boston. Most donors affected by the Madoff scandal declined to discuss their plans. Mr. Zuckerman, who pledged to pay his 2006 gift to Memorial Sloan-Kettering over 10 years, says that his Madoff-related losses will not affect that gift but that his charitable trust "will have $30 million less to give away." The Carl and Ruth Shapiro Foundation says that all current pledges will be honored, but that it will make no new pledges in 2009. The Fishers and the Feinsteins could not be reached for comment. The recipient institutions -- wary of offending their benefactors -- are also reluctant to comment. Dana-Farber says the Shapiros have confirmed that they will honor their commitment to the organization. The University of Pennsylvania says it has no indication that Mr. Fisher won't fulfill his pledge. Memorial Sloan-Kettering says it hasn't had any donors tell them they won't be fulfilling pledges because of Mr. Madoff. A spokesman for North Shore-Long Island says that the Feinsteins have committed to fulfilling their pledge and expressed a willingness to provide future support, but that the Madoff scandal may cost the institution tens of millions of dollars in future pledges over the next few years. Already, it says it has postponed plans to start building a new pavilion at its Schneider Children's Hospital, which was to contain a new pediatric emergency room, intensive-care unit and imaging center. For health-care causes, one of the more worrisome casualties of the Madoff scam is the Picower Foundation. Created by Palm Beach, Fla., investor Jeffry Picower and his wife, Barbara, in 1989, its investment portfolio had a market value of about $950 million, according to its 2007 tax returns. That year, it gave millions to health-related causes. Recipients included the Children's Health Fund, the Lymphoma Research Foundation and Pennsylvania State University. Much of this money supported the type of basic, high-risk research not typically funded by the National Institutes of Health, which scientists say chooses research projects that have already shown promising results. The Picower Foundation "valued novelty, approach and potential impact," says Barbara Kahn, chief of the division of endocrinology, diabetes and metabolism at Beth Israel Deaconess Medical Center in Boston, whose laboratory received $900,000 from the foundation over the past two years to study diabetes. Picower leveraged many of its gifts by funding multiple researchers to study different aspects of a disease and to share their findings. To this end, the foundation created a Parkinson's consortium in 2004, which eventually included seven top Parkinson's researchers around the country. In 2007, they received a total of at least $4 million from Picower. Two years ago, the foundation created a second consortium, to study diabetes, giving some $2.5 million annually to five labs at four institutions. Both groups met at least twice a year to discuss their findings. "It's the size and magnitude of the generosity that gets things done," says Virginia Lee, director of the center for neurodegenerative disease research at the University of Pennsylvania, and a member of the Parkinson's group. In December, researchers at both consortia received the email from Mrs. Picower, explaining that the foundation was ceasing its grant-making. The Parkinson's funding will end in June, and the diabetes support in October. The researchers' collaborative efforts will likely dissolve, and each scientist is scrambling to find alternative funding. 'Grinding to a Halt' The scientists worry they may have to lay off young researchers or redirect their work to other diseases where funding is more readily available. "In the worst-case scenario, the lab will just grind to a halt," says Tim Greenamyre, a professor of neurology at the University of Pittsburgh and a member of the Parkinson's consortium. When the Picower Foundation stopped making grants, the Nurse-Family Partnership, the Denver-based national office of programs that send visiting nurses to the homes of low-income, first-time mothers to teach parenting and life skills, lost $1 million in funding. "It's a lot of money," says Lauren Baker, the group's spokeswoman. The money was the final year of a three-year pledge -- the first two years had been paid already -- and was to help open more local programs. Currently, visiting nurses serve about 17,000 new mothers in 28 states. The $1 million that was lost could have helped the group serve another 3,111 families, Ms. Baker says. The Bernard L. and Ruth Madoff Foundation itself was a victim of the alleged Ponzi scheme. At the Gift of Life Bone Marrow Foundation, a Boca Raton, Fla.-based nonprofit that manages a bone-marrow registry, about one-third of the funds spent on donor recruitment in recent years came from the Madoff foundation, according to Jay Feinberg, the group's executive director. Since the problems came to light in December, he says, the nonprofit has lost more than $2 million in pledges. Part of the sum was to be used to test 18,000 potential donors. "That represents about 18 bone-marrow transplants each year -- for many years to come -- that might not happen," Mr. Feinberg says. At MIT, the $2 million check that Dr. Bear and his colleagues were expecting from the Picower Foundation in April -- but that will never arrive -- represented the second year of a two-year grant. The money was an "innovation grant" meant to fund adventurous research aimed at developing "blockbuster ideas," Dr. Bear says. Projects to be funded included studies on memory, schizophrenia and language learning. If the scientists can't find alternative funding by the time the Picower money runs out this spring, they may have to halt these projects and lay off researchers. Compounding the problem: It's not a great time for highly trained scientists to look for work, so such layoffs could create a brain drain that could affect the research community for years. "We're back at the starting gate," says Dr. Bear. "It's disheartening." ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
