Health Care Organizations Ensnared in Giant Ponzi Scheme

It seems that news about concentration and abuse of power in health care, about ill-informed, ill-advised, conflicted, self-interested, even corrupt management of health care organizations, has almost been swamped by stories of even worse concentration and abuse of power elsewhere, from mysterious hedge funds, to US state government, to countries on multiple continents. And yet, health care and health care organizations seem to have been swept up into these larger fiascos. We commented briefly earlier on one health care connection to the allegations that the Governor of Illinois tried to auction off an appointment to a US Senate seat.

Now it turns out that the spectacular collapse of a financial organization that really was a giant Ponzi scheme also has ensnared many health care organizations.

Reporting on the collapse of Bernard L Madoff Investment Securities is everywhere. (See this initial story, for example, in the New York Times.) Here is a list of the health care organizations that are involved.

Madoff was on the Board of Trustees of Yeshiva University, and its Treasurer. Yeshiva University is the parent university of the Albert Einstein College of Medicine. (The Board of Trustees web-site has had its content removed, but the cached version listed Madoff. This role was also reported by Bloomberg.)

Another member of the Yeshiva University board, J Ezra Merkin, ran a hedge fund, "which then put almost all of its $1.8 billion in capital in Madoff's hands." (per AP)

Yeshiva University itself was reported to have "lost tens of millions of dollars, if not more." (per New York Magazine.)

The Carl and Ruth Shapiro family charity, formerly a major donor to Boston health care institutions such as the Beth Israel Deaconess Medical Center, Boston Medical Center, and the Dana/Farber Brigham and Womens' Cancer Center, lost about half its assets, which had been invested with Madoff (per the Boston Globe).

Robert Jaffe, who "operated a company whose sole purpose was to market Madoff investment products," is "an overseer of Beth Israel Deaconess Medical Center." (Also per the Globe.)

The North Shore - Long Island Jewish Health System was "believed to have lost millions" (per AP).

So besides being a stunning example of financial mismanagement and fraud, this case is a reminder of how prominent health care institutions got caught up in the contemporary business culture, which in turn was dominated by the self-proclaimed Masters of the Universe who lead the big financial institutions. But after the Madoff case, as one writer on TheStreet.com put it, "does anyone still doubt that the global banking and investing industry is full of greedy idiots?"

ADDENDUM (16 December, 2008) - see multiple posts about the relationships among Yeshiva University and Madoff on the University Diaries blog.