The victims of Bernard Madoff's alleged Ponzi scheme continue to pile up at the base of the cliff, a sad tangle of duped philanthropic organizations, banks, hedge funds and individuals. The reverberation, as well, continues to travel ever outward.
Madoff was arrested in early December and accused of fraudulent investments -- he used new investors' money to pay earlier investors -- leading to $50 billion in losses. On Dec. 17, one of the many entities that had handed over its funds to the trusted Madoff to manage, the nonprofit Fair Food Foundation -- which helps urban communities develop sustainable food systems -- sent a letter to its friends and supporters. The letter said it was ceasing operation as a grant-making foundation because its donations had vanished.
One recipient of the letter was the Arcata-based Mainstream Media Project, said Harmony Groves, the program coordinator for MMP's Guest on Call program, which provides a news and analysis service to radio markets nationwide. MMP also creates World of Possibilities, an internationally syndicated hour-long public-affairs radio show -- you may have heard it locally on public radio.
Groves said MMP had been planning to seek funds this year from the Fair Food Foundation. On top of that, the MMP was also about to seek funds from the JEHT Foundation, which works on human rights issues -- among other things -- JEHT also announced in early December that it was shutting down after its two main donors lost their investments with Madoff.
"We have gone to JEHT before; we were going to go to JEHT again to seek funding," Groves said. "We were surprised when they closed -- they're a very upstanding foundation. They basically were bankrupt."
Groves said it remains to be seen if any of their current donors end up as Madoff victims. For now, she said, MMP will do what everyone else has to do -- look to other sources for funding.
"I don't think it will shut down our organization, but it definitely was interesting to see that we have less options because of the Madoff scandal," she said. "I feel confident that we have funding through the next year. But with the economic crisis, coupled with the economic scandal, it may be very difficult for nonprofits nationwide to keep doing the good work they're doing."
Scott Greacen, executive director of the Environmental Protection Information Center, said as far as he knows, none of EPIC's funders have been hurt directly by Madoff -- although it's too early to know the full impact, he said. But even without that particular scandal, he said, the nonprofit world was already suffering. Note the shrinkage in staff and narrowed focus of the Northcoast Environmental Center, he said, which doesn't rely heavily on foundation funding anyway.
"What we have been affected by is the larger market condition -- the scandal writ large, as it were," Greacen said.
He said that by late 2008 it was clear that some foundations' budgets were already shrinking, which indicated that 2009 would likely find foundations even tighter-fisted.
"It's already been very competitive and, frankly, foundation budgets haven't increased anything like as much as the need for foundation funding has gone up during the Bush administration," he said. "And, in the 2006-8 period, we saw an awful lot of the discretionary funds available to progressive types going into the election, and for good reason, but there's very little reason to think at this point that a lot of that might come back into the nonprofit world. It's just not there."
Greacen said EPIC will cope by continuing what it's always been good at: reaching out to more people. That worked well, he said, during the group's end-of-the-year appeal for donations -- responses were up. However, the contribution amounts were, on average, lower. But that could be a good strategy.
"Frankly, I think the hope that we've got is probably not that different from a lot of groups -- that we can find a way to reach more people and stay alive," he said. "Kind of the Obama solution. More smaller donations make up for fewer big donations. Traditionally, for a lot for nonprofits, it's easier to raise a budget by going to a few good donors or foundations -- the risk of that strategy is amplified in a bad market, obviously."
Still, smaller groups may have a glum future, nonetheless. Big groups like the Sierra Club, or the Natural Resources Defense Council, can shed some staff if they have to, Greacen said. Small groups like EPIC have so few employees, and such a high work load, that's not an option. Some may merge with other groups or, as Greacen puts it, simply "wink out."
"It was already hard times for little groups, and I think a lot of the smaller nonprofits are going to be in real trouble in the near term," Greacen said.