Tufts Loses $20 Million in Madoff “Ponzi Scheme”
Tufts Says Investment Made with “Due Diligence”
Story Updated 9:39PM, Sunday, December 21, 2008
– Allison Goldsberry
Tufts University is the latest victim to fall prey to an enormous so-called Ponzi scheme orchestrated by disgraced Wall Street financier Bernard Madoff.
According to an email sent out Friday by Tufts President Lawrence Bacow, the school lost $20 million.
“I am sorry to report that Tufts is one of a growing number of victims of the crimes allegedly committed by Bernard Madoff…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,” wrote Bacow in the email.
Bacow said Tufts’ Investment Committee in 2005 authorized an investment with Ascot Partners, who invested the entire sum with Madoff Securities.
According to the Tufts Daily, the school knew the investment would be with a hedge fund linked to Madoff, whose schemes had yet to be detected at the time. A university spokeswoman said Tufts performed its usual “due diligence” in making the investment.
“Before making this investment, the university followed all of its usual due diligence procedures, including a full legal review and full review of the fund’s investment strategy, and an analysis of the risks and strengths of the investment, including audited returns. In light of this analysis, this investment seemed to be a prudent one,” university spokeswoman Kim Thurler wrote in an email to the Daily.
Bacow said the university has written off the loss, which represents 2% of its endowment. He said the loss does not significantly affect the school’s operations and Tufts will attempt to recoup as much of the investment as possible. The school also plans to cooperate fully with investigators.
Thurler told the Daily the school is exploring all of its options, including legal action.
Madoff has been arrested and charged with securities fraud for allegedly running a Ponzi scheme that lost billions of investors’ dollars. Ponzi schemes, named for the man who launched the first one in the 1920’s, are illegal pyramid schemes that operate by paying off earlier investors with money from new ones until the entire thing collapses.