Madoff Scheme Deals New Hit to FSU Jews

The Ponzi scheme perpetrated by Bernard Madoff is the latest in a string of financial blows to Jewish aid programs in the former Soviet Union, wiping out a major foundation that was the primary funder of Jewish higher education in Russia.

The Chais Family Foundation, a $178 million philanthropy forced to close after investing all its money in Madoff’s fraudulent fund, gave away more than $12 million per year to Jewish causes. About $2.5 million of that focused on the former Soviet Union, where the foundation funded at least 12 cultural and educational programs.

Even before the foundation’s collapse, several organizations — including the Jewish Agency for Israel, Chabad-Lubavitch and the American Jewish Joint Distribution Committee — had announced in recent months that they would be reducing support programming in the region, fueling doubt and fear among Russian Jewish communal leaders.

“Many of my colleagues and others think that 2009 could be the hardest year for the Jewish community of the former Soviet Union,” Mikhail Chlenov, the general secretary of the Euro-Asian Jewish Congress, who also sits on the board of a program that was funded by Chais, told JTA. “Education is the first sphere of work that is already suffering, but social welfare programs could be next.”

Re-creating a Jewish community in the former Soviet Union following the collapse of communism has been an intense project undertaken by the broader Jewish community, drawing hundreds of millions of dollars in recent years from the Jewish Agency, Chabad and the JDC. The Chais Foundation’s annual $2.5 million contribution was the driving force behind creating a sustainable and self-sufficient piece of infrastructure in the region — a higher education system equipped to train Jewish professionals and teachers.

Chais funded the Center for Biblical and Jewish Studies in St. Petersburg, the Jewish studies department at Moscow State University and the Chais Center for Jewish Studies in Russia, which it founded. The Chais Center brings professors from the Hebrew University in Jerusalem to the region to create accredited programs. Hundreds of Jewish professionals have been trained through the center.

In addition, the foundation was a major funder of the Open University of Israel, which transmits online curricula to the former Soviet Union.

Those programs are now in danger.

Arkady Kovelman, the head of the Jewish studies program at Moscow State, said his program could definitely expect to lose some opportunities for grant money.

The Moscow program relies on academics from the Chais Center at Hebrew University who conduct courses in Hebrew and Russian. Kovelman says it is too early to tell if the program will continue or what the loss of Chais money will do to his program.

“I am hoping that it will not have an immediate impact,” Kovelman said. “They are telling us that everything is more or less OK.”

Even if programs in Russia weather the loss of Chais, the foundation’s closing is only the latest in a half-year of calamity for programs in the region pinched by the downturn in the global economy.

The Heftziba system — a network of 41 state-sponsored schools that offer Jewish curricula, which is is administered by the Jewish Agency — is in peril. The system, which was set up by Russian municipalities in conjunction with the Israeli Ministry of Education immediately after the fall of communism, has seen its finances gutted by $40.5 million in cuts to the Jewish Agency’s overall budget.

The agency, which pays to have some 11,000 students bused to the schools, is reducing its funding for the system from $12.7 million in 2008 to just over $5 million for 2009, with the hope that local philanthropists will help pick up the slack.

Alan Hoffmann, the director of the Jewish Agency’s education department, estimates that the Heftziba budget now has a $5 million hole.

“It could really be a mortal blow” to the school system, he told JTA Sunday.

The Jewish Agency already had been forced to adjust after Russian-Israeli philanthropist Arcadi Gaydamak pledged $50 million in 2006 to help establish programming in the former Soviet Union, but then froze the gift after giving only $10 million.

The two other Jewish-run school networks in the region — the secular ORT system and the Orthodox Shma Yisrael — have suffered from cutbacks undertaken by the Jewish Agency. Shma Yisrael has lost $200,000 in funding and the ORT schools are struggling through a budget cut of $1.2 million in recent months, according to ORT officials, JTA reported in November.

In the past three months, the largest Jewish educational network in the region, Chabad’s Or Avner system, has been forced to make significant cutbacks as its main benefactor, Lev Leviev, withdrew a substantial portion of his funding in the face of the financial crisis.

On top of these cuts, the Joint Distribution Committee, which provides social services to the frail and elderly in the region, is cutting its $100 million-plus 2009 budget in the region by about $5 million.

“You put those factors together in one six-month period from June 2008 until January of 2009 and you have some serious dynamite there for some institutions,” Hoffmann said. “I think it is a serious body blow to Jewish life in the FSU.”

The survival of Jewish programming, he said, “will depend on how quickly the world economy improves and the philanthropy world improves.”

U.S. Jewish leaders and Israeli officials have long hoped that the creation of new Jewish wealth in the region would lead ultimately to the formation of a home-grown Jewish philanthropy class that one day could pick up the mantle. But that had been slow in coming, even before the financial crisis and the drop in the price of oil wiped out huge swaths of Jewish wealth in the region.

For a system still largely dependant on outside money, the disappearance of Chais could really hurt.

Outside of higher education, the foundation funneled tens of millions of dollars into several programs aimed at promoting Jewish identity among youth.

Hillel in the former Soviet Union relied on the Chais Foundation for 23 percent of its budget and the ripples of the Madoff scheme have forced its operations “to the edge,” said Hillel FSU director Osik Akselrud.

“Now I don’t know how to find the exit from this situation because we have to cut programs and reduce salaries,” he told JTA at a Hillel staff conference in Baltimore. “I just don’t know what to do.”

Akselrud, like others whose organizations received funding from Chais, received a letter last week saying that he could no longer expect any support from the now-defunct foundation. The letter, which arrived just as he was to fly to the United States, set off a frenzy of meetings to determine how Hillel FSU could stay afloat.

Akselrud is also the chairman for Limmud FSU, an increasingly popular series of educational conferences that began last year. Limmud has plans for two conferences next year, in Belarus and Ukraine, and the Chais Foundation was expected to be a major underwriter of both.

The Sefer Center, an umbrella group that holds conferences and brings together students in Jewish studies from across the region, had relied on the Chais Foundation for 50 percent of its budget, said its director, Victoria Mochalova. She also learned in a terse message last week that her organization would need to look elsewhere for support.

In the face of the bad news, Mochalova predicted that the older generation of Jewish community activists in the former Soviet Union who had built the network from scratch would find a way to get through a decrease in funding.

“We never had a great situation and we have learned how to live in a hard situation,” she said. “For the young it is a big blow to take.”

In the United States, at least one Jewish organizational leader is holding out hope.

“I am not going to predict the future, but today if you go to our JCCs or to Yesod in St. Petersburg, they are full and active and Jewish life is vibrant,” said Steven Schwager, the CEO of the JDC. “They are critical links in building a Jewish community, and some way or other they will find a solution to continue them.”