University Diaries, I’ve had occasion to say, couldn’t exist without Yeshiva University. Yeshiva is part of a tiny American university elite, a group of schools so arrogant, so dishonest, so mismanaged, so inbred, so simply without a clue, that their unceasing scandals provide a good deal of this blog’s content.

Yeshiva, furthermore, is a religious institution, which makes its very bad behavior that much more astounding. To a man (there aren’t any women in positions of authority there), the Yeshiva representatives UD has experienced appear to her to be pious hypocrites.

Yeshiva’s latest catastrophe was totally expected. Let me quote in its entirety the short notice the Jewish Daily Forward just placed on its website.

Yeshiva University’s credit rating has been downgraded by a major ratings agency amid large and growing deficits, a falling endowment and fears of costly litigation stemming from recent allegations of sexual abuse at its high school.

Moody’s downgraded Y.U.’s debt from A2 to Baa1, putting it below the median credit rating for similar institutions.

The agency says that the litigation prospects of the alleged sexual abuse victims will largely determine if the debt is downgraded further.

Since its peak in 2007 Y.U.’s endowment has cratered, falling 45%, doing handily worse than the stock market. Y.U.’s reliance on hedge funds, in particular, has been extremely damaging. It was also slammed by the financial crisis and damaged by its entanglement with Bernie Madoff’s Ponzi scam.

Meanwhile, the federal lawsuit filed last week by former students at Y.U.’s affiliated high school, alleging administrative negligence in response to abuse they suffered there, is demanding over $380 million in damages. According to Moody’s the attendant publicity may have large consequences for Yeshiva’s fundraising efforts.

As a commenter on this notice writes, “the major damage to the YU bond ratings is not just because of the lawsuit, but because YU has probably lost the confidence of donors.” One Yeshiva donor, Andrew Sole, tried to warn Yeshiva as far back as five years ago. Read his letter calling for the resignation of the entire board of trustees here. The letter, it goes without saying, was ignored.

And note the word “entanglement” up there, relative to Bernard Madoff’s scheme. Madoff, you recall, was a high-ranking, much-venerated trustee of Yeshiva University up to the moment he was taken into custody. Ezra Merkin was also on the board of trustees at that time, working, in consort with Madoff, the sort of financial magic that has become the stuff of legend. Yeshiva tried to make itself out to be a victim of Madoff’s, but it was an enabler, it made plenty of money off of him while the making was good, and it looked the other way when anyone could see that Madoff’s returns were totally impossible.

“Moral bankruptcy,” Algemeiner newspaper said of Yeshiva University earlier this year. That moral bankruptcy has so disgusted donors that it threatens to become financial bankruptcy.

… is currently being sued for about three times what it lost by investing in its much-honored ex-trustee Bernard Madoff’s fund.

It’s not easy to keep up with the financial and sexual scandals at Yeshiva University, so don’t try. UD will do it for you.

This bizarre institution is one of the main locations keeping this blog in business. It specializes in trustees like Bernard Madoff and Ezra Merkin, infantilizing and sexist rules for its students, conflict of interest among its post-Madoff/Merkin leaders, and decades worth of hushed-up sex scandals. And it’s all presided over by a very highly paid president who responds to most things with denial or silence.

Yeshiva is the very model of a corrupt university, and it should surprise no one that today its chancellor has had to resign in disgrace, having ordered the hushing up of extensive sexual abuse of students.

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The larger context:

In recent years traditional law prohibiting cooperation with oppressive governments was invoked by ultra Orthodox groups to forbid reporting sexual abusers to the civil authorities (as required by American law). Modern Orthodoxy followed the haredim in denying the legitimacy of non-Orthodox movements. Even at Yeshiva University, a highly respected rosh yeshiva and decisor, Rav Hershel Schachter (seen as continuing Rabbi Joseph B. Soloveichik’s halachic teaching in the rabbinical seminary), said publicly that the prime minister of Israel should be assassinated if he dared to give up some section of Jerusalem for the sake of a peace treaty. (He later apologized for the comment.) Recently, Rabbi Schachter was recorded warning against reporting sexual abusers to the authorities (lest they be imprisoned and exposed to harm from anti-Semites).

You can’t make this shit up.

A top rabbinic dean of Yeshiva University has warned rabbis about the dangers of reporting child sex abuse allegations to the police because it could result in a Jew being jailed with a black inmate, or as he put it, “a schvartze,” who might want to kill him.

… Yeshiva University has been embroiled in a mounting scandal following a series of reports in the Forward since December about abuse allegations against two former staff members at Yeshiva University’s high school for boys in Manhattan.

“[The] warden in the prison can kill you. They can put you in a cell together with a shvartze,” [Hershel Schachter said].”

— is once again on the receiving end of a spanking delivered by a Jewish newspaper. “Moral bankruptcy… exists at the institution… [Yeshiva] must immediately undertake an independent investigation which examines moral issues at the institution.”

The author reviews some – not all – of the scandals emanating from Yeshiva just over the last few years. He wonders why Yeshiva covers them up, denies them… UD has asked why Yeshiva refuses to respond to angry public letters from alumni, fails to change its incestuous form of governance…

Far from being willing to examine its structural corruption – a corruption which will continue to generate scandals – Yeshiva shows every sign of believing itself to be morally superior.

How long can a large complex organization remain delusional?

UD gives it another five years before it will be put in some form of receivership.

… set the pace here** – and as for bohemoth endowment losses based on interest-rate swaps, no one will ever outpace Harvard’s Larry Summers .

But Dartmouth is certainly doing its bit, with “the investment of $550 million in interest-rate swaps with now-defunct Lehman Brothers that [a faculty and alumni group] says are now worth $250 million.”

A lot of people at Dartmouth are unhappy about university trustees who are also money managers, and they’ve written a letter about it to the governor and attorney general of New Hampshire.

The letter calls for an investigation into money managers who have invested the Hanover, N.H.-based college’s assets while members of the investment committee… The letter accuses the money managers of “enriching themselves” through private equity, venture capital and hedge fund investments made by the endowment.

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In an official letter distributed to alumni, students, faculty, and administration, Yeshiva University President Richard Joel stated that Merkin, who was Chairman of the University Investment Committee, managing its endowment of almost $1.8 billion (as of about 2 years ago), had invested about $112 million in his own hedge fund, Ascot Partners, which was almost solely invested with the [Bernard] Madoff fund. In actuality, it was an initial investment of $14 million that became falsely inflated to $112 million over time. As such, Merkin collected an initial fee of one percent and later 1.5 percent, standard for all of Yeshiva’s money managers on whose Board of Trustees he sat. He collected over $2 million in fees, almost $1 million for Ascot alone. In fourteen years, the fund grew 9 percent a year, even after subtracting losses for Madoff and expenses. He made at least $10 million from Yeshiva over his tenure. Although Joel implicitly acknowledged that the university’s charter lacked a conflict of interest restriction on the management of school funds, Merkin resigned from all of his positions at Yeshiva that day.

… UD figures universities with a penchant for sketchy money guys (Yeshiva had Ezra Merkin too) have instituted Trustee Early Warning systems so they can dump the guys before the federal government moves in for the kill.

Brown University’s TEW system must be going

awhooogawhoooga

right now.

… named in honor of erstwhile Yeshiva trustee Ira Rennert, intends to be, says its webpage, ‘a gateway to the “real world” of entrepreneurial business.’

It doesn’t get any realer than Rennert’s latest venture: A private museum on his Sagaponack estate (already the largest residence in the country).

Rennert has run into a problem, however:

[Rennert] has been instructed by [town] officials to cease construction of a museum on the 63-acre property. A village building instructor discovered Rennert’s plan to build when he noticed a concrete pumper truck on the property. “There has been no attempt to file a permit for any… type of structure,” the village official told the Post.

And why not? You’d think the reporter for the Jewish Chronicle would at least think to ask the question. Everyone else is getting clawback-sued, and they didn’t – like Yeshiva – have the Madoff/Merkin Partnership on their board of trustees.

… this book.

Or, I mean, they should. Their university, after all, was dumb or corrupt enough to make Bernard Madoff, and his comrade in crime, Ezra Merkin, trustees of the school. The Markopolos book will help Yeshiva’s students understand how Madoff was able to turn their university into a laughingstock. It will help them understand how to avoid having that happen to their university in the future.

Unfortunately, far from dealing openly and honestly with its embroilment in Madoff, Yeshiva airbrushed him and Merkin from its history, hoping, I suppose, that no one would notice the positions of trust and authority these men held at that school for years.

It’s a shameful story, as Yeshiva alumni with integrity, like Andrew Sole, know.

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Here are many UD posts about Yeshiva University and Bernard Madoff.

From Corporate Board Member:

Are the board members of nonprofits that put money into the vaporized funds of Bernard Madoff legally vulnerable for the losses? Possibly. Some individual donors may go after the trustees if charities they supported invested that money in a Madoff fund. So might the attorneys general of states where the nonprofits are based.

… Directors of nonprofits are legally shielded from monetary liability unless they engage in criminal acts or are grossly negligent or reckless. “You’re not liable for bad judgment; you’re not liable for mistakes; you’re not liable if things just don’t go well,” says Jack B. Siegel, head of Charity Governance Consulting LLC, a Chicago outfit that advises nonprofits on governance issues. Still, the dollar amount that Madoff made off with has invited new consideration of what constitutes gross negligence or recklessness. “My personal view is that this is an area of the law that’s going to be tested heavily as you see more and more nonprofits suffer significant losses in their investment portfolios,” says Keith Freid, a senior vice president with American International Group, a leading underwriter of directors’ and officers’ liability insurance for nonprofit organizations. Donors who see that universities invested their donations badly rather than using the money in the way they intended, for instance, might sue the college trustees for legal redress.

… Directors of nonprofits who have business relationships with the outfits—or “wear more than one hat,” as Steven Scholes, a partner with the law firm of McDermott Will & Emery, puts it—face the greatest risk of being accused of breaching a fiduciary duty. Both Madoff and hedge fund manager J. Ezra Merkin, for example, were members of the board of trustees of Yeshiva University in New York City, which lost a $14.5 million investment with Madoff, along with some $95.5 million in phantom profits. Merkin was chairman of Yeshiva’s investment committee and managed a portion of the school’s money, apparently by simply turning it over to Madoff…

… Yeshiva University, which did not respond to requests for comment, may… be at risk for clawbacks. The university’s initial investment of $14.5 million with Ezra Merkin’s Ascot Fund, which was invested indirectly with Madoff, had reached a purported value of $110 million by November 2008. The university has not responded to inquires about whether it withdrew an amount greater than its initial investment

… While both Yeshiva University and Hadassah have substantial endowments that far exceed any amount they could be asked to return by the Madoff trustee, neither would identify steps the organizations had taken to reassure donors that new donations would not be used to pay off future clawback requests…

Background here.

Tell it to Richard Joel, the president of your university.

He still hasn’t faced the fact that Bernard Madoff and Ezra Merkin held among the highest positions of authority at your university for years, and that no one ever questioned that. Only when criminal investigations proceeded against these men did your university respond, and it responded by erasing them from its web pages and pretending they didn’t exist.

Nor has Joel faced the fact that a number of the remaining Yeshiva trustees — all male, of course, wouldn’t want to pollute things with a woman (see the post directly below this one)– at your university seem still to be involved in financial conflicts of interest with one another.

Really, Professor Asch. Begin at home. Start by looking around you.

An article in the Jewish Daily Forward notes many Jewish executives who’ve taken pay cuts in harsh economic times.

But not Joel. He’s rewarding himself for having kept both Bernard Madoff and Ezra Merkin in positions of power at his university until they were hauled off by the authorities.

Gross negligence of the sort that permanently soils a university doesn’t come cheap.

… Roger Williams…

All of these universities are models of insider dealing, their boards of trustees bursting with local merchants making money off of their position.

Of course, no one does it like Jersey.