Learning from the Madoff Scandal—Dealing with Unfulfilled Charitable Pledges
(Jan. 5, 2009) As has widely been reported, the Bernard Madoff scandal has extended well-beyond the corporate sector and has hit the charitable sector quite hard. It is estimated that philanthropic organizations have lost $2.5 billion dollars so far as a result of Madoff’s activities.
Foundations, in particular, have suffered in the wake of this scandal, and many no longer have the financial means to support causes and organizations that rely on their charitable dollars. The domino effect throughout the charitable sector has been swift and powerful with reports of charities already closing their doors.
This unfortunate situation (as well as the dismal economic climate) gives rise to a broader, yet simpler question—what happens when a charitable pledge to a philanthropic organization goes unfulfilled?
In the Attachments section below is a brief document created by AFP's legal counsel, Perlman & Perlman LLP, summarizing the legal issues surrounding unfulfilled charitable pledges. Among other things, the document describes a charitable pledge’s enforceability, a charity’s potential recourses and factors that should be weighed when an organization is deciding whether or not to enforce a pledge.
AFP thanks Perlman & Perlman LLP for developing this brief. For media coverage of the Bernard Madoff scandal please click here, where the AFP Resource Center has housed several articles on this topic.