Page 6, 9th January 2009

9th January 2009
Page 6
Page 6, 9th January 2009 — American Church loses £1.4 million in Madoff fraud

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American Church loses £1.4 million in Madoff fraud


AN AMERICAN diocese and two Catholic schools have lost an estimated $2 million (£1.4 million) which it had entrusted to Bernard Madoff, the Wall Street broker facing criminal charges for fraud.

Bishop Herbert Bevard of St Thomas, in the Archdiocese of Washington, said in a letter to parishes that money invested by the diocese had “gone in what appears to be the largest security fraud in history”.

The bishop said St Mary’s school in Christiansted and St Patrick’s parish in Frederiaksted, both in the Virgin Islands off America’s east coast, also had money invested in the scheme.

He said the losses to the diocesan savings and the schools’ endowment funds were not expected to cause cuts in services. The Associated Press and a Virgin Islands daily newspaper said the diocese estimates total losses at about $2 million.

Bishop Bevard, who has led the diocese only since September, said in the letter that over the years returns on the investment had been good, “but not so good that they raised warning flags. The income supplemented the two schools’ operating budgets, allowing them to keep tuition costs low for the students on St Croix.” He said the diocese researched Madoff before funds were invested decades ago and found him to be “a highly regarded figure on Wall Street and the former chairman of the NASDAQ stock exchange. We were considered ‘lucky’ to be taken on as clients.” Madoff was arrested on December 11 by FBI agents investigating what has been described as a massive Ponzi scheme, a pyramid type of investment fraud where new investors’ funds are paid out to previous investors. The complaint filed in a court in New York quoted Madoff as saying the scheme had lost $50 billion (£34 billion).

Bishop Bevard’s letter said there was no indication that anyone connected with the diocese was guilty of any wrongdoing.

Regular monthly statements from Madoff’s firm had reflected apparently normal stock transactions.

“I do not yet know if we will be able to recover any of this money, but it would seem that such a hope is not wellfounded,” the bishop wrote. He said the diocese and the Redemptorist order that runs St Patrick Parish would seek repayment of the funds.

“We shall recover from this blow to our financial wellbeing,” Bishop Bevard wrote.

Other victims of Madoff’s scheme include some of Britain’s top high street banks.

Santander, a Spanish bank which owns Abbey, Alliance & Leicester and Bradford & Bingley, stands to lose £3.1 billion (£2.1 billion) while HSBC could lose $1 billion (£0.7 billion). Hampshire County Council’s pension fund also risks losing £7.1 million.

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