Madoff Scam Hits Harvard Medical School Grants

Harvard Medical School researchers Jeffrey S. Flier and Barbara B. Kahn were on their way to New York one morning before Christmas when they received e-mails from Barbara Picower—philanthropist and president of one of the nation’s largest educational foundations—saying that their scheduled meeting was off.

That the e-mail came just days after Wall Street trader Bernard L. Madoff had been accused of running a $50 billion Ponzi scheme—the largest in history by a single individual—made Flier and Kahn immediately suspect that something was amiss. The doctors were on their way to meeting to present the results of their diabetes research thus far to Picower, whose foundation supported the work.

“Immediately after the meeting in New York City, we Googled ‘Picower’ and ‘Madoff’ and found that Madoff had served on at least three of the boards of the Picower Foundation,” Kahn said. “That connection looked pretty bad.”
Four days later, the two received an e-mail from Picower informing them that the Florida-based foundation, which has offices on New York’s Park Avenue, had not escaped the fate that has befallen Madoff’s many victims.

“It is with great sadness that I write to inform you that the Picower Foundation has ceased all grant-making, effective immediately, and will close its doors in the coming months,” Picower wrote. “The foundation’s endowment was managed by Bernard L. Madoff, who, as you well know, was arrested on Dec. 11 for securities fraud.”

The foundation reported a $952 million market value of its investment portfolio on its 2007 tax return, but it is unclear exactly how much the foundation lost.
Flier, who is also the dean of the Medical School, was awarded $1.5 million last October to further his work in diabetes and metabolism over the next three years. Kahn, who heads the division of endocrinology, diabetes, and metabolism at Harvard-affiliate Beth Israel Deaconess Medical Center received $1.35 million.

The foundation also gave $50 million in 2002 for brain research at the Picower Institute for Learning and Memory at MIT, then the largest single gift that Harvard’s cross-town rival had received from a foundation.

Only one year into the Picower-sponsored research, Flier said that the projects that he and his colleagues from other institutions embarked on were “more scientifically adventurous than is typical” of work funded with money from federal agencies like the National Institutes of Health. Kahn, for instance, received Picower grants to investigate a potential function of fat cells that she said was too preliminary to gain federal support at the time.
With the funding stream from Picower unexpectedly shut off, it is unclear whether the researchers will be able to continue the innovative work.

Flier said that some of the research may have progressed to a point where it could receive federal funding, but that he and his colleagues—each heading his or her own laboratory—would have to make individual decisions about how to continue their work.

Kahn said that she may dip into some discretionary funds as a short-term solution to continue the research.

“Certainly there will be a slowdown on that research until it can be formally funded from another source,” Kahn said.

Kahn said foundations like the Picower have allowed researchers to pursue innovative ideas as governmental support for scientific research has weakened, something that she said is crucial given the effects of the economic crisis on federal funds. The NIH budget has been flat in recent years, meaning that it has often declined in real terms.

“It really is a travesty,” Kahn said.

And though the impact of the alleged Madoff scheme has touched other Boston-area universities—Tufts reported $20 million in investment losses on Friday—some Harvard affiliates affected by Madoff have been more fortunate.
Carl and Ruth Shapiro, the Boston couple who lost nearly half their foundation’s assets through Madoff’s fund, pledged in a statement last week to honor “all existing commitments.” Their couple’s foundation has supported many initiatives at Harvard-affiliates including the Dana Farber Cancer Institute and Brigham and Women’s Hospital.

Beth Israel received two grants totaling $12 million in recent years to renovate the Shapiro Clinical Center and to fund the teaching hospital’s education programs. The multi-year commitments were to be paid over several years, according to Beth Israel’s chief executive, Paul F. Levy.
Levy said in an e-mail that he was “not sure” how much had been paid to date.

—Staff writer June Q. Wu can be reached at junewu@fas.harvard.edu.