Ailing agencies in former Soviet Union take a Madoff hit

moscow | The Ponzi scheme allegedly 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 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 for 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,” said 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. “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 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 Joint Distribution Committee. The Chais Foundation’s annual $2.5 million contribution was the driving force behind creating a higher education system equipped to train Jewish professionals and teachers.

The Chais Center brings professors from 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.

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 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 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 have suffered from cutbacks undertaken by the Jewish Agency. The Orthodox Shma Yisrael has lost $200,000 in funding, and the secular ORT system is struggling through a budget cut of $1.2 million in recent months, according to ORT officials.

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 JDC, 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,” said Alan Hoffmann, the director of the Jewish Agency’s education department. “I think it is a serious body blow to Jewish life in the [former Soviet Union].”

American 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 homegrown 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 dependent on outside money, the disappearance of Chais could really hurt.

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

Akselrud received a letter recently saying that he could no longer expect any support from the now-defunct foundation, as did the Sefer Center, an umbrella group that holds conferences and brings together students in Jewish studies from across the region. The Sefer Center had relied on the Chais Foundation for 50 percent of its budget, said its director, Victoria Mochalova.

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.”