Economy, Madoff scam hit Harlem Children’s Zone

By A. James Memmott

January 27, 2009 at 11:56am

A bad year for Wall Street and a bad year for Bernard L. Madoff is turning out to be a bad year for the Harlem Children’s Zone, a successful New York City education reform project.

The Wall Street Journal reported that the Children’s Zone, an ambitious effort led by Geoffrey Canada, an educator and social worker, has been hit by a double whammy.

Before the recession arrived, 20 to 30 percent of the nonprofit’s annual budget of $68 million had come from Wall Street, the Journal reported.

But as investment banks have closed, as CEOs have lost their jobs, the donations to the Children’s Zone have slowed.

The drop in that funding has forced Canada to cut staff and put on hold plans to help more children.

To add to its problems, the Children’s Zone has lost $2.7 million of its endowment because of a Madoff-linked investment.

The money had been invested with J. Ezra Merkin of the Ariel Fund Ltd. However, Merkin had then invested it with Madoff, the financial adviser now under arrest for running a multi-million-dollar Ponzi scheme.

“When I found out part of our endowment was invested with Madoff, you start thinking, ‘Jesus, is anything safe?’” Canada told the Journal.

In addition, one of Canada’s other funders, the Picower Foundation, has closed because Madoff managed its endowment. The foundation had been giving the Children’s Zone $1 million a year, the Journal reported.

The loss in funding comes at a time when the Children’s Zone was achieving a national reputation as a project that worked where other urban educational projects had failed.

The effort focuses on 97 blocks in central Harlem and last year helped 10,883 young people.

Under Canada’s leadership, staff start their work with parents before a child is born. The project then helps the child until he or she graduates from high school. Math and reading levels have improved significantly, and other indicators are on the rise.

A graduate of Bowdoin College with a master’s degree in education from Harvard University, Canada, 57, joined the truancy program that evolved into the Children’s Zone in 1983. He became its president and CEO in 1990.

Within a few years, Canada expanded the program’s mission, and he significantly increased the program’s fund-raising and budget.

He was assisted in this by Stanley F. Druckenmiller, the project’s board chairman. A hedge-fund billionaire and George Soros protege, Druckenmiller has given more than $100 million to the project, according to Canada.

Druckenmiller, also a Bowdoin graduate, helped Canada tap Wall Street leaders for donations.

According to the Journal, Soros chipped in, as did John Mack, the CEO of Morgan Stanley. Richard S. Fuld Jr., the one-time head of the former Lehman Brothers Holdings Inc. and Maurice “Hank” Greenberg, the former head of American International Group Inc., also contributed.

The board of the Children’s Zone is also a kind of Wall Street Who’s Who and/or Who Was Who.

In addition to Druckenmiller, it includes Zoe Cruz, a former co-president of Morgan Stanley, and Joseph M. Gregory, former president and chief operating officer of Lehman Brothers.

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