Stateline Story

Corrections Funds Vanish in Madoff Scandal

  • January 28, 2009
  • By John Gramlich

(Updated 11:40 a.m. EST, Jan. 28, 2009)

The $50 billion Ponzi scheme that Wall Street financier Bernard Madoff is accused of orchestrating has stunned many state corrections officials - and not simply because of the magnitude of the alleged crime.

Among the funds lost in the scandal, it has emerged, were millions of dollars earmarked for corrections-related projects in the states, ranging from post-conviction DNA testing for inmates in Texas to housing assistance for ex-convicts in Kansas.

The money belonged to the JEHT Foundation, a New York-based charity that has provided tens of millions of dollars in grants to state and local governments, nonprofit organizations and other groups working for progressive corrections reforms.

The 9-year-old foundation, whose name stands for Justice, Equality, Human dignity and Tolerance, invested heavily with Madoff, and will shut its doors at the end of the month, its chief executive announced in a brief statement posted on the charity's Web site.

Madoff was arrested by federal authorities in December amid allegations he carried out the largest individual financial fraud in history. The former money manager is accused of paying off existing investors with funds collected from new ones, rather than with actual returns.

The foundation's sudden collapse has rocked the criminal justice reform community, from those advocating for looser criminal sentencing laws to those promoting expanded opportunities for inmates who have already served their time.

While the foundation also has emerged as a leading supporter of state elections reforms in recent years, it made its name as one of the few major philanthropies to focus primarily on corrections policy - specifically, seeking ways to reduce the booming U.S. prison population without compromising public safety.

"I'm not sure people will ever appreciate what they did to make our state safer and make the country safer," said Roger Werholtz, secretary of the Kansas Department of Corrections, which received a $4.7 million grant from the foundation in 2007 to help pay for a statewide pilot program that helps former inmates find jobs, transportation and housing.

The program, known as the Kansas Risk Reduction and Reentry Plan , is credited with reducing recidivism in the state by a third and putting off the construction of new prisons.

Werholtz said Kansas is relatively fortunate because it has already received $4 million of the foundation's grant; only the final $700,000 will be lost. But he noted that the foundation had not ruled out providing the state with a future grant. "It felt like the door certainly would be open," he said. "That opportunity is gone now."

In Michigan, the foundation provided about $6 million to help create and continue another statewide anti-recidivism program, the Michigan Prisoner Reentry Initiative , according to Dennis Schrantz, the deputy director of the state corrections department. A $1.6 million grant the foundation approved Dec. 6 - just days before Madoff's arrest - will not be fulfilled, he said.

Even worse than the loss of the foundation's funding, however, Schrantz said, is the loss of a organization that acted as a partner "in the truest sense of the word." The charity distinguished itself by helping to plan and participate in the projects it funded, he said, " as opposed to other foundations where you (simply) send in an application for funding.

In Wisconsin, the foundation made a $573,000 grant to the state court system for research about how to improve its criminal justice administration. But the state will lose $322,000 for the second half of its project, which would have laid the groundwork for a statewide approach to finding alternatives to incarceration, said A. John Voelker, director of the State Courts Office.

The charity also has provided grants to other states that could see grant money disappear, including Colorado and Missouri, which have received hundreds of thousands of dollars to promote their own anti-recidivism efforts.

While some states are likely to feel a burden from the charity's demise, scores of nonprofit organizations and advocacy groups that have partnered with states on criminal justice reforms are certain to be affected.

A review of the JEHT Foundation's portfolio of criminal justice grants , posted on its Web site, highlights the breadth of the charity's financial reach, particularly in the nonprofit and advocacy communities. The foundation has:

  • Provided at least $4.7 million to the Innocence Project , which seeks to identify and free wrongly convicted inmates through DNA evidence. A separate $454,000 grant allowed the Innocence Project and the district attorney's office in Dallas County, Texas, to partner to review some 400 post-conviction cases.
  • Granted more than $3 million to the Vera Institute of Justice to advise states and localities on corrections policies;
  • Granted more than $1 million to the Center for Effective Public Policy , which has helped train state corrections officers across the country, including parole supervisors who monitor recently released inmates;
  • Provided more than $1 million to the Corporation for Supportive Housing , a New York-based nonprofit, to work with city and state officials around the country to identify housing opportunities for ex-offenders and the homeless;
  • Funded corrections-related research at colleges and universities nationwide.

The Pew Charitable Trusts - which funds Stateline.org - also has partnered with the JEHT Foundation, primarily on elections reforms.

Pew's Make Voting Work initiative, which seeks to improve the way elections are administered in the states, has received $2.7 million from the JEHT Foundation; it will lose out on an additional $3.1 million as a result of the foundation's closure.

Meanwhile, Pew's Public Safety Performance Project , which promotes strategies to reduce state prison populations, has worked alongside the JEHT Foundation on prisoner reentry projects in Kansas and Michigan, without receiving funding from the charity.

While the JEHT Foundation's corrections efforts have focused heavily on prison reform, it also has stepped into more explosive policy debates in criminal justice, including the death penalty and criminal sentencing.

The foundation has made grants to the Death Penalty Information Center , which opposes capital punishment, and to efforts in Florida to stop the state's use of lethal injection. On criminal sentencing, it has supported groups including The Sentencing Project and Families Against Mandatory Minimums , which seek relaxed sentencing laws.

Among those who worked with the foundation, its willingness to make criminal justice its top priority was what made it stand out, especially amid a lack of major funding from other philanthropies.

"Our poster children are not puppies and sick children," said Barbara Levine, executive director of the Citizens Alliance on Prisons and Public Spending , a Michigan advocacy group that used a $490,000 JEHT Foundation grant in part to lobby state legislators about ways to strengthen the parole process. But, Levine said, "this is work that has an enormous impact on taxpayers and on public safety."

For state corrections officials and others who worked with the foundation, meanwhile, the timing of the collapse could not be worse. The national recession has pillaged state revenues, and strapped governments are unlikely to be able to provide much support for programs that relied on JEHT Foundation funds - particularly as other needs, from secondary education to social services, compete for appropriators' attention.

The Madoff scandal has "decimated one of the main sources of funding for the reentry community," said Debbie Mukamal, director of the Prisoner Reentry Institute at New York City's John Jay College of Criminal Justice.

See Related Stories:

Strapped states eye prison savings (1/26/2009)

States want Second Chance Act funded (11/24/2008)

Report: States seeking prison solutions (1/24/2008)

States seek alternatives to more prisons (6/18/2007)