Franklin, Andrews, Kramer & Edelstein

[scion]

Geoffrey Canada gets a front-row seat to another financial scandal

By A. James Memmott
November 3, 2009 at 8:18am
http://news.muckety.com/2009/11/03/geoffrey-canada-tangled-up-in-two-financial-scandals/21591

Geoffrey Canada, the CEO of the not-for-profit Harlem Children's Zone, may be wondering about the cost of connections.

Canada found himself helping make bail last month for a Children's Zone board member, Raj Rajaratnam, the hedge fund CEO.

Thus Canada was swept into another high-profile financial case, just as he earlier this year found his organization on the Madoff victims' list.

Rajaratnam, the billionaire founder of Galleon Group Inc., was accused along with five others of making more than $20 million in insider trades. His bail was set at $100 million.

As The New York Times noted Monday, helping with the bail exposed Canada to financial ruin should Rajaratnam leave town.

Nonetheless, Canada stressed that he believed in Rajaratnam, who has denied the charges against him.

"I have not had a moment's doubt, knowing Raj and his character," Canada told the Times. "I'm not worried about it at all."

The Times does suggest that the insider case against Rajaratnum is not a slam dunk.

"The credibility of a crucial witness against him has already been seared," the paper reported, "and Mr. Rajaratnam's fund actually lost money on the trades outlined in the complaint against him."

On Oct. 21, Rajaratnam informed "employees, clients and friends," that he would wind down the funds.

At that time, the funds had $3.7 billion in assets and had received requests for $1.3 billion in redemptions. Rajaratnam said that the money is there to pay investors.

An IRS 990 report for 2007 filed by the Children's Zone showed $4.16 million invested with Galleon.

Regardless of any damage from the Galleon investments, the Children's Fund was already hurt by its connections to Bernard Madoff, the money manager convicted this year of running a huge Ponzi scheme.

According to The Wall Street Journal, The Children's Zone lost $2.7 million invested in the Ariel Fund Ltd. The fund was run by J. Ezra Merkin, who invested its money with Madoff.

Future Children's Zone millions also disappeared in another Madoff investment.

The Picower Foundation had been giving the group $1 million a year. However, all of its money was managed and lost by Madoff. Consequently, the foundation closed its doors.

Jeffry Picower, co-founder of the foundation with his wife, Barbara, was found dead of a heart attack in a swimming pool last month.

http://news.muckety.com/2009/11/03/geoffrey-canada-tangled-up-in-two-financial-scandals/21591