Friday, January 2, 2009

Madoff scandal hits Boston-area research labs, life science foundations

By Marc Songini

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Fallout from the collapse of fraudulent money man Bernard Madoff’s financial empire is taking a toll in Boston’s research community, with more than $2 million in annual foundation funds being yanked from cutting-edge medical researchers, leaving them scrambling for different cash sources.

Madoff was arrested last month in a highly publicized $50 billion fraud. One of his major investors was the Boston-based Carl and Ruth Shapiro Family Foundation, which funded medical research and care. Another was the 20-year-old Palm Beach, Fla.-based Picower Foundation. The organization was funding innovative diabetes studies for an informal research consortium based in Boston. The abrupt collapse of the foundation is slamming the consortium’s members.

“I was shocked and disappointed,” said Bruce Spiegelman, a professor of the Boston-based Dana-Farber Cancer Institute and Harvard Medical School, and one of the affected researchers. “It means, for sure, that there is research not going to be done that would otherwise have been done.” He wonders what he’ll do to make up the gap for his own lab. “This is the first time in my career money was committed and is not coming through,” he said. “It’s a terrible thing.”

The Picower Foundation had been awarding roughly $2.3 million a year to the five-member consortium of local and regional labs, led by Jeffrey Flier, dean of Harvard’s Faculty of Medicine. The cash, split five ways, or about $450,000 each, was meant to support unique projects not typically bankrolled by grants from the National Institutes of Health.

After Madoff’s arrest on Dec. 11, foundation president Barbara Picower issued an e-mail to consortium members announcing that the organization had used him to manage its money, which was now gone. Subsequently, the foundation “has ceased all grant making, effective immediately, and will close its doors in the coming months.”

The consortium members have received the first- and second-year checks, but the third year and any subsequent funding opportunities from the Picower foundation was suddenly gone. It was generally understood the funding would continue as long as the researchers were getting results, said members.

There are other potential fund sources, said Spiegelman, but this means a “substantial shortfall” to his work in the near term — either he raises more money, or he does less research. 

 “It could potentially slow down progress on certain innovative research projects,” noted diabetes researcher Barbara Kahn, chief of endocrinology, diabetes and metabolism, at Beth Israel Deaconess Medical Center and a professor at Harvard Medical School. “There are other foundations with this kind of funding, but some are affected by Madoff and some are affected by the economy,” she noted.

The NIH isn’t “the most conducive avenue for really sparking innovation,” either, Kahn added. The Picowers interacted very closely with the researchers themselves, she said, describing the relationship as “a very special element.”

Other Picower Foundation grants targeted locally may be lost, as well. In 2002 the Picower Foundation funded the MIT Picower Institute for Learning and Memory with $50 million. Last May, it awarded the Picower Institute another $4 million to launch the Picower Institute Innovation Fund to support cutting edge or high-risk neuroscience research. A spokeswoman for MIT said as of right now, it appeared the $4 million was “in jeopardy.” She noted, however, the initial $50 million that launched the institute had been paid in full.

The Picower Foundation didn’t return requests for interviews.

It’s not only the monetary loss that the recipients of the Picower funds find distressing. “The whole thing is so upsetting,” said Spiegelman. “This guy fleeced a philanthropic foundation funding biomedical research. This is serious bottom-feeding.”