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The case against Bernard Madoff appears relatively straightforward. But the sheer magnitude of losses means that no individual claimant is likely to recover more than a few pennies on the dollar. As a result, hoping to recover a bit more of their investments, a number of affected parties have shifted attention from Madoff to managers of the so-called "feeder funds" that put the money into Madoff's hands. The current debate is whether these fund managers knew what Madoff was up to and, if not, whether they should be liable for failing to uncover his scheme.
The Orthodox world, in particular, was hit hard as a result of the actions of one fund manager, Ezra Merkin, a former Yeshiva University trustee and pillar of the Modern Orthodox community, who funneled tens of millions of charitable dollars into Madoff's firm. As a result, Y.U. and some of the country's leading Modern Orthodox day schools and synagogues lost millions of dollars.
Like other claimants, these institutions are unlikely to recoup the bulk of their investments. There is, however, an avenue by which they can achieve a measure of justice and, more importantly, initiate a communal discussion to avert future disasters of this sort. They should consider calling Merkin, and others involved in the scandal, before a beit din, a rabbinic court.
At first blush, adjudication pursuant to Jewish law seems like a poor choice for addressing the issues raised by the Madoff scandal. It has been at least 300 years since halachists have been deeply engaged in application of commercial law. The system lacks the terminology for hedge funds, arbitrage pricing, options and derivatives, and most of the operative concepts of 21st-century finance. Moreover, contemporary expositors of Jewish law have sometimes displayed indifference to the realities and necessities of modern commercial life. Too many rulings employ formalistic readings of classical texts instead of engaging in a reflective analysis of how traditional principles apply to shifting commercial configurations. The lack of experience in commercial law also means that the analogies to Talmudic and medieval precedents will invariably be somewhat distant. For example, a Talmudic passage on the proper care for grains of wheat is a far cry from an articulation of the duty of care required from a...