In a Connecticut town, local officials scrambled to get a handle on damage to pension funds held for its police officers and firefighters. A Massachusetts charity announced it was shutting down. In New York, a distinguished economist feared he had lost his $2.2 million nestegg.

Damage continued to ripple from the massive fraud allegedly engineered by storied Wall Street money manager Bernard Madoff Monday, even as investigators worked to unravel the scheme’s working and its reach.

Impact spreads

While details remained sketchy, the sudden collapse of Madoff’s firm began revealing an impact far beyond the world of the ultra-wealthy and well-connected who were the mainstay of his client base. And the firm’s extensive dealings with charitable foundations and other groups suggests the fraud may take a toll in unexpected places.

“It’s devastating to people and communities and lives,” said Deborah Coltin, executive director of the Robert I. Lappin Charitable Foundation, a Salem, Mass., organization that sponsors Jewish educational program and is being forced to close it’s doors.

The 70-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they’ve been wiped out, and it is thought many more are yet to come forward.

Late Monday, a federal judge directed that proceedings to liquidate the assets of Bernard L. Madoff Investment Securities LLC be moved to bankruptcy court.

Millions lost

The biggest victims include international banking institutions HSBC Holdings PLC of Britain, Royal Bank of Scotland Group PLC and Man Group PLC, Spain’s Grupo Santander SA, France’s BNP Paribas and Japan’s Nomura Holdings. All reported that they had fallen victim to Madoff’s alleged Ponzi, or pyramid, scheme.

The alleged victims who sunk cash into the veteran money manager’s investment pool include real estate magnate Mortimer Zuckerman, and a charity of movie director Steven Spielberg. Irwin Kellner, a well-known economist for, filed a lawsuit Friday against Madoff in U.S. District Court in Long Island, seeking repayment of more than $2.2 million he invested with the money manager.

Big and small

The list of people and organizations allegedly taken by Madoff reached into the ranks of the little guy, too.

When local officials in Fairfield, Conn., heard of Madoff’s arrest “it set off every bell,” said Paul Hiller, the town’s chief fiscal officer.

The town’s employees board and police and fire board – which cover 971 workers – had $41.9 million invested with Madoff, said Paul Hiller, Fairfield’s chief fiscal officer.

Town officials immediately notified their investment fund to liquidate. “At that point, it was too late,” he said.

“We obviously didn’t ask enough questions,” Hiller said.

Without the Madoff funds, the town’s pension funds remain safe, officials said, but the loss mean they’ve lost their cushion.

Others, though, have no such comfort zone.

Officials at the New York-based JEHT Foundation, a nonprofit focused on juvenile justice and fair elections, said it was freezing all its grants and would shut down at the end of January. The group gets all its fundings from a couple, Jeanne and Kenneth Levy-Church, whose personal investments were managed by Madoff.

“The impact is really quite deep because we’re talking about $25 to $30 million in funding to organizations that are no longer going to be getting that money,” Robert Crane, the president of the foundation said. “So it’s a very significant ripple effect.”

Another New York nonprofit, the Philoctetes Center for the Multidisciplinary Study of the Imagination, may be forced to close, spokesman Adam Ludwig said.

Looking for quick fix

In Palm Beach., Fla. – a denizen of the very wealthy where Madoff found many investors – news of his arrest continued to reverberate.

“Ever since Thursday, I’ve been getting these phone calls. Levi, I need your help,” said jeweler Levi Touger, who had just returned to his office after seeing a yacht one customer wanted to use as collateral for a loan.

He said people seeking money were offering a variety of collateral, from four-carat diamonds to a Lamborghini.

“There are people who have been hurt by this and they need a quick fix and they need right now to send to their broker X amount of money,” Touger said.

Reports from Florida to Minnesota included profiles of ordinary investors who gave Madoff their money. Some had been friends with him for decades, others were able to invest because they were a friend of a friend. They told stories of losing everything from $40,000 to an entire nest egg worth well over $1 million.

They join a list of more powerful investors that have come forward, all worried about the extent of their losses. The roster of names include the Steven Spielberg charity, the Wunderkinder Foundation; New York’s Yeshiva University, former Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services, among others.

Among those overseas confirming exposure on Monday, Banco Santander, the largest bank in the euro zone by market capitalization, said its clients have $3.07 billion invested with Madoff, mostly through a fund called Optimal Strategic US Equity.

HSBC, Britain’s largest bank, said a “small number” of its institutional clients had a total of about $1 billion in Madoff funds.

The extent of the potential damage prompted a leading fund manager in London to lash out at U.S. regulators for failing to detect the fraud earlier.

“I think now it is very difficult for people to invest in things that are meant to be regulated in America, because they haven fallen down in the job,” Nicola Horlick, the manager of Bramdean Alternatives, which has 9 percent of its funds invested in Madoff’s scheme, told the British Broadcasting Corp.

“All through the credit crunch this has been apparent,” Horlick added. “This is the biggest financial scandal, probably, in the history of the markets.”

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