March 2, 2010 — A number of Massachusetts nonprofits that had been counting on receiving funding from the family foundation of Boston philanthropist Carl Shapiro may have to look elsewhere if a federal judge’s decision in the Bernard Madoff bankruptcy case stands.

Yesterday, New York Federal Bankruptcy Judge Burton R. Lifland ruled that investors' losses should be defined as the difference between the cash paid into a Madoff account and the amount withdrawn before the massive fraud collapsed in December 2008.

In making the ruling, he rejected arguments by hundreds of defrauded investors, including Shapiro, who sought to have their claims based on the balances shown on their final account statements before Madoff was arrested, according to a report in The New York Times.

“At bottom, the...customer statements were bogus and reflected Madoff’s fantasy world of trading activity, replete with fraud and devoid of any connection to market prices, volumes, or other realities,” Lifland wrote in his 53-page filing, which detailed the elaborately constructed fraud.

Madoff pleaded guilty last March to charges arising from the record-breaking ripoff and currently is serving a 105-year prison term.

According to a report in today’s Boston Globe, a number of former Madoff clients, including Shapiro, argued that the judge’s decision is unfair. The report noted that a New York lawyer representing former Madoff customers will likely appeal the judge’s decision.

Massachusetts hospitals, universities, and arts institutions that were counting on additional payments from the Shapiro Family Foundation may not receive some or all of those future expected payments.

The foundation suspended all new grant making activities in 2009, but according to its website, “made two commitments to its grantees: 1) It would continue to pay on all current grant agreements; and 2) It would undertake special efforts to reach out to its community-based grantees to offer support 'beyond the grant'.”

Last year, the foundation reported that it made grants totaling $12,967,599 to 65 organizations.

Local nonprofits that currently receive multi-year grants from the foundation include Brigham and Women’s Hospital, Boston’s Museum of Fine Arts, Hebrew SeniorLife, and the Sippican Lands Trust in Marion.

The Boston Globe quoted Thomas McLaughlin, a specialist in charities and a vice president with the Nonprofit Finance Fund in Boston, saying that if he were running a nonprofit that has received pledges from the Shapiros, “I would have already discounted considerably the possibility of getting the rest of those dollars.’’

The paper also reported, “The family has said it, too, was a victim of Madoff’s multibillion-dollar Ponzi scheme. They’ve said they lost at least $545 million to Madoff, about $145 million from the family foundation, the rest Shapiro’s personal money.”

Had the judge sided with Shapiro and other investors, each would have been eligible to claim up to $500,000 from the Securities Investor Protection Corp. as a cash advance against their share of any recovered assets.

Investors believed they had lost nearly $65 billion, based on their last financial statements sent by Madoff before his arrest. If Lifland decision is upheld, total losses would reportedly be about $20 billion.