John G. Bennett Jr., who rocked the philanthropy world during the mid-1990s with a donation-matching program that turned out to be a major Ponzi scheme, is due to be released from federal custody early next month.
Bennett, as president of the Foundation for New Era Philanthropy, was ultimately found to have bilked more than $100 million from a constellation of 150 nonprofits when it collapsed in 1995. The roster of New Era clients ranged from Harvard University and the Philadelphia Orchestra to small, evangelical Christian groups.
According to the U.S. Bureau of Prisons, he will be set free from a halfway house in Philadelphia on March 5. He was sent there this past Sept. 11 after serving nearly 10 years at the Fort Dix Federal Correctional Institute in New Jersey.
In accordance with federal policy, Bennett’s exact address was not disclosed. Other questions, such as a possible work routine, were not immediately answered. Bennett himself could not be reached about his future plans.
Bennett had filed a court motion in the spring of 2005 to have has sentence reduced, backed by letters from some of the same nonprofits he had duped. However, he still will wind up in custody until the March 2008 release date he was given at the time.
Bennett pled no contest to more than 80 charges of money laundering, filing false tax returns and wire and mail fraud. He was sentenced to 12 years in September 1997.
A Christian businessman who had run drug education centers and corporate training programs and hosted periodic prayer breakfasts, Bennett launched New Era in 1989 by inviting individuals he knew to invest. These early contributors kicked in $5,000 after he promised to double it in three months, thanks to a secret stable of sponsors willing to provide matches for charitable purposes. At maturity, the initial deposit could be withdrawn and the $10,000 donated to a nonprofit.
Court accounts showed that he covered the first deposits with money he earned from another business. That, however, turned out to be the only legitimate income New Era, which he based in Radnor, Pa., ever earned.
After that, the foundation deteriorated into a classic Ponzi scheme, which diverts money from the most recent donors to pay off earlier ones who cash out.
New Era was relatively obscure until 1993, when the Philadelphia Academy of Natural Sciences was given one of the grants. The following year, Bennett opened up New Era for nonprofits to invest in directly on the premise of doubling their money in a term that had been extended to six months.
This opened the sluice gates, with New Era pulling in a total of about $365 million, not only from small groups but the upper crust that had become convinced it was true even if it did sound too good.
Albert Meyer, then a professor Spring Harbor College in Michigan, began to trigger serious doubts about New Era through his own investigation of its finances. Although shunned at first by officials at the college, which had deposits at New Era, he ultimately proved correct.
As the bankruptcy proceeded, victimized charities were able to recoup about 90 percent of their claims through an unusual settlement orchestrated by the leaders of the Evangelical Council for Financial Accountability. Rather than go through a drawn-out legal fight, nonprofits that had gotten out in time agreed to pay their profits into a fund that was distributed among those that had suffered losses.
This article is from NPT Weekly, a publication of The NonProfit Times.
Subscribe to The NPT Weekly eNewsletter or any of our other enewsletters and get the latest news and ideas related to fundraising delivered to your inbox.