Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, June 1, 1995 TAG: 9506010065
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: MORRISTOWN, N.J. LENGTH: Long
A man sits in a corner of the dark, Spartan chapel, staring quietly. Four stories above, the head of the Market Street Mission is doing his own soul-searching.
The small shelter and charity has lost $300,000 - about one-third of its annual budget - in the collapse of the Foundation for New Era Philanthropy, leaving Director Dave Scott scrambling for cash - and for answers.
Old vans that deliver sandwiches to street people won't be replaced. A staff house must be sold. A loan may be sought.
The losses have shaken the 100-year-old evangelical mission just as it shed old-fashioned ways and gained confidence in the world of savvy, grant-thirsty nonprofits.
For a time, New Era seemed to epitomize the height of smart fund-raising, with its program to match millions of dollars from charities and benefactors - such as Laurance Rockefeller - with anonymous gifts.
But this arrangement collapsed in mid-May amid accusations of a colossal scam that left New Era in bankruptcy. For the mission and other struggling charities, it's a story of well-intentioned aspirations turned sour.
As Scott talked in his office one afternoon, a man in the mission kitchen readied a tray of chicken for supper. Donated doughnuts sat on a dining-room table.
Up to 20 men take shelter nightly on the floor of the chapel, and up to 48 others bunk upstairs while participating in a six-month work-study program for homeless and addicts.
The mission distributes clothes, food, and furniture; runs a thrift shop; and dispatches a van three nights weekly to dole out coffee and sandwiches among the 4,000 street people who live in and around Morristown, a mixed-income city an hour's drive west of New York.
For decades, mission work depended on $5 and $10 donations. Fund-raising consisted of a mailing list of 22,000 names, ``many of whom had been dead for a long time,'' said Scott, a clergyman who peppers his speech with ``praise the Lord.''
But three years ago, when the original brick mission deteriorated, Market Street did what it had never done: serious fund raising.
Scott invited Peter Mancuso, former mayor of a neighboring town, to head a campaign that raised $1.75 million in pledges for renovations. Mancuso also garnered donations from local companies, such as Allied Signal Inc.
``The mission's whole image changed from the time they elicited some of us from the community to help them,'' said Mancuso. ``They've really become part of the community.''
In 1993, the mission hired its first outside fund-raiser: Walter Gramm, a retired phone company executive who wrote the mission's first development program.
Gramm, in turn, hired the Rev. Leonard Erb, a former head of the mission, to write grants. Erb suggested applying to New Era.
Erb was among several consultants who reportedly solicited money for New Era, which was offering to double the money of charities through matching gifts from anonymous donors, a claim that later proved fictitious. Erb did not return messages left at his Syracuse, N.Y., office.
One reference given by Erb for New Era was the Biblical Theological Seminary in Hatfield, Pa. - Scott's alma mater. That helped assure Scott of New Era's legitimacy.
David Dunbar, Biblical Theological president, said later that Erb had used it as a reference so many times that the seminary asked him to stop. It also lost an undisclosed amount of money in New Era's collapse, which Dunbar said is forcing some ``major belt-tightening.''
``People were basing their decisions not on analyzing the deal or the scheme but on the reputations of the individuals of people involved,'' said Daniel Borochoff, president of the American Institute for Philanthropy, a watchdog group.
Along with checking tax statements and references and visiting New Era, Scott said he contacted a donor ``on the level'' of former Treasury Secretary William Simon, but declined to identify him. The donor first expressed surprise, then vouched for New Era, Scott said.
``If someone on the level of the secretary of the treasury loses money, then who do I go to for advice?'' said Scott.
Simon himself lost $6.5 million in the collapse of New Era.
In late 1993 Scott and the board twice sent $50,000 checks to New Era through Chelten Baptist Church, a conduit of foundation funds. Both times, the mission's funds were doubled.
At the same time, Scott and Gramm attended a seminar given by a New Era-linked institute founded to teach religious nonprofits how to win grants. ``It was the best training I've ever had,'' said Scott.
When the mission needed $300,000 to pay renovation loans in late 1994, it went to New Era again, sending two checks for $150,000 each.
In mid-May, New Era collapsed, leaving $30 million in assets and up to $200 million in liabilities.
Scott said he'll try to get the lost $300,000 back, and he's not considering a bankruptcy trustee's requests for charities to return gains made from New Era.
``We're at a loss,'' he said. ``I don't have money to give back.''
``We were trying to be more sophisticated about who we are, to do a better job,'' he says. ``But then we lose $300,000. That doesn't look very sophisticated.''
by CNB