ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, September 28, 1996 TAG: 9609300045
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: PHILADELPHIA
SOURCE: Associated Press
NOTE: Above
INVESTORS SAY New Era Philanthropy President John G. Bennett owes them $500 million after persuading them to invest in the now-defunct organization.
A foundation president was indicted Friday on charges of swindling philanthropists, museums and other nonprofit groups out of $135 million in what prosecutors call the biggest charity fraud in U.S. history.
John G. Bennett Jr., 59, formerly of Devon, Pa., could be sentenced to up to 907 years in prison and fined up to $28 million if convicted on all 82 counts, including fraud and money laundering, in the spectacular collapse of his Foundation of New Era Philanthropy.
``We have some terribly damaged victims here,'' U.S. Attorney Michael R. Stiles said.
Bennett, who has not spoken publicly about the foundation's bankruptcy in May 1995, pleaded innocent and was freed on $100,000 bail.
According to the indictment, New Era persuaded schools and various other nonprofit organizations to put up money, promising that it would be doubled after a certain period, usually six months, by contributions from wealthy anonymous donors.
But the anonymous donors did not exist, and New Era used money from new participants to pay off earlier investors, authorities said. The Securities and Exchange Commission, which has sued Bennett, said he also diverted about $4.2 million to his own use.
Counting the money they expected to receive along with the amounts they had invested, the victims put their losses at more than $500 million. Under a recent settlement reached in Bankruptcy Court, the victims will be compensated for the lost invested money at up to 65 cents on the dollar.
The cheated charities included the Philadelphia Orchestra, the American Red Cross, the Salvation Army, the United Way, World Harvest Mission and the Juvenile Diabetes Foundation. Many of the smaller groups, primarily Christian organizations, continue to struggle.
The government also charged accountant Andrew Cunningham with helping to devise the scheme. He is expected to plead guilty.
The indictment said Bennett started the scheme in September 1989 to bail out a check-kiting scheme. Bennett wrote check after check, not backed by sufficient funds, and deposited them in one account after another to keep the balances inflated.
When the bank finally restrained one of the New Era accounts, Bennett started contacting wealthy individuals, asking them to participate in the foundation's ``New Concepts in Philanthropy'' campaign.
The participants included Laurance Rockefeller, who lost $3 million, and former Treasury Secretary William Simon.
Stiles said the scheme was successful at first, because the initial donors did receive double their money in charitable giving.
LENGTH: Medium: 60 lines ILLUSTRATION: PHOTO: (headshot) Bennett. color.by CNB