Victims of Alleged Pyramid Scheme Seek a Half-Billion Dollars
PHILADELPHIA (AP) _ The fallout from the double-your-money giveaway known as the Foundation for a New Era Philanthropy has landed in Bankruptcy Court with a thud.
Religious organizations, colleges, museums and philanthropists victimized in the alleged pyramid scheme have filed 499 claims for reimbursement. The claims fill seven accordion files weighing maybe 40 pounds.
On their face, the claims ask for the impossible _ more than a half-billion dollars from an organization that folded with only an estimated $31 million in assets.
Most groups want not only the money they invested and lost, but also the 100 percent profit they were promised _ though there’s no chance whatsoever of that happening. In fact, the creditors will probably get back little of the money they lost.
Lawyers familiar with the case expect that by January, bankruptcy trustee Arlin Adams will have crafted at least a tentative plan to address the creditors’ demands.
But the case, already unprecedented in the world of nonprofit organizations because of its size and complexity, could become even more muddled by a flurry of lawsuits.
One of the biggest creditors wants to see more than just the money returned.
Religious fund-raiser Clair Leaman wants to see criminal charges brought against New Era’s charismatic founder, John G. Bennett Jr.
``It amazes me that he still hasn’t been indicted,″ said Leaman, who pooled the investments of 47 Christian colleges and other religious organizations and turned the money over to New Era. They lost more than $8 million.
For two years, New Era solicited money from museums, universities, charities and philanthopists by promising to double their money in six months with matching contributions from anonymous donors. Bennett eventually acknowledged no anonymous donors existed. Authorities say he kept up the scheme by meeting previous commitments with the new money he received.
Authorities have accused Bennett of diverting up to $5 million from New Era into other companies he controlled. FBI agents seized documents by the box load from Bennett’s home and offices after New Era declared bankruptcy in May.
Bennett has denied any wrongdoing. Fred Hamilton, a spokesman for the U.S. attorney in Philadelphia, refused to comment on the case.
Leaman said his lawyer has speculated that prosecutors are waiting to see how much Bennett helps the trustee reconstruct New Era’s finances before making any decision about criminal charges.
Adams, the trustee, has the option of suing New Era’s broker, law firm, accounting firm and Bennett to try to get more money for the creditors. Adams also faces the daunting task of sorting out the groups that profited from the ones that lost money.
``There’s claims all off the wall there,″ said Marvin Krasny, a Philadelphia bankruptcy attorney who represents one of the creditors.
Krasny said the size of the claims is indicative of the way bankruptcy lawyers are forced to practice today: ``We all look over our shoulders because of malpractice. You have to try to get as much as you possibly can for your clients.″
The creditors can sue if they believe there’s more take than give in Adams’ plan come January.
Samuel Gerdano of the American Bankruptcy Institute expects that most creditors will walk away disappointed. ``There is going to be kind of a cents-on-the-dollar approach,″ Gerdano said.
Cents on the dollar would at least make creditors like Leaman feel a little better.
Leaman said he was taken in by Bennett’s convincing style, as were many others, including millionaires Laurence Rockefeller and former Goldman Sachs co-chairman John Whitehead.
``Everything was so credible _ and it worked for so long,″ Leaman said. He added: ``You think you’re helping people trying to look for their interests overall, and then something like this happens.″