Settlement reached in New Era case - Foundation for New Era Philanthropy

Christian Century, Oct 16, 1996

A pathbreaking settlement has been reached in the scandal resulting from the collapse of the Foundation for New Era Philanthropy, the Pennsylvania charity whose grant programs have been described as an investment scam. U.S. Bankruptcy Judge Bruce I. Fox approved a $39 million settlement August 22 that will allow agencies that lost money through New Era to receive as much as 65 cents on every dollar invested - much of that money coming from organizations that profited from New Era dealings.

Hundreds of groups across the country, ranging from evangelical ministries to the University of Pennsylvania and the Philadelphia Museum of Art, were affected when New Era filed for bankruptcy in May 1995.

In the scheme, New Era, based in Radnor, Pennsylvania, offered many charities a "matching grant" program that promised to double their money. Federal investigators say the program was a Ponzi scheme, which created the illusion of financial success by using contributions from new investors to pay previous ones. New Era's founder, John G. Bennett Jr., was indicted September 27 on 82 federal counts relating to the affair. He could face a 907-year prison sentence and a fine of $28 million if convicted. He pleaded innocent to all charges.

Rollin A. Van Broekhoven, a federal-agency judge who represented some Christian groups caught up in the scheme, characterized the agreement as "marvelous" and "economically sound." Van Broekhoven is chairman of United Response to New Era, a consortium of about 195 evangelical charities and churches involved in the case. "It is a magnificent legal document, but it also is driven by moral and religious motivation," he said of the court's ruling.

In what is viewed as an unprecedented decision, the settlement allows for groups that lost money through their association with New Era to get more funds returned to them than would usually be the case - and sooner. Some basic principles about fairness and stewardship that were drafted by evangelical ministry leaders and lawyers early in the case may have expedited its resolution.

Van Broekhoven, a Virginia judge who hears cases involving the federal government and its contractors, also is chairman of the board of the Evangelical Council of Financial Accountability, the Herndon, Virginia, organization that formed United Response to New Era. Van Broekhoven, a member of a Presbyterian Church in America congregation in McLean, Virginia, testified at earlier bankruptcy court hearings in the case. "As I stated [then]... we start out with a principle that all of the resources and wealth in the world are God's and God's alone." Out of that notion came two overriding principles. United Response leaders beheved that those who benefited from their association with New Era should return money to those who lost funds. And thev thought it was inappropriate for Christian charities to be pitted against each other in a long, litigious battle. One of their ultimate goals, Van Broekhoven said, was to be a Christian witness" of cooperation, both within the evangelical nonprofit community and the entire nonprofit world.

Creditors representing about 80 percent of the dollars lost have agreed to the plan. Those who gained money through New Era will save legal fees they would have incurred through a longer process.

Bob Andringa, president of the Coalition for Christian Colleges and Universities, said his group lost $350,000 and hopes to receive about $210,000 as a result of the settlement. If it does, some of the money will be used for scholarships for a school in Moscow. "There were times when we doubted that we could get this many diverse organizations to agree," Andringa noted. "I think it's a great example of working on the principle that collaboration is more powerful than competition."

The entire process could be delayed if Prudential Securities, the investment company that handled New Era's accounts, appeals the judges decision. Van Broekhoven said United Response will do "whatever we can legally and morally to press the case forward." Barring such a delay, affected groups could see some money by the end of the year.