Whitworth College is one of 300 unsecured creditors in the bankruptcy of a nationwide fund-raising organization.
Whitworth President Bill Robinson said Wednesday the college is owed about $3.5 million by the Philadelphia-based Foundation for New Era Philanthropy.
But Whitworth did not lose any money. The fund-raising organization previously had given Whitworth slightly more than $3.5 million in an ongoing matching grant program, Robinson said.
New Era had promised to double the money of participating institutions and charities.
Robinson said the grant program worked like this:
Participants raised money from their own donors and deposited the proceeds with New Era for six months. New Era then would find wealthy anonymous donors to double that amount. Interest off the institution’s deposit would pay New Era’s operating expenses.
“We are disappointed, but being disappointed is better than being out a couple of million,” Robinson said. “It’s had no effect on our operations. It’s had no effect on our endowment.”
New Era listed $500 million in unsecured claims, including the money owed to Whitworth, and $80 million in assets.
The bankruptcy, filed Monday in Philadelphia, comes in the wake of a lawsuit filed by Prudential Securities Inc. after New Era failed to repay a $45 million loan from Prudential.
The Wall Street Journal documented the troubles at New Era in front-page stories on Monday and Tuesday.
New Era began in 1989 by offering fund-raising and management workshops.
Whitworth’s relationship with New Era dates back to workshops in 1993, said Thomas Johnson, vice president for business at Whitworth. After that, the college began participating in the fund-raising program.
Robinson said he and several other college officials checked out New Era, and believed the program was secure.
One reason they decided to participate was the involvement of heavy-hitters in the world of finance and charity, including John Templeton Sr., founder of the successful Templeton mutual fund group.
But the head of New Era never revealed the identities of the secretive donors and disclosed in a staff meeting Saturday that they never existed, the Wall Street Journal reported.
Whitworth is in good company. Others involved with New Era as donors or recipients include the University of Pennsylvania, the Christian Broadcasting Network, Princeton University and the wealthy former co-chairman of Goldman, Sachs & Co.
New Era had close ties with Christian organizations, and Whitworth is affiliated with the Presbyterian Church. New Era also developed relationships with as many as 150 wealthy donors around the country.
Robinson said Whitworth plans to offer refunds to the people who donated money to Whitworth for the New Era matching program.
None of the matching money was used for operating expenses. However, the money held by New Era was intended for building projects, Robinson said. They include the second phase of a new campus center and renovation of the science building auditorium.
Also, the college planned to use New Era money to help pay for this summer’s renovation of Cowles Memorial Auditorium. The college now will have to pool money from another account for the work.
Whitworth’s endowment fund, which is separate from the New Era matching program, now stands at more than $18 million, Robinson said.