A bankruptcy judge Friday ordered the immediate liquidation of a fund-raising foundation, one day after federal regulators accused its founder of major fraud and FBI agents searched his $620,000 home.
The Radnor-based Foundation for New Era Philanthropy filed for Chapter 11 bankruptcy protection on Monday, claiming $80 million in assets and $551 million in liabilities.
Friday, at New Era’s request, U.S. Bankruptcy Judge Bruce Fox changed the classification from Chapter 11, which would have given the group a chance to recoup, to Chapter 7. The change means New Era must immediately liquidate all assets to settle with creditors.
On Thursday, the Securities and Exchange Commission filed a lawsuit alleging New Era founder John G. Bennett diverted $4.2 million of its funds to his own private businesses. Later in the day, FBI agents left with six boxes of undisclosed items from the home he bought for cash last year on the city’s tony Main Line.
Bennett decided to ask for Friday’s ruling by the judge after he realized he had no hope of reorganizing the foundation, New Era attorney Neal Colton said.
“He no longer has the support of donors,” Colton said. “Mr. Bennett has exhausted every possible charitable donor who might be willing to speak with him.”
The liquidation order was opposed as premature by W. Jeffrey Garson, a lawyer who said he had met Thursday with 50 evangelical groups counted among New Era’s creditors.
“It’s brand new to them obviously and they’re looking at their options,” including a possible reorganization, he told Fox.
Fox on Thursday had unsealed a list of hundreds of creditors who had placed millions of dollars with New Era, which is accused of running a Ponzi scheme with a philanthropic appeal.
Among the losers: philanthropist Laurance Rockefeller, $11.3 million; potato chip entrepreneur Jim Herr, $10.8 million; insurance mogul Hugh MacLellan, $9.9 million; and former Treasury Secretary William Simon, $6.5 million.
Pennsylvania Attorney General Ernie Preate accuses New Era of paying yesterday’s creditors with today’s donations.
The list contained the names of philanthropists, museums, schools and charities from across the country. Many expressed regret for having bought into the alleged scheme.
Hundreds of charities and institutions also lost money, including Whitworth College, which is owed about $3.5 million.
New Era solicited money from museums, universities and other charities by promising to double their money in six months with matching contributions from anonymous donors. New Era would keep only the interest earned during the search.
Bennett, founder of New Era, also used the lure of anonymous donors to get philanthropists to deposit money with New Era with the promise it would double and then be passed on to the charity of their choice. Lawyers for the foundation say Bennett admits that there are no anonymous donors.
The court released two lists: one of the 20 charities and the 20 individuals who lost the most money; the other of all 315 creditors. Only the short list included loss estimates: $136.9 million for the charities and $136.2 million for the individuals.
The SEC’s lawsuit said New Era ran “a massive fraudulent scheme.”