TOO GOOD TO BE TRUE

By Steve Wulf

Philanthropist Laurance S. Rockefeller believed in John G. Bennett Jr. So did singer Pat Boone, Philadelphia Mayor Edward Rendell and former Treasury Secretary William E. Simon, as well as an array of institutions ranging from the University of Pennsylvania to the Nature Conservancy to the National Museum of American Jewish History.

Albert Meyer, an accounting professor at Spring Arbor College in Michigan, did not believe in Bennett, however, and therein lies the tale of how an elaborate Ponzi scheme came unraveled, leaving Philadelphia, Wall Street and the cozy world of nonprofit organizations reeling in embarrassment.

Bennett, 57, is chief executive officer of the Foundation for New Era Philanthropy, a charity based in Radnor, Pennsylvania, which he began in 1989. A former drug-program administrator who advised nonprofits on management and fund-raising techniques, Bennett became a popular and influential figure in Philadelphia's philanthropic and cultural circles, thanks in part to the prayer breakfasts he often held. New Era soon became the answer to a lot of prayers: Bennett promised the organizations and individuals he approached a 100% return on their contributions within six months, thanks to anonymous donors who would match their gifts. New Era would keep only the interest earned during the search. It sounded too good to be true, especially since the mysterious benefactors were known only to Bennett. But when he delivered on his early promises, the news spread and investments in New Era increased exponentially; last year it rivaled the Rockefeller Foundation in its largesse (total: $100 million). Cathryn Coate, executive director of the Greater Philadelphia Cultural Alliance, says, "The word on the street was that Bennett was a super credible man, impeccable. You'd hear things like, 'Oh, I've known Bennett for 15 years.' It's not like a bunch of quick-fix guys duped a bunch of bozos."

Bennett was only doing what Charles Ponzi did in Boston back in 1919, paying back one wave of investors with money he received from ensuing waves. Like Ponzi, Bennett was something of a civic hero for a while, and like Ponzi, he was careful not to draw attention to himself with a flamboyant life-style.

Meyer, a 44-year-old South African who taught at one of the Christian colleges that gave funds to Bennett, became skeptical after reading a letter out-lining the matching fund-raising offer. He discovered New Era was not actually registered as a foundation. Then he wrote to the Internal Revenue Service office in Philadelphia, requesting New Era's return. He didn't like what he saw, so Meyer took his concerns to college administrators. "I was told it's tough raising funds, and they didn't need my meddling."

At that point, Meyer called Bennett directly. "He seemed bewildered and flustered," says Meyer. "He wasn't a smooth talker. There was an 'aw, shucks' atmosphere to it all. At the end of our conversation, when I put down the phone, I actually liked the guy." But when New Era tried to pressure the college into silencing Meyer, the professor sent letters detailing his suspicions to the Securities and Exchange Commission, the irs, the U.S. Attorney General's office and finally the Wall Street Journal.

The SEC alerted Prudential Securities, which held some $73 million in its New Era account, that there might be problems at the foundation. When Prudential examined the account, it came across one troubling aspect: those funds were used as collateral for a $52 million loan. After New Era's lawyers balked at providing foundation records, Prudential called in the loan, and the dominoes began to fall. Last week New Era filed for bankruptcy protection, the state attorney general accused Bennett of fraud, and the SEC charged that he diverted $4.2 million into two firms he controlled personally. In a letter sent last Friday to his contributors, Bennett wrote, "Those of you who know us, know we would never have done anything other than enable you to grow and flourish . My sole desire is to do everything possible to see that the obligations we have to you are fulfilled." But according to the Wall Street Journal, he admitted to his staff on May 13 that the mystery donors never existed.

Listed among New Era's creditors were Rockefeller ($11.4 million), Simon ($6.5 million) and Boone, although the largest individual loser was the Rev. Glenn Blossom of Dresher, Pennsylvania ($27.5 million), who was using the funds to establish a seminary. All in all, New Era claimed $551 million in liabilities against just $80 million in assets.

Bennett's secret was that he was able to marry two powerful but seemingly contradictory human instincts: greed and charity. Those who threw in with New Era were so anxious to give, and to get, that they overlooked the obvious. But then greed and charity have met before. Charles Ponzi's biggest extravagance was a $100,000 donation he made to an orphanage.

--Reported by Mubarak Dahir/Philadelphia and John Moody/New York

With reporting by MUBARAK DAHIR/PHILADELPHIA AND JOHN MOODY/ NEW YORK