Fraud Probe Targets Charity Foundation

Prosecutors on Tuesday pressed a fraud investigation of a foundation that promised to double the money of nonprofit groups and then collapsed, threatening hundreds of charities, universities and museums.

The Foundation for New Era Philanthropy filed for Chapter 11 bankruptcy protection Monday, listing $551 million in liabilities and $80 million in assets.

The foundation had solicited money from nonprofit groups by promising to double their money within six months with matching donations from philanthropists who wanted to remain anonymous. The rich donors’ identities were supposedly known only to New Era’s president, John G. Bennett Jr.

The foundation also solicited donations from named philanthropists, promising to double their money in the same way and give it to a charity of their choice.

Lawyers for the foundation said Bennett has now admitted that the anonymous donors never really existed.

That leaves as many as 300 unsecured creditors in danger of losing millions of dollars.

“The whole philanthropic community--individuals and institutions--has been dealt a painful blow,” said Keith S. Thompson, president of the Academy of Natural Sciences of Philadelphia, which has $2.7 million at stake.

Others with money at stake include the University of Pennsylvania, the Pennsylvania Academy of the Fine Arts and the Franklin Institute, a science museum in Philadelphia.

“This just shows that even savvy, sophisticated people can at times be suckered,” said Bob Smucker of Independent Sector, an umbrella group for nonprofit organizations, based in Washington. “There’s no easy way to get big bucks, no quick fix. There is nothing new under the sun.”

The Pennsylvania Attorney General’s Office is investigating the possibility that New Era operated as a “Ponzi scheme,” said Janice L. Anderson, chief deputy attorney general.

A Ponzi, or pyramid, scheme creates an illusion of financial success by paying off early investors with funds provided by later investors. The scheme eventually collapses when no more investors are found.