Penn to return $2.48 million to New Era

Last year the University received approximately $2.1 million as a return on its investment in the Foundation for New Era Philanthropy, which filed for bankruptcy in May. But now, as requested by New Era, the University will pay back an estimated $2.48 million to help cover losses suffered by other investors, according to Executive Vice President John Fry. The University's payment is the third -highest amount that New Era requested be returned. New Era, which was based in Radnor, Pa., with offices in London and Hong Kong, promoted itself as an innovative new charity capable of doubling non-profit institutions' money by soliciting matching funds from a pool of anonymous wealthy donors, who supposedly relied on the charity to find worthy causes. Along with the University, hundreds of nonprofit organizations invested their money in New Era, which said it would hold the funds for six months in brokerage accounts rather than in escrow. The organization claimed to be investing the money in certificates of deposit or treasury bills while finding matching donors. Government regulators have charged that John Bennett, New Era's founder, used money from the charities and institutions that invested later in the program to pay the promised returns to earlier participants, a practice referred to as a "Ponzi" scheme, according to The Chronicle of Philanthropy. "Ponzi" schemes promise victims huge returns on their investments and produce the illusion of financial success by paying off early investors with the money donated by later victims. The scheme eventually collapses when no more investors can be found or the operator disappears with the pooled funds. The foundation is asking more than 1,000 charities, individuals and non-profit organizations to return approximately $84.4 million distributed during New Era's six years of operation. This is approximately $90 million less than the amount the foundation's bankruptcy trustee Arlin Adams said in January he would try to obtain, according to The Chronicle. And Fry said the philanthropy's trustee has extended the University a $200,000 goodwill discount for agreeing to return the money so promptly. "It is a good sum of money to return, but in absolute terms, we didn't lose any money," Fry said. "We behaved as model citizens in agreeing to return it." University General Counsel Shelley Green described the University's negotiations in the matter as "amicable." "Penn was one of the earliest institutions to offer to return the money," Green said. "The bankruptcy trustee realized how we worked with other institutions and exercised leadership, and we're pleased he recognized this by affording us a discount on our payment." Haverford College and Princeton University were also among the institutions requested to pay back the largest sums of money. Haverford President Tom Kessinger said that Haverford is working with other groups to negotiate a global settlement to return the college's payment of $3.54 million. "Haverford put none of its own money into the philanthropy," Kessinger said. "We were a non-active participant and it is only right that we give the money back and put the matter behind us." Bennett has not been charged with any crime, but admitted last summer to his staff that the anonymous wealthy donors -- who were supposed to act as the source of funds for the charity -- never really existed, according to New Era's attorneys. Approximately 118 charities have been completely dropped from the list of groups owing money to New Era, and many charities are also being asked to return smaller sums of money than they were previously asked to return, reported The Chronicle. Hearings will continue in order to approve the new settlements that New Era has requested. Lawyers for the New Era trustee said they hope to have at least some portion of the money returned to the groups that lost money from the philanthropy by this summer.