Harvard, Princeton to return $2.5 million to New Era Philanthropy

Last week, Harvard and Princeton universities agreed to return a combined $2.5 million as a return on their investments in the Foundation for New Era Philanthropy, which filed for bankruptcy last May. Princeton will give back $2.1 million and Harvard will return $467,000. Each university will be allowed to keep just under 10 percent of its profits in recognition of their cooperation. Earlier last month, New Era also requested that Penn pay back an estimated $2.48 million to help cover losses suffered by other investors, according to Executive Vice President John Fry. Fry said the philanthropy's bankruptcy 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." The University's payment is the third-largest amount that New Era requested be returned, and Princeton's payment is the fourth-largest out of more than 1,000 charities, individuals and non-profit organizations. In total, the groups have been asked to return approximately $84.4 million distributed during New Era's six years of operation. 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 allegedly 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 U.S. Treasury bills while finding matching donors. A total of 23 organizations so far have agreed to return $8.5 million to New Era's trustee. That money will be used to give partial compensation to approximately 600 groups and individuals who have filed a cumulative total of $500 million in claims, according to Reuters News Service. New Era's trustee has also threatened to sue organizations that refuse to return money they received in excess of their initial investments. The University was one of the earliest institutions to offer to return the money, according to General Counsel Shelley Green. 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. "Ponzi" or pyramid 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.