It is an old principle that a confidence trick succeeds by appealing to the victim's greed. Put up $1 of "good faith" to get back $2. Ha-ha. You will never see that $1 again.
That lay behind the operation, called a Ponzi scheme, attributed by investigators to the Foundation of New Era Philanthropy of Radnor, Pa. The state attorney general accused the foundation of repaying investors with the take from the next investors -- a classic Ponzi scheme doomed to self-destruct when no new investors are found. It collapsed in a cloud of dust, where $273 million had been, when a bankruptcy judge in Philadelphia ordered its liquidation last month.
The day before, the Securities and Exchange Commission had filed a lawsuit accusing founder John G. Bennett Jr. of diverting $4.2 million of foundation funds to his private business. The FBI carted boxloads of papers from his house. Mr. Bennett sought bankruptcy protection, claiming $80 million in assets and $551 million in liabilities.
Among the creditors are Laurance Rockefeller, the environmental philanthropist, for $11.3 million; former Secretary of the Treasury William Simon, $6.5 million; the Lancaster Bible College, $16.9 million; a fund set up by the Rev. Glenn Blossom of Chelten Baptist Church in Dresher, Pa., $27.5 million. Blue stockings fail to hide red faces. Many of the most prestigious institutions in Philadelphia are among the stung.
Mayor Edward Rendell and mutual fund super-manager John Templeton were among those sold on Mr. Bennett. Professing to be an evangelical Christian, he took Christian institutions for the most. Prudential Assets lent $44 million. An enthusiastic Philadelphia Inquirer story on April 16 said the Foundation "sounds too good to be true."
Nothing was further from victims' motives than personal greed. They sought to advance good causes: art, education, religion. They wanted to maximize what they gave. And that made them act as greedy dupes do, putting up $1 to get back $2. That blinded them to warning signs.
The usual precautions would have turned up suspicion: Checking a resume that included an honor that was never awarded. Noticing that the "foundation" -- which began life in 1989 as a consultant to nonprofit organizations -- was never a foundation, an organization with an endowment making gifts of its income.
Let other philanthropies learn: Good intention is no substitute for prudence. What is too good to be true usually is not. The good that the victims would have done with the money lost is the cost paid for faith wrongly placed. The victims of the next scheme like this one should have known better.