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At Spring Arbor College, they used to call Prof. Albert Meyer an alarmist. Today, he is something of a hero for his persistent efforts at questioning the now-bankrupt dealings of the Foundation for New Era Philanthropy.

A professor of accounting at Spring Arbor College, Meyer became concerned when the college began channeling large sums to a charity that promised to double those contributions in less than a year. When Meyer voiced his concerns to officials at Spring Arbor, in Michigan, and other Christian organizations funneling sums into the Radnor, Pennsylvania-based Foundation for New Era Philanthropy, "They said, 'You're biting the hand that feeds us,' " Meyer says.

Now that New Era has gone belly-up, and those groups-like the dozens of others that sent funds to New Era-stand to lose millions, they may wish they had listened more carefully.

Last month, in a move that sent shock waves through the nonprofit community, New Era's chairman, John G. Bennett, Jr., announced to his board that a pool of anonymous donors, ostensibly the source of tens of millions of dollars in matching grants, did not exist. On May 15, the group filed for bankruptcy, listing $551 million in liabilities and $80 million in assets. The next blow came when the Securities and Exchange Commission accused New Era of selling unregistered securities and Bennett of diverting at least $4.2 million from New Era donors to companies under his control.

Law enforcement officials are calling New Era's matching grants program a Ponzi scheme, an illegal business practice in which initial investments are paid off with extremely high returns, using the contributions of later investors. The scheme may continue to pyramid until there is insufficient new money coming in, leading to financial collapse.

The bankruptcy of New Era jeopardizes the original tens of millions staked by wealthy philanthropists and hundreds of nonprofit groups, including about 100 religious institutions and ministries. The episode has thrown boards of directors, organizational presidents, and donors into disbelief.

The Christian groups listed among New Era's creditors that are owed the largest amounts are Lancaster Bible College in Pennsylvania ($16.9 million); Colorado Springs-based Young Life (YL) ($11 million); Gordon-Conwell Theological Seminary of South Hamilton, Massachusetts ($9.8 million); Philadelphia College of Bible of Langhorne, Pennsylvania ($8 million); and Wheaton (Ill.) College ($4.6 million).

In many instances, the amount "owed" is much higher than the initial investment that an organization deposited with New Era. For example, YL's Greg Kinberg says the group had deposited $2.5 million of its own funds with New Era and that the remainder has been pledged through "a series of matches."

RED FLAGS: For many, one of the most troubling-and obvious-signs that all was not well was the group's requirement that participants deposit funds in New Era, rather than with an outside party, before they could be "doubled."

Barry Gardner, a financial consultant who investigated New Era, said he heard "alarm bells" over the requirement that money be placed under New Era's control. He says the money could have been put in escrow, or with a third party.

New Era had explained the requirement as a necessity because it would use the interest and earnings from the original contributions to pay its own expenses. But according to the group's 1993 tax return, New Era earned a slim $33,788 on $41.3 million in contributions.

Other participants had concerns over the secretive aura surrounding New Era. Robert Andringa, president of the Coalition for Christian Colleges and Universities in Washington, D.C., says, "New Era said specifically we could not use the name 'New Era' when soliciting funds."

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June 19 1995, Vol. 39, No. 7