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A solid majority of organizations-both those that gained and those that lost money as a result of last year's collapse of the Foundation for New Era Philanthropy-have registered their support for a unique settlement agreement designed to resolve the controversy without costly litigation.

The agreement was developed by the Evangelical Council for Financial Accountability (ECFA) on behalf of the ad hoc group United Response to New Era. If all goes according to plan, organizations that lost money could receive as much as 65 percent of it back by year's end.

The plan requires the support of organizations representing at least 80 percent of the money lost to New Era. It also calls for the endorsement of donors representing at least 80 percent of the amount given to New Era with the misguided expectation that their gifts would be doubled by wealthy, and apparently nonexistent, anonymous donors.

AGREEMENT PROPOSED:

According to ECFA President Paul D. Nelson, the percentage of support now stands at close to 90 percent, both for organizations and donors. At a two-day hearing last month in Philadelphia, the plan-with the full endorsement of bankruptcy trustee Arlin Adams-was presented before Bankruptcy Court Judge Bruce Fox.

Nelson described the hearing as "an impressive display of a unified effort by strikingly diverse interests." He said, "One attorney after another stood to voice support for the plan. They called it 'fair,' 'creative,' and 'landmark.' "

If the plan is approved, organizations that profited from New Era would have two months to return a total of $39 million for redistribution among those that lost money. Nelson says he is optimistic, but adds that a ruling in favor of the plan is not a "slam dunk." The greatest threat, he says, comes from Prudential Securities, which opposed the plan at the August hearing and, according to Nelson, may attempt to nix it through further legal maneuvering. The bankruptcy trustee has sued Prudential, which provided financial services to New Era, for allegedly giving credibility to New Era despite evidence of problems.

DISSENTING VIEWS:

Garnering support for the United Response agreement to New Era has been a tedious process (ct, April 8, 1996, p. 95). While most of the more than 180 evangelical schools and Christian organizations are solidly behind the United Response, support is not unanimous.

President James A. Gwinn and Chair Robert C. Screen of the Seattle-based Crista Ministries drafted and circulated a 13-page letter to Nelson, claiming that the plan "favors those who gained money at the expense of those who lost."

In its objection, Crista says its division World Concern forwarded $2 million to New Era and received no monies in return. Gwinn and Screen contend that, as the case developed, "United Response moved far beyond its originally announced role and developed its own agenda which was in the best economic interest of some members, but certainly not all." Many ECFA members agreed to the United Response approach, Gwinn and Screen say, based on incomplete information.

The agreement encourages "net positive" organizations to give back the full 100 percent. But it requires repayment of just 65 percent, and less than that in cases of financial hardship. Thus, in theory, the plan allows for some organizations, in the end, to gain from New Era 35 percent or more of what they put in, while others stand to lose 35 percent.

Furthermore, the plan makes special allowances for the individuals who lost donated money through New Era. They may apply their New Era losses toward reducing the repayment obligations of a net-positive organization.

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September 16 1996, Vol. 40, No. 10