New ERA: Bennett to Use Insanity Defense at Trial

Federal authorities charged Foundation for New Era Philanthropy founder John G. Bennett, Jr., with an 82-count criminal indictment on September 27. Bennett, 59, is accused of mail fraud, wire fraud, filing false tax returns, and money laundering in connection with the Radnor, Pennsylvania-based New Era, which filed bankruptcy in May 1995.

Churches, charities, colleges, and individuals—including more than 180 evangelical schools and Christian organizations—lost $135 million in the scheme, according to the indictment. If convicted, Bennett faces a maximum of 907 years in prison and $28 million in fines.

In a hearing in U.S. District Court in Philadelphia, Bennett pleaded innocent and was released on bail after using his daughter’s $115,000 house as collateral.

Bennett’s attorney, Odell Guyton, told CT that he is preparing an insanity defense for his client, who is under psychiatric care. In court, Bennett said he has had hallucinations and that he sustained brain damage from a car wreck in 1984—five years before he started New Era.

The indictment contends that Bennett established New Era as a classic Ponzi scheme almost from the beginning, with money brought in by later contributors—rather than drawing interest—being sent back out immediately to original investors. The indictment says Bennett created the perception that anonymous “persons of great wealth” were behind the investments and artificially inflated New Era balances to disguise insufficient funds in the accounts.

Andrew Cunningham, a 34-year-old certified public accountant, is named in a separate indictment. Cunningham, hired by Bennett as New Era bookkeeper—and auditor—is accused of aiding and abetting the scheme. Bennett is accused of laundering New Era funds to pay for a lavish lifestyle, including a $570,000 house in Devon, Pennsylvania, $53,000 to buy a new Lexus car, and $49,000 for a family trip to New Zealand.

SETTLEMENT SNAG? Meanwhile, the plan to resolve the controversy without costly and lengthy litigation (CT, Sept. 16, 1996, p. 82) could be in jeopardy.

Developed by the Evangelical Council for Financial Accountability (ECFA) on behalf of the ad hoc group United Response to New Era, the plan has drawn support from around 90 percent of both donors and creditors. Under the settlement, formally adopted August 21, organizations that lost money could receive as much as 65 percent of it back yet this year.

In September, however, Prudential Securities, which provided financial services to New Era, filed an appeal to the United Response settlement and filed suit against 39 charities and nonprofits. Prudential—itself the target of multiple suits—claims charities improperly received New Era funds through Prudential accounts. “Prudential is trying to scare ministries,” ECFA president Paul D. Nelson told CT.

The “net positives,” which are organizations that had a net financial gain from New Era, had until October 21 to return monies, with a $39 million threshold needed to make the entire settlement viable.

“Prudential could destroy the negotiated settlement if they succeed in tying this up in courts,” Nelson says. “The survival of some smaller ministries depends on getting this money back soon.”