Prudential Securities, broker for the bankrupt Foundation for New Era Philanthropy, will pay $18 million to settle related lawsuits.
In November, Prudential and 33 organizations that took legal action against it agreed to the settlement, which will add funds to the pool of money going to reimburse New Era's victims. The move will boost the recovery of the $135 million that about 200 charities lost in the investment scandal.
Paul D. Nelson, president of the Evangelical Council for Financial Accountability (ECFA), says the additional funds mean it is realistic to project that charities will recover between 85 and 90 percent of lost funds. Before the Prudential agreement, organizations that lost money had little hope of receiving more than 65 percent back (CT, Nov. 11, 1996, p. 109).
ECFA played a leadership role by forming the ad hoc group United Response to New Era, which attempted to address the crisis equitably and without expensive litigation. "Our goal all along was to achieve a 100 percent recovery," Nelson says. "But those who were negotiating with Prudential apparently made the judgment that it was in their best interest to take the eighteen million dollars."
Nelson says it is likely that concerns about delaying the repayment figured prominently in reaching the agreement with Prudential. He noted that some organizations hurt by New Era are teetering on the edge of financial ruin and would rather receive an 85 percent return soon than a 100 percent return years later. "I'm not aware of any creditor who is unhappy with this decision," Nelson says. "I would almost defy somebody to find a bankruptcy case where that much money is returned to the creditors."
Prudential had been sued because of its alleged role in facilitating ...1
Already a CT subscriber? Log in for full digital access.