wfn.org | Seminary Joins in Lawsuit

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"UNITED METHODIST DAILY NEWS" by SUSAN PEEK on Aug. 11, 1991 at 13:58 Eastern,
about FULL TEXT RELEASES FROM UNITED METHODIST NEWS SERVICE (2972 notes).

Note 2970 by UMNS on May 22, 1996 at 16:52 Eastern (4045 characters).

SEARCH: seminary, United, New Era, investment, suit, gift  

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CONTACT: Linda Green                        256(10-21-22-71){2970}
         Nashville, Tenn. (615) 742-5470              May 22, 1996

United Theological Seminary joins suit against
brokerage firm that handled New Era accounts
 

                 by United Methodist News Service

     
     United Theological Seminary in Dayton, Ohio, along with 30
other non-profit institutions filed a $90 million civil
racketeering suit on May 7 against the brokerage firm that handled
the accounts of the Foundation for New Era Philanthropy, Radnor,
Pa.
     The seminary, along with other religious, educational and
charitable institutions lost money when New Era went bankrupt last
May. The organizations, which claim to have lost $39.6 million are
suing Prudential Securities Inc., a Wisconsin Prudential broker
and New Era president John G. Bennett Jr. 
     United, a 125-year old United Methodist-affiliated
theological school, invested $1.75 million with the Foundation for
New Era Philanthropy.  
     New Era promised the school, charities and nonprofit
institutions that their investments would double in a six-month
period through matching funds from anonymous donors. New Era since
has been charged by federal investigators of operating a Ponzi
scheme -- an investment swindle that pays off some earlier
investors from money of later investors. 
     Several institutions such as United Methodist-related
Albright College, Boston University, Duke University and Hendrix
College did not participate directly in the New Era program, but
were designated grant recipients either by third-party benefactors
or by New Era itself.
     According to a wire service report, the suit accuses
Prudential Securities and a broker of opening fictitious escrow
accounts and establishing a toll-free telephone number that was
staffed by Prudential employees to answer questions from current
and prospective New Era investors.
     Religion News Service quotes the lawsuit as saying Prudential
and the broker played a major role in New Era's plot:
"Prudential's involvement in the Ponzi scheme not only legitimized
the venture to the charitable community, but was the crucial
element that enabled Bennett and New Era to overcome many
skeptics."
     In the same story, Prudential Securities spokesman Charles
Perkins said he is sympathetic to those who lost money, but
"actions should be taken against the people responsible and we
were bystanders in this matter."
     The suit seeks compensatory and punitive damages. If the
charges of racketeering are proven satisfactorily, federal law
states that plaintiffs can claim triple damages. 
     While United Theological Seminary was under advice from its
attorney not to comment on specifics of the suit, Janine Armitage,
United's vice president of admissions and treasurer, said that
from the $90 million lawsuit, it is possible for the seminary to
recoup its $1.75 million loss.
     Even though the seminary checked out New Era before giving
them money, Armitage said, officials now will be more cautious
about "unusual matching gift programs" that come their way.
     Because of the New Era debacle, 1995 was the first time in 30
years that the seminary had trouble balancing its budget. 
     Armitage said, while the school is doing well and moving
onward this year, she is sure the financial situation left by New
Era will be reversed when the lawsuit or bankruptcy estate is
settled. 
     New Era filed for bankruptcy protection last May after a
lawsuit demanded repayment of a $44 million loan. In filing, the
foundation stated that it had $551 million in liabilities and $80
million is assets.
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