CNBC's hit show American Greed devoted its broadcast Wednesday night to the infamous story of John G. Bennett, Jr. who was able to scam roughly 150 charities out of more than $100 million prior to being caught in 1995.
The NonProfit Times described the scam as "a promise to double organizations' investments after a six-month holding period through anonymous matches. It was later discovered that the anonymous donors didn't exist. At its most basic, a Ponzi scheme pays off original investors by using the funds from new recruits. Eventually new recruits dry up and the scheme collapses."Amazingly, Bennett was able to raise over $500 million from 1100 donors and embezzle $135 million of it - mostly from Christian religious organizations and charities in the Philadelphia - before being discovered by Albert Meyer, an accounting teacher at a college in Michigan.
After Meyer was able to get the attention of a reporter at the Wall Street Journal, the foundation declared bankruptcy and many prominent nonprofits in a terrible financial situation.
The NonProfit Times also reported that "victimized charities later recovered more than 90 percent of their losses in an unprecedented bankruptcy settlement orchestrated by leaders at ECFA who formed the United Response to New Era, according to officials familiar with the settlement."
According to the PA Attorney General's complaint, the victimized charities included the Boy Scouts of America, the Environmental Defense Fund, Haverford College, Harvard University, Princeton University, The Nature Conservancy, One to One Partnership Inc., Planned Parenthood, the Philadelphia Orchestra, Stanford University Medical School, the United Way and Yale Law School. Other organizations included:
Academy of Natural Sciences, Philadelphia, PA, $2.7 million
Biblical Theological Seminary, Hatfield, Pa., $5.8 million
CB International, Wheaton, Ill., $4.6 million
Covenant College, Lookout Mountain, Ga., $5 million
Detroit Institute of Arts, Detroit, Mi., $4 million
Houghton College, Houghton, N.Y., $4 million
John Brown University, Siloam Springs, Ark., $4 million
International Missions, Reading, Pa., $5 million
International Teams, Prospects Heights, Ill., $5 million
King College, Bristol, Tenn., $5 million
University of Pennsylvania, $2.1 million
Wheaton College, Wheaton, Ill., $4.6 million
Bennett faced 82 federal counts of money laundering and wire, mail and bank fraud. He planned to claim in his defense that he had been possessed by "religious fervor", but the judge did not allow this. In the end Bennett pleaded no contest to all the charges in March of 1997. Though federal sentencing guidelines indicated a sentence of 22 to 27 years, the judge gave him 12.What's most interesting is that Bennett was originally slated to be released next month - in March of 2008, but I've been unable to determine through research if this bastard ever got out of jail early on good behavior.
If you want to read more about this scam, I recommend this article.