October 27 1997

ARTICLE TOOLS

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Part two of two parts; click here to read part one.

ARTIFICIAL PROSPERITY: The seemingly tough rules that guided New Era's grant-making operations enhanced the prestige and plausibility of the New Era scheme.

From the beginning, Bennett said that an organization could only join the program if nominated by one of the beneficiary donors, his inner circle. Particularly after October 1993, New Era required lengthy application forms and a visit of the organization's management to New Era's headquarters.

Many participants asked why New Era had to hold on to the money. Bennett usually explained that the anonymous donors had made this requirement so that New Era could pay its expenses and all donated moneys would go directly to charitable purposes.

However, Bennett told others that the anonymous donors paid for New Era's operating expenses and that the interest income went for charitable grants. In reality, money under New Era's control generated little interest income because soon after it came in, it went out to cover the doubling of an earlier donor's investment. Few observers noticed that the tiny amount of interest income New Era reported in its latter financial statements revealed that few deposits remained for the six months New Era said they would.

Bennett told participants that New Era held its money in escrow or a "quasi-escrow" account with low-risk interest rates, most frequently at Prudential Securities. Yet no escrow accounts in fact existed. Bennett could dip into New Era accounts whenever he wanted.

Special care was given to organizations and individuals that deposited more than $400,000. Bennett told these top donors that they could call the Prudential Securities office in Kenosha, Wisconsin, provide the staff with a ...