New Era Founder Took Comfort-and Cash-From Former Treasury Secretary

When the Foundation for New Era Philanthropy collapsed in 1995, former U.S. Treasury Secretary William E. Simon, who lost $3-million in the scheme, wasn’t bitter. Instead, the multimillionaire businessman says his first impulse was to figure out why New Era founder John G. Bennett, Jr., had gone wrong.

“When Jack Bennett first told me his story about his funds and how he had anonymous donors who would match the funds, I extolled his virtues to others,” says Mr. Simon. “I was fooled. And I’m not an unsophisticated financial person, I think that’s a safe statement to make.”

During its existence, the Foundation for New Era Philanthropy took in more than $350-million from more than 1,000 non-profit groups and dozens of donors. It invited selected charities and donors to turn over money to it for six months with the promise that those funds would be matched dollar for dollar by anonymous philanthropists, with the total going to the charities. Those anonymous philanthropists did not exist.

Mr. Simon says that Mr. Bennett was highly credible, a religious man who had the backing of top-notch people like Sir John Templeton. “I started to invest, I gave him more than $3-million, and I did it with ‘superb’ timing — just before the thing collapsed. I couldn’t believe it,” says Mr. Simon.

When it became clear that New Era was falling apart, he says, “Everybody was throwing their hands up in the air and cursing and swearing, and the people who’d supported Jack Bennett said they wouldn’t talk to him again. I said, ‘Time out, time out. There must be another side to the story.’”

Mr. Simon says that after several tries, he eventually reached Mr. Bennett by telephone early on a Sunday morning. “Jack said, ‘If you had called an hour from now, you wouldn’t have gotten me. I can’t take it anymore, I’ve disgraced my family.’”

Mr. Bennett confessed that he was about to commit suicide, says Mr. Simon. “I said, ‘Jack, you are a man of God. That would not solve anything and, as a matter of fact, would just compound everything. Judas despaired, hung himself. Is that what you want, the same fate Judas had? Many people have made mistakes in their lives. You’re a nice guy, I think you meant well. I want you to promise me you’ll be down here at my office tomorrow morning to talk.”

The two men eventually spent much time talking, and Mr. Bennett survived to plead no contest last year after he was charged with 82 counts of fraud, money laundering, and tax-code violations. He argued that he had been mentally ill when he was running New Era and had not intentionally sought to defraud anyone.

Mr. Simon was one of more than 100 donors, charity officials, and others to write letters to the court regarding Mr. Bennett’s sentence. Mr. Simon asked the judge to show leniency to the New Era founder. “I begged for [John Bennett] to get off, to be sentenced to 10 years of community service, eight days a week, whatever it took, but leave the man out of prison to do good,” says Mr. Simon. “He wasn’t a rapist or a murderer. He made a mistake.”

Although the judge did not give Mr. Bennett the harshest sentence, he did send him to prison for 12 years.

Mr. Simon laments, “I could have found something useful for Jack Bennett to do. He was mentally ill, but I don’t believe he was dishonest, not for a minute.”