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Controversial charity loses bid to keep creditors secret

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Controversial charity loses bid to keep creditors secret06/16/95 PENNSYLVANIA--A federal bankruptcy court refused in mid-May to temporarily seal the creditors'…

Controversial charity loses bid to keep creditors secret

06/16/95

PENNSYLVANIA–A federal bankruptcy court refused in mid-May to temporarily seal the creditors’ list of the Philadelphia charity Foundation for New Era Philanthropy, which contained the names of high-profile philanthropists, colleges, museums, churches and many Philadelphia cultural institutions.

In its motion to seal its list of creditors, New Era argued that public disclosure would disrupt the contributors’ affairs and generally create a “chilling effect” on anonymous donations to charities. The foundation asked the court to maintain confidentiality of the document only until New Era had determined the accuracy of the list.

Three media organizations, the U.S. trustee and two creditors intervened to oppose the motion on the grounds that New Era’s interests in secrecy did not override the presumption of access and heightened public interest in the bankruptcy case.

The bankruptcy court agreed. The court determined that public interest in the case outweighed New Era’s interest in keeping the list confidential. The court recognized a common law and constitutional right of access, and ruled that the bankruptcy code’s narrow exception to disclosure should not be used to protect the foundation.

New Era, whose “gift-matching” program was described by SEC officials as a scheme to defraud charitable contributors, filed for bankruptcy protection in mid-May. The foundation had promised donors that funds they handed over would be matched by anonymous donors, who New Era has admitted do not exist. Instead, new contributors paid off old contributors until there was no one left to put up any money.

The SEC filed a civil suit against New Era and its founder, John G. Bennett Jr., alleging massive fraud and the sale of unregistered securities. The SEC is also seeking criminal indictments before a federal grand jury. The Philadelphia Inquirer asked the federal District Court in Philadelphia to unseal documents seized from Bennett’s home, but the court ruled that they are part of the grand jury investigation and exempt from disclosure. (In re Foundation for New Era Philanthropy; Media Counsel: Jeremy D. Mishkin, Philadelphia)