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The Vanguard Foundation's Great Con 

Wednesday, Jul 18 2012

Illustration by Stuart Bradford.

It meant the world to Myra Levy to send her annual donation to the Vanguard Public Foundation, a public grant-maker dedicated to funding grassroots nonprofits often too radical to receive mainstream funding. For 30 years she and her partner had sent in a couple hundred dollars each December, a contribution Levy considered an investment in a future that would reflect her values. Levy's ties to the foundation were also personal. Her sister had served on the board, and several of the nonprofits Levy worked for over the years had been funded by Vanguard grants.

Thus, in 2009, despite not having received the usual appeal letter and envelope, Levy went online to search for the address to which she should send her latest contribution. To her surprise, she found none.

In fact, she found nothing at all — which was peculiar, given that Vanguard had been one of the oldest and influential radical grant-makers in the country, endorsed by social justice figureheads like Harry Belafonte, Dolores Huerta, and Danny Glover.

Only later did Levy learn of the massive scam that defrauded Vanguard out of existence.

Vanguard had quietly ceased operating by 2006. In 2007, the California Secretary of State had suspended its nonprofit tax status. And yet Levy's December 2008 check to the foundation had been promptly cashed.

"Vanguard was a precious thing in the community, and I believed it would be passed from one trusted generation to the next," Levy says. "I assumed a chain of trust."

All this is how Levy found herself more than two years later sitting through the trial and sentencing of Samuel "Mouli" Cohen, who was found guilty of defrauding the Vanguard Foundation's major donors of millions over the course of six years. She would learn that Cohen's biggest aide in stealing the money was the foundation's 15-year president, Hari Dillon, a charismatic hero of the left, who understood the power of loyalty to the "movement."

But it was only Cohen who stood trial. "It was a strange feeling, being in the courtroom, knowing that [Cohen] willfully diverted money that should have funded nonprofits," Levy said. "His wife was there too. I would see the designer clothes and bag she was wearing, and I would wonder if my $200 helped pay for it."

"In my more than 40 years with the criminal justice system, I have never encountered a con man like Mr. Cohen," Judge Charles Breyer said at Cohen's sentencing hearing on April 30 in San Francisco's U.S. District Court. "He is serial in his proclivity to commit cons. He is nearly sociopathic in his inability to relate to victims of the cons that he conceives."

As the trial unfolded, the testimony of Vanguard board members, staff, and donors revealed the tragic events that led to the foundation's demise. Perhaps the dramatic highlight was the two-day examination of Dillon, the prosecutor's star witness. By the time he took the stand, Dillon had signed a plea agreement admitting guilt to embezzling upward of $2.5 million and acknowledging his role in wire fraud and money-laundering. "I've taken full responsibility for the things I did," Dillon told SF Weekly.

Dillon's testimony revealed a classic Ponzi scheme. When he met Cohen in August 2002, Cohen was the co-founder and CEO of a company called Ecast, a digital entertainment firm that manufactured bar games. By January 2003, Cohen said he'd become Ecast's executive chairman — although in reality he hadn't worked there since October 2002. Ecast even brought charges against Cohen alleging fraud before settling out of court.

According to testimony from donors and staff, Cohen claimed Microsoft was on the brink of acquiring Ecast, which would increase the value of Ecast stock market shares tenfold. He offered to let Dillon and some of Vanguard's wealthiest donors purchase his stock prior to the acquisition for $2.50 to $3 per share, although in actuality, they were worth less than a dime.

Starting in 1997, Dillon and some of the foundation's donors had profited from insider trading opportunities twice before by investing in Purchase Pro and Chromatics. Cohen's offer seemed like a similarly promising — if underhanded — chance to enrich Vanguard and themselves. Dillon and some donors pounced, purchasing $6.2 million of Cohen's shares. Dillon obtained a $700,000 loan from the Mission Area Federal Credit Union to invest in Ecast. Five of Vanguard's donors followed suit, obtaining millions worth of loans and pledging half of their net gain to Vanguard.

But the deal never came through. Instead, Dillon reported at the trial, Cohen came up with a succession of excuses: reviews from the Department of Justice and the European Union; the possibility of a bid from Google. Each time the transfer stalled, Dillon and Cohen requested additional funds from Vanguard donors to pay regulatory or attorney fees. "He was saying if we didn't cover these costs, we'd lose what we originally put in," Dillon says. "It's a mixture of enticement and fear. He convinced everybody that this was all real."

Cohen must have been exceptionally convincing. Between 2005 and 2007, he managed to extract an additional $22 million from the Vanguard faithful, all funneled through Dillon's personal bank account. Investors were cautioned that speaking to attorneys or outsiders might threaten the deal — and could jeopardize what they'd already invested. And when some — including Belafonte, Roger Altman, and Delroy Lindo — decided to withdraw, money from other donors was used to repay them.

Over the course of six years, Cohen made off with more than $31 million.

Results from an IRS investigation turned up evidence that Cohen had over 30 domestic bank accounts and six in Switzerland.

His monthly expenses included a Belvedere mansion that he rented for $45,000 but claimed to own, and bills of up to $300,000. Cohen labored to convey a sense of great wealth, requesting personalized logos affixed to the rented jets and claiming his copies of a Calder mobile and a Picasso were originals.

About The Author

Laura Rena Murray


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