The Vanguard Foundation's Great Con

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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 April 2012, Mouli Cohen was found guilty of defrauding over 55 investors of more than $30 million over the course of six years.
Illustration by Marc Scheff
In April 2012, Mouli Cohen was found guilty of defrauding over 55 investors of more than $30 million over the course of six years.
Anti-apartheid activist Hari Dillon pleaded guilty to charges of wire fraud and money-laundering, admitting to his role in the Vanguard Ponzi scheme.
Photo by Gil Riego Jr.
Anti-apartheid activist Hari Dillon pleaded guilty to charges of wire fraud and money-laundering, admitting to his role in the Vanguard Ponzi scheme.

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.

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9 comments
hplovecraft
hplovecraft topcommenter

Even Marx would'a said "Whu ?!" to all of this.. Leftists fail to remember

that the cruel inequalities found in history are/were simply a matter of

'historical fact' [ Marx ] and that it's now time 'to move onward..'

charles000
charles000

One of the darker, and most tragic attributes of the human condition is the vulnerability created by the desire to believe in something of value, belong to a cause greater than oneself, and the willingness to become fanatically devoted to that belief mechanism which has been so craftily constructed, packaged and marketed.

 

As a consequence, there will always be sociopathic predators of the worst kind, who are remarkably charismatic, know how to look and play the part with astonishing precision, and are specialists at latching onto the most worthy and beautiful sounding causes, like a lamprey . . . and suck the life blood out of the organism in question and anyone mesmerized by it.

 

These sociopathic predators, and the pyschodynamics of various people who are looking for something to connect to and identify with as part of their own emotional existence platform, has existed since the earliest days of known human history, and probably always will.

 

I've seen this myself, many times - the codependent symbiosis of sociopathic predators and their mesmerized victims.

 

It is particularly sad, but not at all surprising, that Vanguard should prove to be just such an example.

dr8kangas
dr8kangas

As for Dillon, Wozniak sees him as a disingenuous predator. 

True.  Money is more addictive than crack or tobacco. 

Bernie Madoff & Hari  Dillon are cell mates. 

dr8kangas
dr8kangas

I have known Hari Dillon for 40+ years.   He has always been a lying sexist and racist pig.  

Ask his daughter, whom he stole $100,000. from    

carry it on
carry it on

Dillon was indeed the one who created the ponzi scheme at Vanguard! - Before Mouli Cohen got into the picture. No need to soften the facts.

been-there-done-that
been-there-done-that like.author.displayName 1 Like

Once said, the problem with capitalism is capitalists and the problem with socialism is socialism, but the Vanguard saga changes that. Hari Dillion is Sandusky-esque in his denial and delusions. The planned stock trades, whether Vanguard participated or not, were illegal and all the named, and conveniently not named, knew that. Stealing with Vanguard is still stealing. Dillion deserves a place in the SF Hall of Shame close to Jim Jones that Hall located on Valencia Street. Anybody using the phrase "people of color" should be given a one way ticket to Zimbabwe. Bad people come in all colors. Socialism always sucks.

Tbarj
Tbarj like.author.displayName like.author.displayName 2 Like

Poverty pimps -- whether at foundations like Vanguard, or at institutions like the former New College of California -- only succeed when democratic governance is replaced by cliques. The fact that both of these flagship Bay Area organizations became cults that led to their downfall should serve as a warning that sacrificing democratic process for some imagined higher calling is the beginning of the end.

Lazamjg
Lazamjg

Any person of color who played the "race card" as Dillion did, only sets back the struggle against racism further. No one learns about racism, they just learn to be guilted by it, or support racism by remaining silent. It is absolutely astonishing that Dillion sees himself as a victim! So he didn't steal as much as Cohen, and he wasn't the person who built the ponzi scheme at Vanguard, but he sure wasn't stopping it either. Was he afraid to stop the pilfering of money? I think more it was his own greed and self importance that prevented him from clogging the hole that was draining the foundation. In the firing of Grace Flannery, first using "anti-leadership," "anti- revolutionary" and then finally when that couldn't fit the bill, Dillion labeled her "incompetent". What Dillion is good at is "staging" his actions with left-wing jargon that ring hollow. As far as him being a "victim" well, in the larger picture aren't we all, but in the case of Vanguard, I say NO, HE WAS NOT A VICTIM, HE WAS THE ENEMY! Mr. Dillion is neither dumb nor stupid, a college educated man with worldly experience....so tell me that he unknowingly followed Cohen? Not a chance, he was just as alert, knowledgable, and scheming as Cohen, and was out for himself as early as 2006 when he started to amass, on his own, houses, cars, valet, and all the other play things that go along with being part of the 'RICH AND FAMOUS IN THE BAY AREA." Mr. Dillion through his own greed and self aggrandizement made leftist politics a joke, and racism a card to pull out of ones hat when it's convenient to do so.

Truefreedom
Truefreedom

Miserable schemes created by Cohen and Dillon are disgusting on so many levels. Solace for those trusting individuals can by found in King Davids Psalm 37:1-2 "Do not fret because of those who are evil or be envious of those who do wrong; for like the grass they will soon wither, like green plants they will soon die away".

 
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