The Vanguard Foundation's Great Con

Her recollections of Dillon's largesse are reinforced by court records, which reveal a more nuanced tale than that of a fallen hero or blind victim. Dillon enjoyed an extravagant lifestyle that belied his annual salary, which never topped $87,000. He employed his own driver and valet, had multiple homes for family members, and spent thousands on clothing, travel, limousines, and investments.

Several former acquaintances recalled Dillon's habit of carrying around a brown paper bag full of cash, used to pay for swanky hotel rooms and expensive restaurants. Whenever Dillon made reservations, they claim, he used an alias to avoid recognition, a habit perhaps adopted from his famous friends. Once exposed to Vanguard's activist community, such grandiosity seemed the antithesis of what Dillon had long fought for.

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.

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.

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Although he didn't know it, by the time Gus Newport was hired by Vanguard to oversee operations in New Orleans in 2005, the foundation was floundering financially. The former Berkeley mayor considered Dillon, Glover and Belafonte friends, and he'd always been willing to write a letter or give a speech when Vanguard called on him. So when Glover asked him to check on a Hurricane Katrina support program the foundation was funding, Newport agreed. He reported back that the project lacked "an operating structure that had the right accounting practices to run the money through."

Vanguard hired Newport, but as time passed, the foundation stopped covering Newport's expenses. He recalls going as long as 60 or 90 days before receiving portions of his paycheck. Newport began receiving apologetic phone calls from Dillon and promises of future bonuses in exchange for patience.

In 2006, Newport attended one of the foundation's last board meetings. He remembers it as notably tense. Some board members, including McKay, asked pointed questions but weren't getting real answers from Dillon. "One woman who made an investment of $600,000 was a lawyer and threatened to sue, so she got all her money back," Newport recalls. "She was called by Hari and some other people a counter-revolutionary."

Disheartened and uncomfortable, Newport left the meeting well before it was over.

After that, he recalls receiving a few phone calls from Dillon asking to talk to his wife about investments and donations. "He's still begging for money," Newport says, "and I know a few people are still giving some. His begging has been successful with a fair number of white women." Indeed, sifting through multiple lawsuit documents and testimonies reveals a man adept at acquiring money from women willing to give him millions or co-sign his bank loans. His family was not immune, either: During Dillon's cross-examination, Cohen's attorney presented evidence that showed Dillon even racked up more than $100,000 in charges on his daughter's credit card in 2008 without her knowledge.

Newport says his greatest disappointment is the overriding lack of accountability, especially from the board members, who wouldn't call Dillon out for fear of being branded traitors to the revolution.

"Ideology being what it is, people buy that bullshit," Newport says, shaking his head. "How can a board made up of professionals — investors themselves, psychologists and lawyers — have sat by and watched this stuff happen?"

Ninety percent of Vanguard's money stemmed from 10 percent of the donors, most of whom had invested in Cohen's scam. The foundation quickly began to spiral down the tubes. "By '06 we were running on fumes," Dillon says. "By '07, there weren't even fumes left. And we then depleted the endowment, which had gone down to $753,000 after the market crashed." At its peak, Dillon recalls the endowment equaling $1.3 million.

Through it all, Dillon and the donors held out hope for the Microsoft sale that Cohen had promised. "Donors were loaning money to Vanguard, so we could keep operating while waiting," he continues.

Dillon discovered the scam in 2008. As he tells it, both in interviews and on the stand, when confronted, Cohen appeared unfazed, and even gave Dillon a hug. The next day, Cohen wired money overseas, and within two weeks had vacated the Belvedere mansion for another in Beverly Hills.

Vanguard continued to issue award letters to organizations promising grants that would never be paid. Then, after three years of failing to submit an annual tax return, the foundation officially shut its doors in May 2009. According to its last 990 report, filed with the IRS in 2007, Vanguard was running a deficit of $3.5 million.

Some of Vanguard's donors lost millions in the scam and a few lost almost everything. By the time he filed for bankruptcy in 2010, Dillon himself owed over $100,000 in federal and state taxes and more than double that in outstanding bank loans. He lost his home and is now reliant on old friends and his staunch supporters from Vanguard, as he awaits his sentencing in September.

On June 9, more than 40 people gathered to participate in a community dialogue organized by Vanguard's former staff and donors. With the exception of one board member, the foundation's directors were absent, but Myra Levy — the donor who had turned to Google to find the address of the foundation — was there, still grappling with unanswered questions.

"I still don't really know how [the scam] relates to the downfall of Vanguard," Levy says. "Even when the flow of grant money to nonprofits was turned off, there was still a lot of money that continued to change hands." She points out the discrepancy between the hundreds of thousands of dollars given to the scam month after month while small grants awarded to nonprofit groups went unpaid.