The Demise of Vanguard

Articles and Reports:

For more background information on Vanguard, see Rick Cohen’s    articles below. These were published on Blue Avocado, an online magazine for community nonprofit organizations:

What happened?

In the early 1970s, a group of young people–with consciences shaped by the war in Vietnam and the Civil Rights Movement, and armed with inheritances from the Pillsbury Baking Company, Sunbeam Bread, and DuPont–created a group of institutions that laid the groundwork for an entirely new kind of philanthropy.

These new philanthropists not only gave away money, but they gave up control by including grassroots activists in their grant-making decisions. They created a half-dozen “alternative” foundations around the country: Bread and Roses Community Fund, Haymarket People’s Fund, Liberty Hill Foundation, McKenzie River Gathering Foundation, North Star Fund, and Vanguard Public Foundation. They also established the Funding Exchange, a national network comprised of progressive foundations funding social change movements.

For more in-depth information, refer to reports on the left.

Former Vanguard Public Foundation staff, donors, and grantees, as well as other social justice allies, have come together to better understand what led to the demise of the Foundation, and to begin a community healing process. Through our dialogues and research, we have uncovered the significant role that Vanguard’s former President, Hari Dillon, played in misappropriating investor and foundation funds and deceiving donors and grantees, and the lack of board oversight during the length of the fraud.

Dillon has painted himself as an unwilling dupe to an unscrupulous investor/venture capital scheme, victimizing the Foundation and its grantees.  But our review of recently unsealed court records tells a different story.

As early as 1993, Dillon was misappropriating Vanguard funds for his personal use. Over time, he preyed on donors, securing millions of dollars in personal loans that he used in pursuits other than those he had pledged so that he could live lavishly.

With the Foundation’s growing deficit each year since 2004, it is evident that fundraising for general operations and grants became a secondary activity to the investment schemes that he and a number of donors were engaged in. His distraction with the five investment groups that he had set up also waylaid all efforts in raising the Foundation’s annual budget, which was a core staff and board activity.  By 2007, the Foundation carried a deficit of approximately $3.5 million.

Dillon and the Vanguard Board were responsible for the sustainability and financial viability of the Foundation. The investment schemes that Dillon presented to donors were too risky for the Foundation to undertake, and it was unethical to encourage donors to divert resources into speculation. At least two money managers advised him that these were high-risk ventures. 

Mouli Cohen received a prison sentence of 22 years for his role in the fraud, which included 15 counts of wire fraud, 11 counts of money laundering, and three counts of tax evasion. Dillon was indicted on 34 counts for his role in conspiring to prolong the fraud, but the plea bargain he struck with the government for testifying against Cohen winnowed down the charges against him to 4 counts. On January 29, 2013, Dillon was sentenced to 40 months in prison and 3 years probation, with Judge Charles Breyer noting that he "ruined a foundation and . . . dealt a devastating blow to organizations that promote social justice."

The result?

Vanguard’s donor base has been crippled. Donor advised funds are wiped out. Grantees were left with unpaid grants. Vanguard’s endowment disappeared, and with it a huge blow has been dealt to the ability to fund social justice now and into the future in the San Francisco Bay Area.

Despite these challenges, the Vanguard Justice Community has coalesced around the notion of reconciliation and healing. Our vision is to bring the community together so that we can rejuvenate the Vanguard spirit and work together as partners for social justice going forward.

Subpages (1): Diverted Funds