gavel.jpgA former foundation director was sentenced in federal court in San Francisco today to three years and four months in prison for a fraud in which he admitted stealing at least $2.5 million from foundation donors.

Hari Dillon, 64, the former executive director of the now-defunct Vanguard Public Foundation, was sentenced by U.S. District Judge Charles Breyer, who called his actions “simply inexcusable.”

“You have ruined the foundation and dealt a devastating blow to organizations that promote social justice and the people they serve,” Breyer told Dillon.

Dillon pleaded guilty before Breyer in 2010 to two counts of money laundering and two counts of wire fraud and admitted to embezzling at least $2.5 million from people associated with the San Francisco-based foundation between 2004 and 2007.

Dillon solicited the money from foundation donors for the supposed purpose of lending money to Belvedere businessman Samuel “Mouli” Cohen to pay the costs of completing a deal in which they had previously invested.

The deal, which turned out to be a fraud in which Cohen fleeced investors of about $30 million, was claimed by Cohen to be the acquisition by Microsoft Corp. of an electronic music company he co-founded.

Vanguard donors were told that investing in the venture would give them profits they could contribute to the foundation’s endowment.

Cohen’s scheme began in 2002. Dillon, who later claimed he was not aware of the fraud until 2008, helped him solicit tens of millions of dollars in investments from Vanguard donors.

Dillon admitted in his plea agreement that after Cohen claimed in 2004 that he needed more money for costs including European regulatory fees, Dillon solicited additional loans from investors and siphoned off at least $2.5 million of those funds for his personal expenses over the next three years.

Prosecutors said he spent the stolen money on expensive hotels, restaurants, limousines, credit card bills and his children’s tuition.

Dillon told Breyer during the sentencing, “I am deeply remorseful.

I truly and sincerely apologize for my wrongdoing.”

After pleading guilty in 2010, Dillon aided prosecutors in investigating Cohen and testified against Cohen in his trial in Breyer’s court in 2011.

A jury convicted Cohen of 29 counts of wire fraud, money laundering and tax evasion.

Last year, Breyer sentenced Cohen to 22 years in prison and ordered him to pay $29.7 million in restitution.

Dillon’s three-year, four-month sentence was heavier than the two-year, six-month term recommended by prosecutors, who cited Dillon’s aid in the Cohen case.

But Breyer said that penalty would be too lenient, telling Dillon, “Your course of conduct and your deception over time warrant a greater sentence.”

Breyer will determine the amount of restitution Dillon owes victims at a later hearing. He allowed Dillon to remain free for several weeks so that he can testify in depositions in a series of civil lawsuits filed against Cohen, Dillon and others by people who lost their money.

The Vanguard Public Foundation, which was supported by celebrities including actor Danny Glover, was founded in 1972 and closed in 2009 as a result of financial mismanagement and Cohen’s fraud.

It funded progressive causes, including civil rights, anti-poverty and anti-war organizations and activities.

Dillon grew up in the Central Valley in a family with roots in India and first became known as a social activist when he helped to lead a student strike at San Francisco State University in 1968. He was hired as executive director of Vanguard in 1990.

Breyer today called the foundation’s collapse a “horrible and tragic episode” and said members of the foundation’s board of directors were in part to blame for failing to be vigilant.

“This foundation was destroyed by the neglect of those who had responsibility to prevent it. This foundation was on the forefront of supporting causes for social change,” Breyer said.

“I address directors, lawyers, and accountants: where were you during the five years this massive fraud continued?” he asked.

But Breyer said he was sentencing Dillon for his own actions, not for those of Cohen or the foundation’s board.

Five victims who lost money in the fraud testified during the sentencing, including one who urged leniency and four who asked for strong punishment for Dillon.

Shannon Gallagher, a patent attorney who said she and other family members lost a total of $1.5 million, said, “He’s a master manipulator. My life has been turned upside down.

“Mr. Dillon’s former self is lost and it’s best to keep society safe from his tomfoolery,” she told Breyer.

Julia Cheever, Bay City News

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