JEC takes in millions, spends only 17% on charity

The S.F.-based Jewish Educational Center collected a record $8.54 million in one year — mostly from its used-car auctions — but spent just 17 cents of each dollar for charitable purposes, according to its latest financial report to the state.

The nonprofit group has been under increasing scrutiny by both the government and the media since last spring when the Wall Street Journal ran a lengthy front-page article on fund-raising by the JEC, which is headed by Rabbi Bentzion and Mattie Pil.

The newest disclosure, required of most nonprofit groups to maintain their tax-exempt status, covers the 12-month period ending March 31, 1996. The documents originally were due in August but the JEC received two 90-day extensions and filed the forms last month with the Internal Revenue Service and the California attorney general.

Most of the revenue, which increased four-fold from the previous year and 40-fold from the year before that, came from the JEC's car donation program. But about $628,000 worth of revenue came from real-estate donations, mostly in California.

Of the JEC's income, 64 cents of every dollar was used to pay for fund-raising, management and other expenses.

Just a small number of the used cars, collected in the San Francisco, Los Angeles and New Jersey areas, were actually donated to Jewish immigrants from the former Soviet Union.

In fact, the group spent less on charitable deeds — $1.46 million — than it did on advertising — $1.53 million.

The JEC's ubiquitous radio spots tout the hefty tax write-offs for donors, one of the prime reasons for the group's meteoric rise.

Charitable programs of the Jewish Educational Center include its 120-student Schneerson Hebrew Day School in San Francisco and a summer camp. The group also runs a variety of programs for immigrants, including English classes, job training and religious education.

The JEC's philosophy is Lubavitcher Chassidic but the group has no ties to Chabad.

Government interest in the JEC began nearly three years ago, when one of the state's auditors heard the group's radio ads. That attention has continued to intensify.

Carole Kornblum, the assistant attorney general who heads the state's Registry of Charitable Trusts, said Tuesday her division continues its audit and a "very broad investigation" into the JEC that began last year.

The JEC also faces possible charges stemming from an accidental fire in November at San Francisco's Pier 48, where the group stored and auctioned off cars.

The JEC's founders and top officials, the Pils, would not directly comment on any topic. They referred all questions to Kamer-Singer & Associates, a San Francisco public relations firm handling their media contacts.

Sam Singer, co-owner of the firm, adamantly defended the JEC's fund-raising techniques, charitable record and rapid expansion.

"It's grown because people have seen that the JEC does good work," Singer said.

"One of the reasons that the JEC draws so much attention is because it is a very entrepreneurial charity. Most nonprofits are struggling desperately to find new sources of funding. The JEC was able to come up with a very entrepreneurial idea."

There are no statutes, either state or federal, that regulate what percentage a nonprofit group must spend on good deeds. But two national watchdog groups offer informal standards.

The JEC does not come close to meeting their guidelines.

According to the Virginia-based Council of Better Business Bureaus, at least 50 percent of a nonprofit's revenue should be spent on its charitable activities — much higher than the 17 percent attributed to the JEC.

Bennett Weiner, vice president of the BBB's Philanthropic Advisory Service, called the JEC's figure "low."

The "vast majority of all charities that we review meet all of [our] standards," he said.

"The bottom line is that contributors expect the majority of what they give will go to the programs they were solicited for. When it doesn't, they are going to be very disappointed and upset."

Singer acknowledged that the JEC's overhead costs could be lower.

"Are the administrative costs high? Yes, they are higher than we'd like them to be," he said.

"In a perfect world, wouldn't it be great if 99 percent of the money went to the charitable cause itself? Yes. But in reality, the costs associated with getting the cars, the advertising, the repair work, the maintenance and the sales — it takes a lot for those cars to come through."

Dan Langan of the New York-based National Charities Information Bureau doesn't accept the explanation that the JEC's expenses are inherently higher due to its form of fund-raising.

"There are charities out there that do the same thing and put 75 cents out of every dollar on programming," Langan said.

According to the financial disclosure forms for 1995-96, the JEC:

*Collected $8,531,680 of in-kind donations, plus another $4,000 in cash.

That included several million dollars worth of vehicles and at least $628,444 worth of real estate, mostly in California. The report did not specify the number of vehicles donated or their total value. Singer said he couldn't get that figure before the Bulletin's Wednesday deadline.

*Spent $5,416,030 on fund-raising, management and general expenses — or 64 percent of its total revenue.

That included $1.53 million in advertising; $1.14 million in salaries and wages, plus another $54,651 that the Pils report as their income from the JEC; $920,877 in auto towing; $509,649 in auto repairs; $431,221 in building rentals; and $139,356 for telephone bills.

Regarding the Pils' salary, Singer said, "they don't pay themselves a whole lot. They are very righteous, very religious people."

*Spent $1,456,977 on charity — or about 17 percent of the money raised.

That included a $377,445 grant to its school, now known as Schneerson Hebrew Day School; $383,575 worth of cars given to needy individuals; $300,093 in direct cash assistance to other charities; $131,213 in religious studies; $123,054 in job training for new immigrants; and $141,597 to its now-defunct "Kids Overcoming Katastrophe" exchange program that brought a dozen boys to San Francisco for a year from areas affected by the Chernobyl nuclear accident.

Regarding the $383,575 worth of cars donated to Russian immigrants, Singer said that the JEC no longer claims in its ads that "a lot" of cars go to immigrants. JEC officials instead decided to help immigrants primarily via the cash proceeds from car sales, he said.

*Held $1.89 million worth of assets, including $504,583 in cash.

The latest financial disclosure filed by the Pils follows their promises over the past two years that they would use a greater percentage of revenue for charitable purposes as the JEC grew.

In the past, they blamed inexperience and high start-up costs for the low percentage of revenue going toward charitable causes.

But the JEC actually had been spending a higher percentage of revenue on charity when it first started the car donation program.

The JEC had almost no income before it began soliciting cars on the radio in December 1993. In fact, it had stopped filing financial disclosure reports with the state a few years earlier because it brought in less than $25,000 annually, the lowest amount requiring such reports.

In 1993-94, the JEC reported $222,970 in revenue. Of that, $108,319 — or 49 percent — went to charitable programs, and $10,238 went toward fund-raising and overhead.

In 1994-95, the revenue jumped to $2.27 million. Of that, $365,755 — or 16 percent — went to programs, with $1.39 million toward fund-raising and overhead.

In 1995-96, the revenue hit $8.54 million. Of that, $1.46 million — or 17 percent — went to programs, $5.42 million to fund-raising and overhead.

Despite that reported revenue, the JEC told Bay Area media it was financially strapped following a fire in November at San Francisco's Pier 48, then the JEC's car storage and auction site. The fire damaged or destroyed about 300 cars.

The Pils then said that two major financial deals — the lease-purchase of a new site for its 120-student Schneerson Hebrew Day School and the purchase of a site for its yet-to-open synagogue — had left them cash poor.

Though the fire was ruled accidental, the San Francisco District Attorney's Office is still determining whether to file charges against the JEC for the fire. San Francisco Fire Department officials have accused the JEC of performing illegal repairs at the site that sparked the fire. JEC has denied the allegation.