JECs bank accounts near empty, state says

The S.F.-based Jewish Educational Center, once awash in millions of dollars but now entangled in local, state and federal legal attacks, is suddenly cash poor.

A court-appointed receiver found only $150,000 in JEC's frozen bank accounts last week, California Deputy Attorney General Belinda Johns said Monday.

That figure contrasts sharply with the $15.6 million that JEC reported as income — mostly from its auctions of donated used cars — from April 1993 to October 1996.

"They have had lots of money in their bank accounts. I don't know where to trace it," said Johns, who has overseen the state's year-long audit and investigation of JEC.

"Why is there only $150,000 left? That's the point of my case — to find the money. We sure don't know where it is now."

In fact, there is so little money in the nonprofit JEC's bank accounts right now that it's possible the charity may simply be forced to shut down, Johns said.

JEC officials have repeatedly denied any wrongdoing.

"Belinda Johns, the attorney general and the district attorney seem to think there is a pot of stolen money somewhere. There absolutely is not," said Carol Ruth Silver, the new chair of the JEC's board.

The bank accounts are low because JEC uses its auction income to pay for its ongoing charitable programs such as a Russian language magazine and student scholarships for the JEC-run Schneerson Hebrew Day School in San Francisco, she said. Money also has been pumped into rent for the day school's building and JEC's used-car lot, as well as for the purchase of a building for a San Francisco synagogue.

She added that the charity recently has been forced to hire expensive attorneys and accountants to help deal with legal problems.

"The JEC doesn't have any cash in its account other than its daily cash or its weekly cash," Silver said Wednesday. "The JEC has an audit trail of every nickel that went through it."

But the state's investigators, who have accused JEC founders Rabbi Bentzion and Mattie Pil of diverting at least $100,000 of the charity's money to buy their home and $30,000 to finance their son's bar mitzvah, aren't satisfied with such explanations.

Silver noted that she doesn't condone any violation of the law. But she added that the amount of money the Pils are accused of taking is "not that much" compared to the millions the JEC has earned.

Johns disagreed with Silver's assessment, adding that the amount of allegedly diverted money could grow and that the Pils would be liable to return any money proven to be diverted.

Since the receiver took control two weeks ago, Johns said, he realized the dire state of the JEC's finances. After spending $90,000 to meet the payroll, Johns added, the receiver and the JEC's own accountant decided to take drastic measures to cut expenses. One-third of JEC's workers have been laid off, Silver said.

Meanwhile, Johns added, the receiver also has started to receive faxes from creditors who claim the JEC hasn't been paying bills.

In a related development, the San Francisco District Attorney's office has closed the smog-check operation of an auto shop used by the JEC and has issued an arrest warrant for the shop's owner for allegedly issuing illegal smog certificates. A second smog-testing shop used by the JEC is under investigation for similar practices, assistant district attorney June Cravett said Wednesday. That means an unknown number of cars sold at JEC auctions likely will have to be tracked down and retested.

The current situation unfolded on June 12 and 13 when the San Francisco district attorney, California attorney general, U.S. attorney and the Internal Revenue Service coordinated a multipronged attack on JEC.

The local and state offices filed separate civil actions, hitting JEC officials with numerous charges — including false advertising, fraud, tax evasion and diversion of funds. The city also accused the JEC of illegal car repairs that led to a Nov. 26 fire and more than $1 million in damage to the city-owned Pier 48. The city is now seeking that money from the JEC.

In the meantime, IRS criminal investigators obtained a search warrant and confiscated JEC office records to seek evidence of wire fraud, mail fraud and money laundering.

The Pils, the nonprofit's founders and its top officials, lost their source of income and control over the organization after San Francisco Superior Court Judge Thomas Cahill appointed David Bradlow as receiver in charge of JEC. The judge also issued a temporary restraining order to prevent the Pils and other top directors from touching any JEC money.

Bradlow, an independent management consultant in San Francisco who specializes in bankruptcy cases and has been appointed repeatedly by courts to oversee financially shaky organizations, could not be reached for comment.

As a result of the Pils' sudden lack of income, Silver set up a "Tzedeka Fund for the Pil Family" this week to help the couple and their eight children. She also made a plea for individuals to continue donating cars — the lifeblood of the organization.

"We've had a significant decrease in the number of cars coming in," she said at a Monday afternoon press conference in Schneerson Hebrew Day School's cafeteria. Behind her, children enrolled in summer camp chattered and munched on bagels during lunch.

Silver, who is not a defendant in any of the legal actions and is former member of the San Francisco Board of Supervisors, defended the Pils and asked for the "campaign of innuendo" in the media to stop.

"We believe the Pils will be cleared…There are many accusations but nothing proven," Silver said.

The Pils have remained silent since the civil actions were filed. Mattie Pil, who was in the cafeteria watching the children and the press conference, again chose not to comment.

Today, the judge will hear arguments over permanently appointing Bradlow as the receiver and granting a preliminary injunction against JEC officials.

Because of the apparent financial crisis, Cahill decided on Thursday of last week to allow used-car auctions to continue until at least today in the San Francisco, Los Angeles and New Jersey areas.

The JEC needs the money generated by its used-car auctions to continue Camp Chai, Schneerson Hebrew Day School, its English classes and other programs. It still plans to begin a kosher meal service for Russian immigrants on July 1.

Silver vowed that the JEC's programs will continue.

"Despite the IRS, the attorney general, the district attorney and the disparagement of the Jewish Bulletin," she said in the press conference, the JEC's programs "are strong, going on and will continue."

As for the smog-testing, the San Francisco District Attorney's Office has shut down the operations of one local shop for allegedly issuing illicit smog certificates by using one "clean" car for multiple tests. It is investigating another one, also used by the JEC, for the same reasons.

Silver said she did not know how many other smog-test shops the JEC has used, how long the JEC has used these two shops, or how many cars might be involved.

But Silver did assert that the JEC — or at least its top officials — weren't aware of phony smog certificates. She also said she was disappointed with the government for waiting until now to close the alleged culprit shops.

"Whoever is responsible is not the JEC," she said.

The JEC also stopped using another smog-check shop in Los Angeles accused of similar practices, Silver said.

All the developments followed several years of complaints and rumors about the charity's practices. Until recently, however, the only public criticism of the JEC had been its relatively low return of money to charitable programs.

Before the JEC revamped the accounting methods it had used for the past three years, financial records showed that only 22 cents out of each dollar raised went to charitable causes in 1996. The rest went to overhead and fund-raising. After changing the accounting practices, the JEC showed that 37 cents of every dollar went to charity.

There are no laws governing how much a nonprofit must spend on charitable programs.

The Pils have so far been accused only of civil violations that would lead to fines and civil penalties, Johns said. But if charged and convicted of criminal charges on the federal level, they could face prison terms.

Besides the Pils, others have been named in the civil actions. They are Levi Plotkin, who is Mattie Pil's brother, as well as several former or current board members including Michael Braude, William Shapiro, Jerome Klein, Sam Budovsky and Simon Klapholz.