Liquidation halted by U.S. judge in S.F.

The Jewish Educational Center's day school, summer camp and emigres programs may still disappear — despite the last-minute reprieve from liquidation the San Francisco charity wrung out in federal court this week.

Frank Malifrando, the JEC's program director and one of a handful of remaining employees, said the court ruling doesn't mean money is available for the JEC's Camp Chai or food giveaways to elderly emigres.

The charity is still weighed down by huge bills, no revenue and accusations that some top officials skimmed money for personal use.

"We can't lose sight that everything isn't la-di-da," Malifrando said Wednesday morning. "Help is still needed."

The deliverance, however temporary, took place in U.S. Bankruptcy Court on Tuesday afternoon. Federal Judge Dennis Montali appointed a trustee who will consider reorganizing the charity instead of shutting it down.

The trustee replaces a receiver installed last month by state Superior Court in San Francisco. The receiver, under the state court's orders, was in the midst of selling all of the charity's assets to pay off creditors, whose claims are now estimated at more than $600,000.

"I'm happy…because nothing could be worse than the situation we were in," Carol Ruth Silver, JEC's board chair, said after Tuesday's court session in downtown San Francisco.

But her relief may be short-lived. The next legal action will take place Monday in the bankruptcy court when attorneys for the state and the JEC hash out the validity of the bankruptcy petition.

In other recent developments:

*Rabbi Bentzion and Mattie Pil, the charity's founders and former top officials, resigned from the board of directors shortly after the receiver cut off their paychecks.

"They thought it would be in the best interest of the JEC," Silver said. The board placed the rabbi on administrative leave but kept his wife on as unpaid school director.

*Receiver David Bradlow claimed he was threatened July 4 by a JEC employee, who warned he would come to Bradlow's home with 250 hungry emigres expecting to be fed if the receiver didn't release $200 to help feed them.

JEC attorney Bartholomew Lee didn't dispute the incident but promised nothing similar would happen again.

*JEC employees turned down an offer from the Bureau of Jewish Education — which got involved at the request of the receiver and the S.F-based Jewish Community Federation — to help find new places for campers and schoolchildren who might be displaced. It was the sole offer of aid from the organized Jewish community, which has long kept its distance from the JEC.

*Lycee Francais, a French school that owns the building JEC rents at 34th Avenue and Balboa Street, began efforts to evict the JEC-run Schneerson Hebrew Day School and Camp Chai. Lycee Francais attorneys assert that the lease has expired, and that JEC owes back rent. JEC claims otherwise and is trying to exercise its right to purchase the building through its lease-option.

*An auction of 184 used cars took place Wednesday morning in San Francisco. It would have been JEC's last car auction in the Bay Area, but that might change now.

*San Francisco District Attorney Terence Hallinan said his office would consider dropping its civil actions charging the JEC with false advertising and unfair business practices if the charity actually was liquidated and "no longer a problem."

Until Tuesday afternoon, JEC's few remaining employees couldn't say whether the summer day camp would be open next week — or even the next day — for the 100-plus campers. The same applied to the JEC's English classes, citizenship classes and meals program for emigres. The future of Schneerson Hebrew Day School also was in doubt.

In the midst of the upheaval, parents of both campers and schoolchildren aired their frustration.

"Just to let the school collapse is really sad. That's the thing about this that really bugs me," said parent Bruce Gottlieb, whose 3-year-old son has attended JEC's preschool for the past two years.

He had planned to send his 3-year-old back this fall because he respected the teachers' warmth and enthusiasm, but was reconsidering in light of the chaos.

"I'm not a gambling individual. It would be in our best interest to look for another preschool…We'll find something for our son, but it will be a lot tougher for other parents," said Gottlieb, who helped run the school's loosely organized parent-teacher group.

Many reiterated their support for the Pils.

"I stand by them 100 percent because I've known them for a long time," said parent Gina Tordjeman, whose three children have attended JEC's preschool or summer camp for several years. "They've done beautiful work and they've always been there for me."

The latest twist in the JEC's tale came as a result of three creditors filing what is legally termed an involuntary petition for Chapter 11 bankruptcy.

In this case, however, the petition wasn't exactly involuntary. The JEC board actually worked with creditors to file the petition in order to oust the receiver, whom they saw as an opponent.

Creditors apparently feared they'd get only pennies on the dollar if the receiver remained in place.

The three petitioning creditors include Glat Western Kosher in Los Angeles, which is seeking $28,900, and KGO radio in San Francisco, which is asking for $41,350.

Although Chapter 11 bankruptcy generally leads to reorganization rather than liquidation of an organization, it is possible that a trustee might decide to shut down the charity anyway.

In Tuesday's bankruptcy court session, the JEC board's authority to consent to the bankruptcy petition was under dispute. Philip Warden, the receiver's attorney, said the board no longer had the power to consent to any action, including a bankruptcy petition.

"Mr. Bradlow is the board of directors," Warden said of the court-appointed receiver.

But the JEC's attorney disputed that claim, saying the Superior Court only gave the receiver control over the assets.

"The receiver is not JEC," Lee said.

Belinda Johns, the deputy attorney general in charge of the state's case against the JEC, wasn't pleased with the receiver's ousting.

"How can they run a business with an injunction against them?" Johns said. Considering the JEC owes at least $600,000 to creditors, "it's kind of irresponsible to say they have a viable charity."

Johns also questioned the motives for filing the bankruptcy petition.

"If the only reason they're doing this is to circumvent state law, that is a very dangerous road to travel," she said before the bankruptcy court appearance.

Silver, one of the few JEC leaders not accused of wrongdoing, openly acknowledged that the bankruptcy petition was designed to boot the receiver.

She hopes the federal court will appoint someone "with more business sense and a background in the car business."

This is only the latest unpredictable twist since the charity's world was turned upside down less than a month ago by the county, state and federal justice system.

Once envied for its cash flow of millions from the donation and auction of used cars, JEC and its officials were hit June 12 and 13 with official allegations of diversion of funds, false advertising, tax evasion and fraud.

The city of San Francisco also accused the JEC of illegal car repairs that led to a November 1996 fire and more than $1 million in damage to the city-owned Pier 48.

At the same time, the Internal Revenue Service obtained a search warrant to seek evidence of mail fraud, wire fraud and money laundering.

In mid-June, San Francisco Superior Court Judge William Cahill appointed the receiver and then issued a preliminary injunction against the charity's founders and several current or former board members.

The Pils are accused of using at least $100,000 of the charity's money to buy their home in San Francisco, as well as about $40,000 to pay for their son's bar mitzvah in January.

Johns predicted that more such transactions would be found as investigators pour over records.

"Believe me, we don't know how much money has been taken. This is the tip of the iceberg," she said.

JEC officials denied any wrongdoing, although the Pils have declined to speak to the media.

Two weeks ago, Lee filed documents in Superior Court stating the Pils' home "can be deeded to the JEC by Rabbi and Mrs. Pil at JEC's request."

Michael Stepanian, who is representing Bentzion Pil, could not be reached for comment. Robert Carey, Mattie Pil's attorney, did not return phone calls.

Lost in much of this was the fate of the day school, which also houses the preschool and the summer camp.

Bradlow, who will not comment on the case to the press, said in court he would separate the day school from the liquidation and let JEC try to continue to run it. But JEC leaders said such programs would disintegrate without income from the used-car auctions.

The JEC's Malifrando berated the receiver for refusing to hand over the $10,000 in fees parents paid for Camp Chai, or even the $200 to pay for meat to feed seniors last weekend.

But Johns accused the charity of a disinformation campaign. JEC employees and officials have not cooperated with the receiver to save the programs, she said.

If JEC officials were so interested in maintaining the school, Johns said, they should have turned over the deed to the building the charity owns at 11th Avenue and Clement Street so the receiver could sell it to raise funds.

The same applies to furs, jewelry, art and 60 pianos known to be donated to the charity, she said.

"All requests for documentation of debts and expenses and a documented need for money have been met with nothing," Johns said. "No response."