Rabbi Bentzion and Mattie Pil, founders of the S.F.-based Jewish Educational Center, cannot run any public-benefit nonprofit in California for at least three years, according to injunctions set forth in the settlement of two civil cases.
The injunctions against serving as officers, directors or trustees of such nonprofits also extend to Sam Budovsky, Michael Braude and William Shapiro, former directors of the now-bankrupt JEC.
The settlement wraps up two cases against the Pils — a state attorney general’s case filed in June 1997 and a federal bankruptcy case filed in November of the same year.
A federal bankruptcy judge conditionally approved the settlement in December. Since then, the parties have been working out the language for the injunctions and signing off on the agreement. As of this week, the major parties had signed it; others will soon follow. The settlement must still be approved by a Superior Court judge.
Attorneys on both sides were pleased with the resolution.
“I think it’s a fair settlement,” said Randy Sue Pollock, an attorney representing Mattie Pil. “There is no admission of wrongdoing by anyone in this case, either the rabbi or Mattie.”
Belinda Johns, the deputy state attorney general who oversaw the state’s case, also expressed satisfaction.
“The purpose of my case was to assure that these defendants be under some court supervision,” she said. “This is at least good for three years. After three years, they can petition the court to have the injunction dissolved.”
According to the settlement, the defendants can serve as employees or contractors of a public-benefit nonprofit, such as the now-defunct JEC — as long as they do not control money. A public-benefit nonprofit, also known as a 501(c)(3), is exempt from paying taxes. The injunctions are not universal, however, because they do not apply to religious nonprofits.
One exception in the injunctions is made for Mattie Pil, a teacher.
If employed as a teacher or administrator in a school owned and operated by a public-benefit nonprofit, she is allowed to handle money “directly related and necessary to fulfill the conditions of her employment.”
The JEC became famous in the mid-1990s for its ubiquitous radio ads soliciting donations of used cars and offering tax deductions to donors. The solicitations brought in millions of dollars to the JEC, which oversaw the now-defunct Schneerson Hebrew Day School and a number of programs for Russian Jewish emigres.
The state attorney general’s civil case against the JEC alleged, among other things, diversion of charitable funds to purchase the Pils’ home and finance their son’s bar mitzvah. The suit also charged them with fraud, unfair business practices and breach of fiduciary duties.
Due to the state’s role as overseer of nonprofits, the attorney general shut down the charity in June 1997. It never fully functioned again. The day school was allowed to stay open, but eventually folded.
The Pils have always denied any wrongdoing.
In addition to the state case, the JEC was hit by local and federal legal assaults in June 1997. The local case was settled in March of last year; the federal investigation is still pending.
The new settlement arose from a case filed in November 1997 by court-appointed bankruptcy trustee Stuart Kaplan.
He filed suit to gain possession of the Pils’ home in San Francisco’s Richmond District, charging the couple used JEC funds for the down payment and monthly payments.
The settlement lets the Pils keep their home while allowing the bankruptcy trustee to recover $200,000 in assets to help pay off creditors, who are owed an estimated $1 million.
The settlement stipulates that $185,000 be paid by the insurance company Executive Risk, through which the JEC purchased an insurance policy protecting officials of the organization.
In addition, Budovsky paid $10,000. Jerome Klein, another former JEC director, paid $5,000.
“They bridged the distance between where the insurance company was and where the trustee was,” said Bartholomew Lee, an attorney representing the two men.
Kaplan said he will keep trying to recover additional JEC assets. Those include parcels of land on the East Coast and elsewhere donated to the JEC in recent years.
In addition, Kaplan said he is in the process of going after “intangible assets” such as money paid to creditors before the bankruptcy lawsuit was filed. Those funds are recoverable under bankruptcy law.
“There might be more lawsuits,” Kaplan said.