A broad settlement reached this week allows Jewish Educational Center founders Rabbi Bentzion and Mattie Pil to keep their home and ends the state attorney general’s civil case against them.
The San Francisco couple still face state injunctions, which have yet to be determined.
According to Belinda Johns, deputy state attorney general, the restrictions most likely will prohibit the Pils and other JEC officers and directors from associating with any “public benefit corporation” — a category of nonprofits that includes the now-defunct JEC.
The settlement, announced in U.S. Bankruptcy Court in San Francisco on Tuesday, requires payment of $200,000 to help pay off JEC creditors owed an estimated $1 million.
The money must be paid by Dec. 10, with $185,000 coming from an executive risk insurance policy that protected JEC officials, and the other $15,000 coming from two former JEC board members, according to the Pils’ attorney David Schwartz.
The bankrupt nonprofit, which once oversaw the now-defunct Schneerson Hebrew Day School, became famous for its ubiquitous radio ads soliciting used cars to be sold at auctions. The auctions brought in millions of dollars.
But the charity’s world came crashing down in June 1997, when the Pils were hit by a triple-pronged federal-state-local legal assault. They were charged, among other things, with tax evasion and diverting thousands of dollars in charitable funds to purchase a home and finance their son’s bar mitzvah.
The local case came to a close in March with a settlement reached with the San Francisco District Attorney’s office. Following allegations of false advertising and unfair business practices, the Pils were slapped with severe restrictions on future advertisements.
The federal investigation, which focuses on criminal charges of alleged mail fraud, wire fraud and money laundering, still stands.
The settlement reached this week stemmed from a suit filed last November by Stuart Kaplan, a court-appointed bankruptcy trustee.
He filed that suit to gain possession of the Pils’ home in San Francisco’s Richmond District.
“We are certain some JEC funds went into the purchase of the home,” Kaplan’s attorney Malcolm Leader-Picone said at the time.
Tuesday, the Pils appeared in court and stated on the record they understood and accepted the terms of the settlement.
Later, Bentzion Pil declined further comment.
But Randy Sue Pollock, an attorney representing Mattie Pil, expressed satisfaction with the outcome. “The goal was to have them keep their house,” she said.
The $2,095 monthly mortgage payments have not been paid for a year. With the settlement reached, Schwartz said, the Pils will catch up on their payments in full. Where that money would come from is unclear.
In early depositions regarding the financing of their home, the Pils invoked the Fifth Amendment more than 300 times. They did so, Schwartz said, to protect themselves from other potential legal problems — particularly the federal criminal investigation.
The attorney stressed that the Pils had answered questions openly in later depositions.
“After the appropriate steps were taken, they were willing to tell everything they knew,” he said.
According to Schwartz, the Pils testified that money for the down payment on their $472,000 home came from sources including Mattie Pil’s brother, acquaintances in Ukraine and a Jewish free-loan association in New York.
In addition, Schwartz said, one check for approximately $14,000 represented JEC money that Bentzion Pil had loaned the organization and later collected.
Despite the latest development, the bankruptcy proceedings are far from over.
“There is still a lot of property to be sold,” Johns said. “The trustee will continue to marshal assets and sell them.”
Leader-Picone made a similar assertion. “We are not through seeking to recover assets to distribute to creditors,” he said.
The recovery of $200,000 was “the best deal possible under the circumstances,” he said. “We feel all the parties worked hard and in good faith.”