The judge also said that William Shapiro, a former JEC director who has yet to lend his consent to the settlement, needs to do so.
Edward Friend, Shapiro’s attorney, said he expects his client to sign on. “He’s agreeable. He will not hold it up,” the attorney said this week.
As for the attorney general’s office, “there remained an issue regarding the wording of the agreement issued between the state and the defendants,” the Pils’ attorney, David Schwartz, said this week. “We were having trouble communicating with one another about what was and was not acceptable.”
As part of the settlement, the state will impose permanent injunctions on the Pils and other JEC officers and directors.
According to Schwartz, those proposed stipulations will prohibit the JEC officials from being in a position of controlling assets of any “public benefit corporation,” a category of nonprofits that includes the now-defunct JEC.
The settlement arose from a suit filed in November 1997 by Stuart Kaplan, the court-appointed bankruptcy trustee. He filed to gain possession of the Pils’ home in the Richmond District, charging the couple used JEC funds for the down payment and monthly payments.
Schwartz said the Pils testified the 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 group in New York.
In addition, Schwartz said, one check for approximately $14,000 represented JEC money Pil had loaned the organization and later collected.
The settlement, announced last month on the eve of the trial, resulted from several days of mediation between the trustee and his attorney, the attorney general’s office, the Pils and their counsel and the attorneys for several other former directors of JEC.
The settlement, which ends the state attorney general’s civil case against the Pils and allows them to keep their home, requires payment of $200,000 to help pay off JEC creditors.
Of the settlement funds, $185,000 will come from a $1 million “errors and omission” insurance policy issued by Executive Life. The policy protects JEC officials from charges of wrongful or negligent behavior, Schwartz said.
According to a court document filed last month by the trustee’s attorney, Executive Life is offering the money even though the firm asserts that the policy was “obtained by fraud” and that the JEC misrepresented the status of the attorney general’s investigation when it applied for coverage.
Executive Life, the document says, indicated it was ready to seek a court declaration that it “had no duty to provide further defense or coverage” for the claims. In addition, the document states, if the attorney general and trustee succeeded in proving intentional wrongdoing by JEC officials, the legal victory would result in an end to all insurance coverage.
Thus, according to the document by the bankruptcy trustee’s attorney, “a settlement at this juncture maximizes the insurance funds available.”
“The $185,000 contribution of the carrier to this settlement reflects the upper range of the costs of defense that the carrier avoids by entering the settlement,” the document states.
The bankrupt nonprofit, which once oversaw the now-defunct Schneerson Hebrew Day School, has faced problems since mid-1997, when the Pils were hit by a federal-state-local legal assault.
They were charged with tax evasion and diverting thousands of charitable dollars to purchase the home and finance their son’s bar mitzvah. The Pils have maintained their innocence from the start.
The local case came to a close in March with a settlement reached with the San Francisco district attorney’s office. The federal investigation is still pending.