JEC’s legal traumas continue in state, federal courts

Legal maneuverings that in the end will make or break the S.F.-based Jewish Educational Center raced ahead this week.

In three separate legal actions:

*A federal judge confirmed a trustee to oversee JEC's Chapter 11 bankruptcy. This move officially ousted a state-court receiver who was in the process of liquidating the charity.

*Two creditors of Charisource, one of the JEC's two for-profit subsidiaries, filed an involuntary petition for Chapter 11 bankruptcy.

*The Lycee Francais, a French school that owns the site housing the JEC-run Schneerson Hebrew Day School, claimed it was suffering financial burdens and appealed to the judge to evict the Jewish school.

Those developments, while critical to JEC's future, managed to overshadow the main question of whether the charity's leaders are guilty of wrongdoing.

Last month, the California attorney general and San Francisco district attorney officially accused them of diverting funds for personal use, fraud, tax evasion, false advertising and unfair business practices. Founders Rabbi Bentzion and Mattie Pil allegedly used at least $100,000 to buy their home and another $40,000 to pay for their son's bar mitzvah.

Meanwhile, the Internal Revenue Service is investigating the JEC on suspicion of mail fraud, wire fraud, money laundering and currency transactions designed to evade federal reporting laws.

JEC leaders have denied any wrongdoing.

On Monday, U.S. Bankruptcy Court Judge Dennis Montali appointed attorney Stuart M. Kaplan as the trustee.

Though state deputy attorney general Belinda Johns initially considered fighting a trustee appointment, she changed her mind by Monday's hearing.

"I'm pragmatic," she said afterward. "As long as I've got someone controlling the assets other than the defendants, it's fine...I just want to make sure the assets are protected."

Kaplan has previously worked as the court-appointed receiver for a Hayward Toyota dealership and was the first president of San Francisco's Brandeis Hillel Day School.

Those two qualities impressed the JEC board chair, Carol Ruth Silver, who had complained that the receiver didn't have the experience to save JEC's program to solicit and then auction used cars. She also asserted the receiver wasn't interested in saving the charity's 150-pupil day school or summer camp.

"I'm satisfied so far," she said Tuesday about Kaplan.

Kaplan, however, emphasized this week to Montali that he wasn't ready yet to judge "the feasibility or propriety of continuing any or all of the debtor's operations."

Meanwhile, Lycee Francais stressed that JEC's financial woes could harm the 600 students in its two Bay Area schools.

"This is causing great hardship for the Lycee, which has been running its assets prudently and conservatively for 30 years," said board member Jean-Yves Lendormy. "This jeopardizes our financial stability. It's a very immediate issue."

Lycee leased its former site at 34th Avenue and Balboa Street to the Schneerson school in August. The JEC originally wanted to purchase the building outright but apparently did not have the money then. So the JEC obtained a lease-option to buy the building for $2.05 million within 10 months.

The French school needed the money to pay for its new site on Ashbury Street and took out a short-term loan for $2 million. That loan will come due Aug. 15.

According to Lycee's court documents, the bank hasn't agreed to extend the loan and won't convert it to long-term financing. Lycee's attorneys maintain it has a buyer for the four-story building, but the French school needs JEC to vacate it before the school year starts in September.

Silver asserted that JEC has someone who will purchase the building for the charity and then lease part of it back.

There is, however, contention over whether the JEC's lease-option expired. A hearing on the issue is set for July 28.

Adding to the fray this week was the JEC's condemnation of the receiver and his attorney for requesting their fees now that they are off the JEC's case.

Receiver David Bradlow and his attorney, Philip Warden, turned in their preliminary bills, totaling $72,333. Montali deferred the matter for now, saying that if he granted the request, "this business would shut down."

Silver, meanwhile, sent out a press release blasting such fees and helped organize a brief protest outside the bankruptcy court building in downtown San Francisco. About a dozen Russian emigres held up a small sign stating "Shame, Shame."

"Not all lawyers charge charities that kind of money," Silver said.

Bradlow and Warden weren't pleased.

"Ms. Silver is trying to divert attention away from why the attorney general filed this case," Warden said.

Judge William Cahill, who appointed Bradlow last month in Superior Court, defended him as well. "All the receiver has done is for me," Cahill said. "He's entitled to be paid."