Rabbi Bentzion Pil, founder of the now-defunct Jewish Educational Center in San Francisco, was prepared to plead guilty yesterday in federal court to a felony charge of evading reporting laws on bank deposits.
"He is guilty," Michael Stepanian, one of his attorneys, said Tuesday.
The criminal charge carries a penalty of up to five years in prison. But a plea agreement worked out with the U.S. Attorney's Office includes a stipulation that Pil will not go to prison, Stepanian said.
Pil — known in the mid-1990s for his ubiquitous radio ads soliciting used cars that he later sold at auction — was arraigned on the charge Nov. 23 before U.S. Magistrate Judge Elizabeth Laporte, in San Francisco.
He is charged with "structuring currency transactions to evade reporting requirements" in relation to more than $1.7 million deposited at Bank of America in 1995.
According to court documents, the JEC repeatedly made deposits of $9,990. Federal law requires anyone making a deposit of more than $10,000 to fill out paperwork as part of the government's attempt to track down potential criminals.
Until now, Pil had maintained his innocence in all accusations of wrongdoing. He did not return a phone call this week requesting comment on the charge.
"He doesn't like the idea of pleading guilty, but he felt this was a way of putting the past behind him and moving toward a more positive future," Stepanian said.
The plea agreement also includes a stipulation that Pil's wife, Mattie, will not face any charges. "It was part of the negotiations," said Randy Sue Pollock, Bentzion Pil's other attorney.
Assistant U.S. Attorney Ross Nadel, who is handling the case, said Tuesday that he could make very little public comment until after yesterday's hearing.
But Nadel did say that Pil's decision to plead guilty was announced at the arraignment.
When Pil is sentenced, the entire affair that hit the headlines 2-1/2 years ago will come to an end.
In June 1997, the Internal Revenue Service went public with its criminal investigation of the Pils and the JEC, alleging mail fraud, wire fraud, money laundering and structuring currency transactions to evade federal reporting laws. The U.S. Attorney's Office handled the prosecution.
At the same time, the California Attorney General's Office and the San Francisco District Attorney's Office filed civil actions against the Pils and JEC.
At the time, the JEC ran the 140-student Schneerson Hebrew Day School, a summer day camp, holiday and Shabbat celebrations, a Russian-language magazine for Jewish emigres, English classes and a computer-training program.
The JEC, a nonprofit started in the mid-1980s, remained small until the early 1990s, when the Pils came up with the concept of asking people to donate their used cars. At first, the Pils promised to give the cars to emigres but eventually they began selling them at auction.
At one point, they were bringing in millions of dollars per year by auctioning hundreds of cars each week in the Bay Area, Southern California and the New York area.
The Pils, who are Chassidic, saw themselves as the primary spiritual leaders of San Francisco's burgeoning Jewish emigre population from the former Soviet Union. Bentzion Pil himself emigrated from Uzbekistan to New York as a teenager.
Both Stepanian and Pollock said they are pleased with the expected outcome of the federal case through the plea agreement.
"It's a fair disposition," Pollock said. "It allows him to get back to his community" and focus on his spiritual work with emigres.
Even this week, Pil organized a public menorah-lighting at 12th Avenue and Lake Street in San Francisco's Richmond District for crowds of up to 200, Pollock said. The Pils have continued to lead Shabbat services out of their home, she added, and organized High Holy Day services for 600 at a Russian restaurant on Clement Street.
Despite the plea agreement, there is still a chance that U.S. District Court Judge Martin Jenkins could send Pil to prison.
Federal judges are not compelled to go along with plea agreements, Nadel said. But if judges choose not to follow the standard sentence, they must give specific reasons allowed under the law.
Both of Pil's attorneys assert that the chances of a prison sentence are slim.
"I feel confident he won't go to jail," Stepanian said.
"It's not going to happen. I can't see that," Pollock added.
Although a federal grand jury was involved in the case, Stepanian noted, Pil was not indicted.
Instead, the government and his attorneys reached an agreement, and the U.S. Attorney's Office filed the charge. On Nov. 23, Pil waived his right to an indictment. He was released that day on his own recognizance but cannot travel outside Northern California until the case is resolved.
The charge of structuring transactions in order to evade federal reporting requirements is related to the amount of money a person can deposit without filling out reports to the federal government.
Federal law requires anyone making a deposit over $10,000 to file paperwork known as a currency transaction report. Congress passed the law over "concerns about what narcotics traffickers and others involved in criminal acts were doing with the money," Nadel said.
According to court documents filed in this case, the transaction reports "have a high degree of usefulness in criminal, tax, and regulatory investigations and proceedings."
According to court documents filed in the state's case against the Pils, the couple made "frequent cash deposits in the amount of $9,990."
As to why Pil structured the deposits to evade federal reporting laws, Stepanian would only say, "I don't want to get into that too much…The explanation and how it came about will come later."
Among financial crimes such as money laundering or tax evasion, Stepanian noted that structuring is the "least onerous" of them.
"In the federal courts, it's a lower case on that totem pole," he said.
But he added that "I don't consider any plea in federal court to a felony to be a minor thing."
When the federal case is concluded, the rabbi will no longer face any government action. Both the city and the state have wrapped up their cases against the Pils.
The city accused the charity and the Pils of false advertising, unfair business practices, and illegal car repair that led to a huge fire at Pier 48 and caused more than $1 million in damage.
The city settled with the Pils in March 1998, when the Pils were slapped with severe restrictions on future advertising to solicit charitable funds. The Pils admitted no wrongdoing in the settlement.
The state accused the charity and the Pils of fraud and diversion of charitable funds. It froze JEC's bank accounts, took control of the charity and found the charity owed creditors more than $1 million. A bankruptcy trustee was eventually appointed, and the charity's assets were sold to try to pay off creditors.
In February, the state settled its suit against the Pils, banning them from running any public-benefit nonprofit for at least three years. The settlement ended the state's case against the Pils.
That settlement also wrapped up a federal bankruptcy case filed by court-appointed bankruptcy trustee Stuart Kaplan that accused the Pils of diverting charitable funds to buy their $472,000 home in San Francisco's Richmond District and to partially finance their son's bar mitzvah. In the state settlement, the Pils were allowed to keep their home and admitted no wrongdoing.
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