By Erin Sherbert
By Howard Cole
By Erin Sherbert
By Erin Sherbert
By Leif Haven
By Erin Sherbert
By Chris Roberts
By Kate Conger
Here's a story that has more baroque Russian names and funny twists than a Dostoevski novel, so read carefully:
Sam Budovsky and Luba Troyanovsky are an unmarried couple who live in a terra-cotta-roofed mansion in the Sea Cliff with a view of the Golden Gate Bridge. They run several self-owned businesses from home -- real estate and import-export seem to be favored lines -- but in 1994, a Russian firm called Bryansk Engineering Works signed over to Budovsky the right to collect a stubborn debt from a shipyard in Bulgaria. BEW is a venerable rail-car company in western Russia that also builds ship propulsion equipment, and it seems the firm made some engines or boilers for Bulgarian shipbuilders in the Black Sea town of Varna. The Varna shipyard, as it's called in court papers, refused to pay up. BEW offered this debt to Budovsky while he was at a trade fair in either Russia or Ukraine. The reasons it did so are in dispute, but Budovsky's lawyer says it was to cover a debt owed by BEW to Budovsky's girlfriend, Ms. Troyanovsky.
"BEW said, 'Look, you go find this money in Bulgaria, and if you collect, you get paid,'" explains Nils Rosenquest, a San Francisco lawyer who represents both Budovsky and Troyanovsky. "And much to their shock, it actually happened."
Budovsky's company, U.S. Dnipro, collected. In a matter of weeks, Budovsky and his partners (a Ukrainian company called DVM) persuaded the Varna shipyard to wire the full payment for the debt to an account in San Francisco. The agreement with BEW allowed Budovsky to keep a commission of $240,000, but he neglected to wire anything at all back to Russia. When BEW sued, in 1996, Budovsky declared bankruptcy. What happened to the money? In a new lawsuit in Northern California District Court, BEW complains that $1.2 million was transferred to Luba Troyanovsky's import-export firm, Amimpex, sometime in 1995.
Troyanovsky's side of the story, as Rosenquest implies, is that BEW owed her money for jackets, mittens, and other goods she'd previously exported to Russia, and the $1.2 million is hers. BEW disagrees. Budovsky, Troyanovsky, and BEW are still in court. The dispute is a big, big mess. And it really has nothing to do with the rest of this column, which is about a local Lubavitcher rabbi, his charity, and several thousand used cars.
How could there be any connection? This Russian story is just a curtain-raiser, a little seasoning to give international flavor to what would otherwise be the burnt end of a dingy local tale. It's a divertissement. A vaudeville comedy act. A little joke.
Rabbi Bentzion Pil grew famous in '97 for raising millions of dollars in a donate-your-car-to-charity scheme that drew attention from several government investigative agencies and a variety of news organs, SF Weekly included. By the lenient terms of his settlement with the state, Pil can't sit on the board of a charity until at least 2002. He was investigated in a criminal vein by federal authorities, and was supposed to be sentenced next month in the resulting case, but it looks like that hearing will be rescheduled, again. It also looks like Pil will face relatively mild punishment as a result of a plea bargain he's entered with the feds.
Not only have the investigations ended with a whimper; they're also wrapping up without answering some of the most important questions raised by the rabbi's multimillion-dollar car-collection operation.
Bentzion Pil made himself prominent in the Richmond's Russian Hasidic community during the mid-'80s simply by being the only Russian-speaking rabbi in San Francisco. He and his wife, Mattie, founded a charity called the Jewish Educational Center, or JEC, to run a school for Jewish kids called Beth Aharon. The JEC and Beth Aharon were essentially broke until 1993. That was when the Pils discovered the lucrative world of donated cars.
The radio, billboard, and classified newspaper ads the JEC started to run promised huge deductions to taxpayers who were stuck with otherwise useless hulks of metal. "That extra car in your garage or your old car, in any condition, can be repaired and given to a needy family," ran one of the radio spots. Response was incredible, not just from the Bay Area, but also from New York, Los Angeles, New Jersey -- from every market where the Pils ran ads. The JEC had to lease Pier 48, in China Basin, to store, repair, and auction the sheer tonnage of donated cars.
Dozens of charities have raised money by accepting donations of used cars. There is nothing inherently dishonest about a charity accepting a gift of a car, and the donor taking a tax deduction for the value of the car. In 1996, though, a Wall Street Journal reporter found the JEC raising millions of dollars, with improbably high overhead costs of around 80 percent of money raised, vs. 40 percent in an average healthy charity. The rabbi for a while drove around in a nice donated Cadillac, and $100,000 in JEC funds was allegedly diverted into a down payment on the Pils' three-story house in the Richmond.
The yard where the donated cars were to be auctioned off, meanwhile, was grim. "The selection of a half-dozen cars that you offered were the worst junk and rotting hulks I've ever seen," a disgruntled man who'd applied for a car wrote in a 1996 letter, "and when I asked the person there if he knew what condition they were in, he responded that if they were driven there he assumed they could be driven away, but could not guarantee it and added that they had not been checked by a mechanic."
Pier 48 burned late in 1996, along with a warehouse containing 200 or 300 cars. It wasn't arson, according to the DA's Office. A mechanic working on a car had apparently left a work lamp on, sparking the blaze. Under the terms of the city lease, mechanics shouldn't have been working on cars at the pier, but no fine was assessed. (The pier matter was handled by the San Francisco District Attorney's Office as part of an unfair business practices civil case against the JEC; it ended in a settlement after the charity went bankrupt.) And only 30 to 40 cars, in any case, were fully destroyed.
"The week after the fire we had like a hundred-thousand-plus[-dollar] auction," says Arthur Anchipolovsky, who ran San Francisco auctions for the JEC until the spring of '97. "We were not prepared at all, we were in a basically naked lot, there was no telephone, there was nothing. Nothing was working for us, and yet we managed to do that."
The Pils have been weathering a four-part attack on the tangled affairs of the JEC since 1997. The DA, the state Attorney General's Office, the U.S. attorney, and a bankruptcy trustee have descended like a series of plagues, but the strangest -- no, second-strangest -- part of the whole saga is how lightly these plagues have lain upon the Pils. Let's try to summarize: Local and state civil cases ended in settlements after the JEC lapsed into bankruptcy and there was no more money to chase. The city settlement restricted the JEC's advertising; the gist of the state's settlement forbids the Pils and several others (including Sam Budovsky, who'd sat on the JEC board) from sitting on the board of any "public-benefit nonprofit" until at least 2002.
The U.S. criminal case went quickly to a plea bargain. Last December Pil admitted to "structuring" charges, meaning he placed more than $1.7 million into a bank account in deposits of just under $10,000 each, to avoid reporting the deposits to the federal government. The sentence -- yet to be handed down -- could involve as much as 18 to 24 months in jail and a $250,000 fine. One term of the plea arrangement is that Mattie Pil won't be charged.
That's about it, as far as crime, punishment, and Rabbi Pil go.
But that shouldn't actually be it, at all.
A big question remains unanswered: What happened to the millions of dollars the JEC brought in by auctioning donated cars? Near the height of the auctioning operation, the JEC had four auction lots -- in San Francisco, Santa Clara, Los Angeles, and New Jersey -- that brought in anywhere from $30,000 to $150,000 each on any given weekend. A conservative estimate of what the JEC amassed during its three- or four-year media blitz is $25 million; the JEC itself reports $15.6 million in proceeds for the period between April 1993 and October 1996. But when the state attorney general froze the charity's accounts in '97, there was a mysteriously low $150,000 in the bank. Where'd it all go?
To charity, say the Pils. To student scholarships, day schools, a Russian-language magazine, and other Jewish organizations, including Chabad Lubavitch Mid City Center in L.A. Also, the charity had high overhead. The pier was expensive to lease, towing companies and mechanics were hired, expensive ads were placed.
But the JEC's financial records are an incomprehensible mess, and even the deputy state attorney general who worked on the case for a year and a half, Belinda Johns, says she can't account for the missing cash.
"I didn't get that far," she says. "When the bankruptcy was filed, I lost jurisdiction. I mean I wanted to know where the JEC money went, but I hadn't gotten there yet."
You remember Sam Budovsky and Luba Troyanovsky, the couple who are involved in the messy lawsuit with Bryansk Engineering Works over the collection of a large debt from Bulgarian shipbuilders? Of course you do, because I told you to forget.
Well, Budovsky sat on the JEC's board and even served as president for a while; Troyanovsky's role was less official. Starting in about '95 she was involved in a series of loans that attracted the bankruptcy trustee's attention. They amount to hundreds of thousands of dollars passing back and forth between the JEC and Troyanovsky's business accounts.
For example: In 1995, the Pils moved into their three-story, $472,000 house near 26th Avenue and Clement. The Pils have admitted that friends and acquaintances came up with the down payment for the house. According to Malcolm Leader-Picone, counsel for the JEC's bankruptcy trustee, Luba Troyanovsky wrote three checks totaling $100,000 toward the down payment. That contribution "appears to be one event in a sequence of loan transactions going back and forth between JEC/Beth Aharon [the Pils' day school] and Ms. Troyanovsky," writes Leader-Picone in a trial brief. He points out that the same amount returned to Troyanovsky seven months later in the form of a $100,000 check from the JEC, deposited into one of Troyanovsky's home-based businesses, AIBI.
Leader-Picone won't speculate on what the sequence of loans might mean. But "when the Pils needed money for a down payment," he says, "it was there. When Troyanovsky's account [AIBI] was overdrawn, money was there." These loans and others at least give the appearance of being a laundry cycle of money, out of the JEC and to the benefit of private people and businesses.
The most interesting aspect of the three cashier's checks written by Troyanovsky for the rabbi's home down payment is that two of them were drawn from the accounts of men who don't live in America, Anatoli Liakh and Vitali Rodomanov. Liakh and Rodomanov happen to work for a railroad company in Ukraine called DVM. And DVM happens to be Sam Budovsky's partner in U.S. Dnipro, the firm that collected that Varna shipyard debt.
What these oblique connections mean, exactly, would be difficult to say, given that none of the investigations of the JEC has focused specifically on them. At the very least, it seems the Pils were closer to ex-Soviet heavy industry than the ordinary observer might have imagined.
Keep in mind that most of this evidence has gone unreported in the press, because none of the cases involving the JEC and Pil has gone to trial. The Pils have settled and plea-bargained; they've admitted to nothing, except the federal structuring charge entered against the rabbi. Leader-Picone amassed his evidence in a partial claim on the Pils' house in bankruptcy court (as a JEC asset), but that case, too, ended in a settlement. The Pils kept the house, but were to pay $200,000 to the JEC bankruptcy estate.
None of the investigators has fully untangled the financial records for the Jewish Educational Center, and there is no way I can tell for sure who got the millions of dollars that flowed into the charity, courtesy of a barrage of donated cars.
But one clear pattern is obvious: State and local authorities have gone soft on the JEC from the start. In the mid-'90s, the JEC went unregistered as a charity in New York and New Jersey, meaning the radio ads and billboards were probably technically illegal. The charity even lost tax-exempt status for a while in California. The Pils nevertheless accepted and sold used cars with no interference from any state attorney general until after the Wall Street Journal piece in 1996.
And now, in spite of a reasonable amount of evidence that at least suggests the Pils, Troyanovsky, and Budovsky engaged in diversion of money from a charity to private hands, the only punishment being meted out is a possible 18 to 24 months for the improper reporting of some $1.7 million in bank deposits by a man who, 10 years ago, was a poor, Uzbekistan-born cleric trying to feed his kids in America.
Of course, the role of Troyanovsky and Budovsky in the JEC operation could be fully investigated. Then again, Belinda Johns, the deputy state attorney general formerly on the case, could have learned more about the JEC's money flow; District Attorney Terence Hallinan's office could have pursued its civil case and allegations of false advertising much more vigorously; Ross Nadel, the assistant U.S. attorney heading the criminal case against Pil, could have tried to prove more serious charges, instead of accepting a plea bargain on a lone, technical charge related to the filling out of forms.
All the government attorneys involved cite the saving of public resources as a reason for not pressing forward with more thorough investigations, but the stink of corruption that seems to envelop the JEC saga makes it hard to watch such a weak denouement.
In the end, the rabbi may not even get prison time. His lawyers are expected to argue this summer for probation, and it would be nice to see them lose.