Judge: Sell off Germantown Settlement

A federal judge Thursday ordered Germantown Settlement’s holdings sold off to pay its debts, effectively shuttering the 126-year-old social-service agency.

Chief Bankruptcy Judge Stephen Raslavich did so over the objections of Settlement's attorney, Albert Ciardi, who asked that the nonprofit group's bankruptcy case, instead, be dismissed so Settlement could continue to operate and possibly find funds to pay creditors.

Raslavich rejected the appeal, saying it would be tantamount to "leaving the fox inside the henhouse," a reference to Settlement's president Emanuel V. Freeman, who has run the agency for 28 years.

"There have been far too many allegations of misconduct by the principals of this entity," Raslavich said. "I've been depleted of any confidence that Mr. Freeman is the right person to oversee it."

With the ruling, Settlement ceases all business operations and will be overseen by a U.S. trustee. It ends Freeman's control of the organization, which, together with a key subsidiary, has reported more than $16 million in debts.

Of that figure, more than $5 million is owed to city, state, and federal agencies. Virtually all of Settlement's funding over the years - as much as $100 million over three decades - has come from taxpayers.

Germantown Settlement was founded by Quakers in 1884 to aid newly arrived German immigrants. Under Freeman's leadership, it grew into a behemoth, collecting millions in government grants and contracts a year. It spun off a community-development corporation and charter school. It built low-income housing, a shopping center, and an office complex.

Over the last decade, however, it has been running enormous operating deficits.

Settlement and its development arm, Greater Germantown Housing Development Corp. (GGHDC), filed for bankruptcy in April.

Last month, Raslavich ordered GGHDC's holdings sold to settle its debts, which were listed at more than $9.2 million. That included $7 million owed to the Parke Bancorp Inc., of Sewell, N.J., and $2 million owed the Philadelphia Industrial Development Corp.

In that case, Parke accused Freeman, as president of GGHDC, of "illegally diverting" about $46,000 that rightfully should have gone to the bank. The money was used to pay other bills.

Freeman was also threatened with contempt of court when he initially refused to sign loan documents as agreed.

Those conflicts were apparently among the "allegations of misconduct" Raslavich referred to Thursday when he ordered Settlement to be liquidated.

The request that Settlement be sold off came from U.S. Trustee George M. Conway, who argued that the social-service agency no longer had the financial ability to operate nor any legitimate plan to come out of bankruptcy.

Conway's position was seconded by Irv Aklesberg, who represented a group of Germantown residents critical of Settlement's operations.

"This case has been built on a fantasy of misleading disclosures from the beginning," Aklesberg told Raslavich.

Freeman, who was in court for the hearing, declined to comment afterward.

Wearing a black overcoat and bowler, Freeman left the court in the company of David Yurky, a legislative aide to City Councilwoman Donna Reed Miller, a longtime advocate of Settlement.

"Well, David," Freeman could be heard saying as the pair disappeared down the hallway, "it is all over."