Court motion seeks missing records in the Germantown Settlement case

Where are the boxes?

That’s one of many questions posed by court documents filed May 12 in the Germantown Settlement saga.

The community group Germantown Community Connection filed a motion in federal bankruptcy court in Philadelphia. It asks the court to order Emanuel Freeman of Germantown Settlement and Greater Germantown Housing Development Corporation to produce records that would clarify the relationships among at least 16 land development companies in which Freeman and/or Settlement have an interest. And it calls for a court deposition of Freeman on the same topics.

The motion also asks the court to order Freeman and the various branches of Settlement to provide a full list of their assets.

A mystery nestled inside the motion is whether some of the answers to those questions might be contained in about 30 boxes that reportedly were removed from the Germantown Settlement office on a recent Saturday night in April.

“During the course of the proceedings in these cases, there has been significant evidence of the blurring of corporate boundaries and of the shifting and commingling of funds between the entities controlled by Mr. Freeman,” the motion reads.

The two nonprofits controlled by Freeman filed for bankruptcy one year ago this month on the heels of foreclosure actions and liens worth millions, a loss of long-standing government contracts and a federal investigation spurred by Freeman’s mismanagement of a charter school he ran, which closed in 2009.

In November of last year a federal judge ordered the agencies run by Settlement to liquidate their assets and close their doors. Judge Stephen Raslavich had harsh words for Freeman, saying it would be, “leaving a fox in a henhouse” if he left Freeman in charge of the publicly funded entities.

Circuitous relationships

The U.S. Trustees involved in the bankruptcy cases have found it difficult to pin down the assets the Settlement agencies actually own.

The GCC motion alleges Freeman still controls hundreds of rental housing units, which were originally developed with public funds through the Germantown Settlement agencies and still generate cash flow.

As an example, the motion cites Settlement’s attempt during the bankruptcy proceedings to sell the Burgess Center, a large commercial building at Wayne and Germantown avenues that faced a $7 million foreclosure, to a company called Lower Germantown Limited Partnership.

This company was one of several created in the 1990s by Emanuel Freeman using state and federal tax credit dollars to work on Settlement development projects.

Freeman could not be reached for comment.

The sale was not allowed by the court.

Catching a break

Gary Seitz, the U.S Trustee in the bankruptcy proceedings for Greater Germantown Housing Development Corporation, one of Settlement’s housing wings, thought he may have gotten a small break in his efforts when a former upper management Settlement employee told him about 40 boxes of records that might shed some light on the assets.

Seitz hired a forensic accountant and went to the Settlement offices at the Burgess Center requesting those boxes, but Freeman and his staff would only allow them to leave with 10, saying the others were records for separate entities.

“We would go to the [Burgess] Center to get the documents and they would start to give us the documents and then they would say, ‘Wait a minute these documents are not GGHDC’s documents; they belong to Germantown Settlement and we can’t let you have them,’” Seitz said. “Once they figured out that line, it was a continued source of frustration.”

Boxes in a window

Seitz hadn’t heard much else about the other 30 boxes of documents until roughly that number of boxes suddenly appeared inside a vacant storefront at Germantown and Wister streets in a strip mall called Freedom Square. One box has the address of the former Germantown Settlement headquarters printed on it.

On Saturday April 9 at around 9 p.m., just days after the Burgess Center was sold at sheriff’s sale to a New Jersey bank, a customer at a nearby Wendy’s said he saw at least two men loading office furniture and file boxes into at least two vehicles from the former headquarters of Germantown Settlement, at the rear of the Burgess Center.

A little later, the same person saw the group carrying the furniture and boxes into the vacant storefront at Freedom Square.

The witness, who asked to remain anonymous for fear of reprisals, said he recognized two of the men involved as Emanuel Freeman and Steven Vaughn, a former staffer for Eighth District City Councilwoman Donna Reed Miller.

Vaughn was at one time a Settlement officer and once went to prison on corruption charges.

He could not be reached for comment.

Freedom Square is owned by a company that, according to the state, also lists Freeman as its chief.

Seitz said the Saturday night move of the 30 or so boxes could have been perfectly legal if Freeman and company removed the boxes to safeguard the records of the separate agencies.

But at the heart of the GCC motion is an attempt to determine which, if any, of the many companies Freeman still controls are in fact separate, or do they all function like one big, new version of Settlement.

Still, Seitz thinks those 30 boxes, even if they do contain information that’s pertinent to his case, may not hold the key to answering that big question.

His reasoning?  If anyone was going to destroy documents relating to the case, it could have been done long ago. The bankruptcy process is pretty slow.

“I hate to be cynical, but I’ve been doing this for a long time,” he said.

 

Correction: The original version of this story had the incorrect filing date for the court motion. NewsWorks regrets the error.

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