Endowment

A breakthrough in the Philadelphia Orchestra's Chapter 11 bankruptcy case could emerge as soon as Wednesday, as management and labor try to hammer out a deal under the supervision of a U.S. bankruptcy judge. But if a new contract does not include continued participation in the national musicians' pension fund, the fund will begin litigation involving donors and board members, fund leaders say. Sources reported "some movement" in talks Sunday and Monday under the supervision of Stephen Raslavich, chief judge of U.S. Bankruptcy Court, Eastern District of Pennsylvania.

Now five months old, the Philadelphia Orchestra Association's bankruptcy case has come to a critical fork in the road. Wednesday's hearing before Judge Eric L. Frank was a subdued affair, with only a few lawyers present and no orchestra players or staff, but it was important for laying out two possible imminent paths - a quick resolution or a long, acrimonious battle that could stretch on for some time and have tragic consequences for the orchestra....

Lawyers for the American Federation of Musicians and Employers' Pension Fund are combing through more than 50,000 e-mails from computer servers of the Philadelphia Orchestra Association, lawyers told U.S. Bankruptcy Judge Eric L. Frank on Thursday. E-mails of the orchestra's chief executive and financial officers and of development staff from the last several years were included in the electronic culling. In court, Frank called the e-mail portion of the discovery process "a daunting task, both in terms of producing it and reviewing it. " Fund officials hope that the e-mail probe, approved by the judge as part of the orchestra's Chapter 11 bankruptcy case, will support their suspicion that a portion of the orchestra's endowment was not earmarked for the endowment by donors, and is therefore available to creditors as part of any bankruptcy settlement plan.

Lawyers for the American Federation of Musicians and Employers' Pension Fund are combing through more than 50,000 e-mails from computer servers of the Philadelphia Orchestra Association, lawyers told U.S. Bankruptcy Judge Eric L. Frank on Thursday. E-mails of the orchestra's chief executive and financial officers and of development staff from the last several years were included in the electronic culling. In court, Frank called the e-mail portion of the discovery process "a daunting task, both in terms of producing it and reviewing it. " Fund officials hope that the e-mail probe, approved by the judge as part of the orchestra's Chapter 11 bankruptcy case, will support their suspicion that a portion of the orchestra's endowment was not earmarked for the endowment by donors, and is therefore available to creditors as part of any bankruptcy settlement plan.

Lawyers for the Philadelphia Orchestra Association and the pension fund of the American Federation of Musicians continued sparring Wednesday in U.S. Bankruptcy Court over the union's demand for deeper layers of documentation relating to the orchestra's $120 million endowment. Association lawyer Lawrence G. McMichael broached a kind of procedural retaliation, saying the association might request a financial probe of its own into the management of the national union's pension fund. Judge Eric L. Frank questioned the logic of such a move, and the subject did not come up again during the nearly four-hour hearing.

In Round One of the American Federation of Musicians' effort to show that some of the Philadelphia Orchestra Association's endowment is not restricted by donor wishes, the association failed to produce documentation for 12 percent of gifts in the endowment. In a letter to the judge in the association's Chapter 11 case, the union's national pension fund says the first cache the orchestra provided shows 476 documents, 57 of which were images that said "documentation has not been found.

The Philadelphia Orchestra has come under assault in recent days by two parties whose legal maneuvers threaten its $140 million endowment. Pianist and conductor Peter Nero, founding music director of the Philly Pops, on Friday filed a request for a financial examination of details of the relationship between the Annenberg Foundation and the Philadelphia Orchestra Association. The orchestra and the Pops are in contentious talks over the financial terms of a separation, and the examination, requested in a motion to the judge in the association's Chapter 11 bankruptcy case, is an attempt to compel a settlement, sources familiar with the action say. The request claims that the orchestra entered into a merger agreement with the Pops in 2005 "as part of its effort to fulfill its agreement with Annenberg and the conditions and goals and requirements of the $50 million gift from Annenberg.

The judge in the Philadelphia Orchestra Association's bankruptcy case has handed down a compromise in the clash between management and the musicians' union over the scope of an investigation of the association's endowment and finances. Noting that the bankruptcy code gives broad discretion in such decisions and is "designed to permit interested parties to 'discover assets, examin[e] transactions, and determin[e] whether wrongdoing has occurred,' " Judge Eric L. Frank ruled Monday to give the union access to documents provided to other parties in the case, and seek additional documents later.

The musicians' union continued on Thursday to demand - and Philadelphia Orchestra management continued to resist - the release of information relating to the orchestra's endowments. Specifically, lawyers for the pension fund of the American Federation of Musicians argued in U.S. Bankruptcy Court that their side was entitled to a large-scale probe of the orchestra's finances and operations to help determine whether the endowments might end up being used to satisfy the pension fund's potential claim as the largest creditor in the orchestra's Chapter 11 case.