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Philadelphia Orchestra Endowment in Jeopardy?
 
  by: Rebel - Havertown, PA
started: 08/01/11 2:19 pm | updated: 08/01/11 2:19 pm
 
The Philadelphia Orchestra and its $140 million endowment in jeopardy? Possibly due to legal filings by two separate parties.

Pianist and conductor Peter Nero, founding music director of the Philly Pops, 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 currently in talks over the financial terms of a separation.

Also, the American Federation of Musicians' pension fund has suggested it could sue members of the orchestra board and outside funders to secure the estimated $23 to $35 million it says it would be owed if the association decided to withdraw from the national musicians' pension fund.

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Peter Nero’s 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 Annenberg Foundation is very disappointed that it, the Philadelphia Orchestra Association's largest benefactor, is being inappropriately pressured in a two-party dispute in which the Annenberg Foundation is not a party, and will be considering all of its options moving forward," David Ulich, a lawyer representing the foundation, wrote in an e-mail.

Options would include the Annenberg Foundation's moving to recall its historic $50 million gift, the orchestra's largest ever, to the endowment. At the time of the donation in 2003, the foundation asserted its right to ask for the money back if the orchestra ever filed for bankruptcy, and it has been watching closely since the orchestra's April 16 Chapter 11 filing.

The Pops' move is only one threat. The American Federation of Musicians' pension fund has suggested it could sue members of the orchestra board and outside funders to secure the estimated $23 million to $35 million it says it would be owed if the association decided to withdraw from the national musicians' pension fund.

In a significant development last week, the union won approval from Bankruptcy Court Judge Eric L. Frank to obtain information discovered as part of the orchestra's bankruptcy process, and to use it in potential lawsuits in other courts.

"We're not being held back from new litigation," AFM president Ray Hair said last week. "We're not muzzled anymore. The debtor [the association] was trying to control who we could sue and for what, and they lost that fight."

McMichael said: "I can't think of anything more ridiculous. Actions against donors or against board members - there is simply no basis for any of it."

Friday's motion by Nero hangs its case on a paragraph in the donor agreement between Annenberg and the orchestra that says "the orchestra shall broaden its artistic view and exhibit the regional, national and international leadership necessary to encompass a cosmopolitan perspective that embraces growth, innovation and adaptation to both social institutions and the needs of the populace."

Neither Nero nor the Pops is mentioned in the Annenberg-orchestra agreement, according to a copy obtained by The Inquirer. But the examination would probe whether the orchestra, in its periodic reports to the foundation, has cited activities of the Pops as evidence of fulfilling requirements of the gift.

The motion, citing the orchestra's "threat" to "kick Maestro Nero and the Philly Pops to the curb," says Nero and the Pops "seek information from Annenberg necessary to understand and protect their rights."

The motion asks to view communication between Annenberg and the orchestra relating to the $50 million gift and asks the foundation to produce a representative to be deposed.

"The information sought is also relevant to Maestro Nero's and [the Pops'] rights to a portion of the endowment and other assets and income of POA upon any potential undoing of their 2005 merger," the motion states.

Talks to sever the relationship between the two groups began well before the orchestra filed its Chapter 11 petition. The two have been unable to settle on financial terms, with the Pops asking for $1.5 million as part of the severance agreement, and the association offering $1 million, according to one source.
 
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