Wednesday, August 20, 2014
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Judge defines scope of Philadelphia Orchestra financial probe

The judge in the Philadelphia Orchestra Association’s bankruptcy case has handed down a compromise in the tussle between management and the musicians’ union over the scope of an investigation of the Association’s finances.

Judge defines scope of Philadelphia Orchestra financial probe

The judge in the Philadelphia Orchestra Association’s bankruptcy case has handed down a compromise in the tussle between management and the musicians’ union over the scope of an investigation of the Association’s finances.

Noting that bankruptcy code allows 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 issued a ruling Monday that allows the union access to documents already provided to other interested parties in the case, plus a mechanism for requesting additional documents later.

Lawyers from the pension fund of the American Federation of Musicians argued in court July 21 for access to a wide range of internal records from the past decade in a quest to ultimately assert that the Association should dip into its $140 million in endowments if it insists on withdrawing from the national union’s multi-employer pension plan.

Estimates on the amount of that liability – which the Association would only have to pay if it ended its participation in the plan – have ranged from $23 million to $35 million. The Association has said it would like to move its musicians from the program into a defined contribution plan.

The judge scheduled a conference call with lawyers Monday to discuss the terms of a confidentiality agreement for any documentation yielded through the financial examination.

“After balancing the competing interests, the court concluding that it is appropriate to attempt to fashion a sequential discovery process that does not impose an undue burden on the Debtor [Association], but that will nonetheless provide relevant information to the Pension Fund in a timely fashion (taking into account the potential for litigation in the near future that may have to be completed within a compressed time frame).”

In court last week, an association lawyer proffered, and CFO Mario Mestichelli testified, that the “manpower” demands of the deep examination proposed by the union would have severely taxed the Association, given its small administration of about 43 members (plus staff shared with the Kimmel Center).

With the Association and union having failed to reach an agreement after numerous tries over several weeks, Judge Frank carefully outlined the procedure for a discovery process in coming days and weeks:

- On or before July 27, the Association shall provide the Pension Fund with a log of those documents that the Debtor has provided to Local 77 of the American Federation of Musicians, the Pension Benefit Guaranty Corporation, the Official Committee of Unsecured Creditors and Encore Series, Inc.

- On or before Aug. 1, the Association shall provide the Pension Fund with those documents.

- On or before Aug. 5, the Pension Fund shall file a statement identifying those categories of documents requested that it considers outstanding and still seeks; listing any new categories of documents, not previously requested, that it now seeks; and the date by which it expects production of the documents. The Association has until Aug. 9 to file any objections.

Also, the Association was ordered to obtain estimates from outside tech firms on what it would cost to retrieve emails and other electronic documents from the Association’s hard drives. Rather, though, than the ten years’ worth of computer records requested by the union, Judge Frank indicated he would approve a much shorter time frame – from Jan. 1, 2009 though April 15, 2011, the latter date being the day before the Association filed for Chapter 11.

Peter Dobrin Inquirer Classical Music Critic
About this blog

Peter Dobrin is a classical music critic and culture writer for The Inquirer. Since 1989, he has written music reviews, features, news and commentary for the paper, covering such topics as the Philadelphia Museum of Art at the Venice Biennale, expansion of the Curtis Institute of Music, the Philadelphia Orchestra's bankruptcy declaration in 2011, Philadelphia's evolving performing arts center and the general health of arts and culture.

Dobrin was a French horn player. He earned an undergraduate degree in performance from the University of Miami, and received a master's degree in music criticism from the Peabody Institute of the Johns Hopkins University, where he studied with Elliott Galkin. He has no time to practice today.

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