Ananda Files for Chapter 11 Bankruptcy Protection

From Vidura Smallen, Steve Weber, and Catherine Van Houten

Vice President/Director, Business Manager/Treasurer, and Director of Development, Ananda Church of Self-Realization

September 14, 1998

Dear friend,

Because you are a close friend, we wanted to let you know right away about an important step Ananda is taking later this week. We wanted you to have this news first, because of the strength we all gain from a shared, positive understanding.

The two lawsuits which have challenged Ananda since 1990 have brought us to the point—nine years and $4.2 million dollars later—where we are forced to enter Chapter 11 Reorganization.

We want to emphasize that we feel very positively about this step. Chapter 11 of the U.S. Bankruptcy Code is a powerful tool for the reorganization of a business. Under Chapter 11, the entity filing the petition is charged with the duty of not only continuing to run the business, but also moving toward a plan of restructuring which is in the best interests of the Debtor’s creditors, other interested parties and the filing organization itself. Of course, we recognize that many companies do not emerge from Chapter 11, but go on to file bankruptcy. This is definitely NOT the case for Ananda. It is absolutely our intent to pay all our creditors everything that is owed to them.

Just a few months ago, Bertolucci’s attorneys sought to prove in court that Ananda is nothing more than an alter ego of Swami Kriyananda—that is, his authority is so absolute and there is such a co-mingling of personal and corporate funds as to blur any distinction between him as an individual and Ananda as an organization. At that time, Ananda’s financial records were subjected to the closest possible scrutiny by the courts. It was clear to everyone that Ananda’s way of working with money is sound and has complete integrity. After an exhaustive review of Ananda’s books and oral examination of our financial controller on the witness stand, Judge Stevens ruled against Bertolucci on alter ego.

Over the years, Ananda’s track record has been one of scrupulously honoring our financial commitments. One of our most loyal supporters has been our local bank. In a spirit of community and because Ananda’s record is so honorable, our bank has bent over backwards to work with us as the costs of the lawsuits mounted to back-breaking levels.

In fact, we’ve had many wonderful friends helping Ananda at every step during these testing years. You among them! Besides the loving outpouring of friendship in the form of millions of dollars in donations, many have stepped forward to loan money to Ananda. Numerous individuals have loaned Ananda money to help us fight these two lawsuits, either of which, if left unanswered, would have closed Ananda’s “doors” forever. These loans from dear friends also allowed Ananda to continue certain aspects of its ministry to others. Minimal internal building, with clear pay-back plans in place, was also able to go forward. For example, the loans which helped build Harmony Guest House are serviced through the operating income of The Expanding Light.

Happily, we are very nearly at the end of the courtroom process in both lawsuits. Numerous settlement offers to Bertolucci from Ananda, offering to pay the compensatory damages awarded her over a relatively short period of time (2-4 years), were contemptuously refused. As we contemplated the end of the Bertolucci proceedings and the failure of settlement efforts, we found ourselves faced with a painful dilemma. Bertolucci was awarded $330,000, in addition to an as yet undetermined amount in court costs which could be as high as $140,000. Knowing how much cash we have available, and knowing the level of debt we have to faithful friends and our supportive local bank, do we allow Bertolucci to “cut in line” in front of everyone and seize all our working capital and assets? We did a lot of soul searching about what was dharmic, and found ourselves returning time and again to the idea of Chapter 11 Reorganization as the best way to ensure that all of Ananda’s creditors are treated equally and fairly. Otherwise, Ananda faces the specter of one hostile, unfriendly creditor (Bertolucci and her attorneys), because they are willing to collect most aggressively, shouldering out those who have been friendly and loyal supporters of Ananda in its most challenging hour.

This is what Chapter 11 Reorganization allows us to do:

1) Treat all creditors fairly, making sure that our commitments to each are taken care of in equitable fashion.

2) Gives Ananda the time and opportunity to design an internal reorganization plan to pay down debt, and regain our usually sound financial footing.

3) Provides for a “stay” in the Murphy (Bertolucci’s maiden name and her second lawsuit against Ananda) suit, now moving forward in the California Superior Court in Nevada County.

4) Protects Ananda from further merit-less, “harassment lawsuits” which Bertolucci’s attorneys threaten to file.

5) Provides the “psychic space” for Ananda to digest the events of the past few years, and make subtler internal, energetic shifts that may be needed now.

6) Become firmly centered again in Ananda’s true purpose: the sharing of the light and teachings of Paramhansa Yogananda.

Because Ananda has been managed responsibly and we are filing a well-developed, detailed petition, we have more than good reason to think that little, if any, control of Ananda’s internal affairs will be lost to outside trustees or to a committee of creditors. Remember, too, that with the one exception of Bertolucci and her attorneys, Ananda’s creditors are friendly and wish us well.

We also want to reassure you that donated money may be used by Ananda in any way the donor directs, and is not in any way under the control of the court which oversees this kind of corporate reorganization. Any gift you feel to send to Ananda will, as always, continue to be used precisely as you direct it to be used.

Dear friend, we thank you for your past support and your friendship in God which has enabled us to weather these storms successfully. Ananda WILL emerge from reorganization, stronger and healthier than ever. Please keep Ananda in your prayers, so that all that we do, every decision we make, may be filled with God’s light and clarity.

In divine friendship,

Vidura Smallen
Vice Pres. & Director

Steve Weber
Business Mgr. & Treasurer

Catherine Van Houten
Director of Development