Mazzoni Center claims a rogue employee took out high-interest debt. Now Philly’s largest LBGTQ health agency is being choked by liens.

Mazzoni Center, Philadelphia’s largest LGBTQ health agency, has struggled financially for years, but in September the nonprofit hit a new low.

When it didn’t have enough money for its roughly $400,000 biweekly payroll, the agency’s former top financial executive got two cash advances with interest rates that topped 40%.

Mazzoni is now fighting in federal court to get out of repaying the roughly million dollars it owes with interest, claiming that the ex-finance officer went “rogue,” entering the agreements without approval. The agency also argues that the payments have illegally high interest rates, and that the lenders are engaging in racketeering.

Because liens filed by the lenders have blocked payments to the agency, Mazzoni warned in a filing in the Eastern District of Pennsylvania that it might not have enough cash to cover payroll as soon as Friday.

» READ MORE: Mazzoni Center, Philadelphia’s biggest LGBTQ health agency, gets a financial red flag in audit

“Should Defendants be permitted to continue their nefarious actions, broadening their attacks on the organization’s life’s blood, Mazzoni Center faces a true risk of bankruptcy and certainly will not be able to meet its obligations,” the agency said in legal filings.

Mazzoni declined to say whether it would be able to meet its forthcoming payroll obligations. In a statement, the center expressed commitment to continue to serve the its patient population.

“We will not allow the alleged actions of a rogue former employee and unscrupulous lenders to derail our important work of providing dignified health services to the LGBTQIA+ community,” a Mazzoni spokesperson said in a statement.

The center has been struggling financially in recent years, and for fiscal year 2022 it earned a rare warning from financial auditors that it might not be able to meet its obligations for more than a year. Mazzoni still has not publicly filed its audited financial statement for fiscal 2023, as it was required to do by the end of March under federal law.

Earlier this year, CEO Sultan Shakir said he was optimistic that the center was heading in the right path fiscally, while noting the struggles of the post-pandemic health-care market.

But by the end of August, Mazzoni did not have enough funds to cover its payroll, court records show. In a search for cash, then-executive financial officer Rachelle Tritinger allegedly decided on her own to enter into two merchant cash advance agreements.

The way the agreements are structured, Mazzoni bought the cash for a fee and agreed to pay daily or weekly until it returned the full amount, plus hefty interest, to the New York-based lenders. The center received $234,570 from LCF Group and agreed to pay $362,500. It also got $479,815, with an agreement to pay $690,000, from FundKite.

On Sept. 11, after payroll was due, Tritinger told FundKite CEO’s that Mazzoni needed the cash to put out “the fire.”

“We need it like now,” she said, according to a transcript of the call.

Funds came that night from LCF and the next morning from FundKite, court records show, and Tritinger allegedly used them immediately for payroll. Noticing the transactions, Shakir confronted his financial officer. On Sept. 12, her employment was terminated, according to court records.

Tritinger did not respond to requests for comment.

In defiance of the cash advance agreements Tritinger signed, Mazzoni also revoked LCF’s and FundKite’s access to its bank account to prevent the lenders from withdrawing payments.

The center claims it offered to pay back the money that it received, according to the complaint, but LCF and FundKite rejected the offer, insisting on the full terms of the agreement. The lawsuit does not state what interest rate Mazzoni offered.

LCF and FundKite declined to comment through their attorneys.

Since then, the lenders have taken legal action against Mazzoni in New York. They sent notices of liens to Mazzoni’s partners, including the City of Philadelphia, Walgreens, a health insurance company, and the nonprofit’s credit card payment processing vendor. All withheld Mazzoni’s funds in response to the notices, amounting to nearly $800,000.

» READ MORE: Philly has terminated its contract with The Consortium, a mental health provider for over half a century

Mazzoni in return filed a federal lawsuit against LCF and FundKite on Nov. 5, arguing that the loans were entered into without proper approval by the center, that the interest rates are illegally high, and that the lenders engage in racketeering. (Mazzoni is not the first to make these type of allegations against the merchant cash advance industry, and courts have ruled before against such lenders.)

The agency also asked that a federal judge lift liens and prevent other measures to choke the center’s revenues.

Following a hearing on Nov. 12, District Judge Karen Spencer Marston denied Mazzoni’s request for the preliminary injunction. In an opinion published this week, Marston said the center “failed to show that they are likely to succeed on any of their claims against” LCF and FundKite.

The ruling doesn’t mean that the case is over. Mazzoni can still introduce new evidence, and expand its legal argument, as the proceedings evolve.

But it does leave the LGBTQ health agency that employs about 160 people and offers medical visits for over 8,000 patients a year, among other services, in a precarious situation.

Mazzoni estimated that it would reach negative cash flow by Wednesday, and it would be $450,000 in the red by Dec. 1. It is unclear how long the center would be able to sustain payroll and other obligations now that a judge has allowed the liens to stand.

“Continued actions to expand that freeze will no doubt present a risk of bankruptcy,” the center told the court.

Staff writer Harold Brubaker contributed to this article.