Embattled Mazzoni Center lays off staff amid financial and legal challenges
Neither Mazzoni Center or the union representing the LGBTQ-health agency's workers would provide details on the layoffs.
The Mazzoni Center is laying off employees a month after it told a federal judge it was on the brink of bankruptcy because of high-interest loans that the LGBTQ-health agency’s former top finance executive agreed to in violation of internal policy.
It is unclear how many employees have been laid off, what positions were lost, or when the workers have their last day. Mazzoni and SEIU Healthcare Pennsylvania, the union representing Mazzoni staff, declined to comment.
All impacted workers were informed, said CEO Sultan Shakir.
“Mazzoni Center had to make the difficult decision to adjust staffing levels to ensure we can continue offering critical services for many years to come,” Shakir said in a statement.
Prior to the layoffs, Mazzoni employed about 160 people and spent roughly $400,000 on payroll every other week. About two-thirds of the staff is unionized, according to court records.
Litigation over high-cost loans
Mazzoni has been embroiled in a legal dispute with two New York-based companies that loaned the center more than $700,000 in September to cover payroll in return for payments with interest rates that exceed 40%.
The center filed a federal lawsuit last month against the cash advance merchants, which provide immediate funds to businesses that have no other options, alleging that Mazzoni’s former finance executive improperly entered into the agreement without the approval of other leadership.
Liens filed by the lenders — LCF Group and FundKite — blocked payments to the center, including over $750,000 from the city as of early November, court records show.
Mazzoni dropped its lawsuit before Thanksgiving after a judge denied its request to issue an injunction on efforts by the lenders to collect payments.
But Mazzoni struck a defiant note in message to supporters that said the center was facing “a combination of financial realities and legal matters with unscrupulous parties.”
“These are not the easiest of days, for our community or for our organization, but we are here and here to stay,” the message said.
Years of financial difficulty
Mazzoni was cash-strapped in recent years, and it received a rare warning that it might not be able to meet its obligations for more than a year. The agency missed by eight months the federal deadline for filing its audited financial statements for the fiscal year ended June 30, 2023.
Earlier this year, CEO 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 expensive merchant cash advance agreements.
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.
Mazzoni received the payments on Sept. 11 and 12, and Trittinger allegedly used them for payroll immediately. She was terminated Sept. 12 when the center leadership learned of the loans.
Mazzoni also revoked LCF’s and FundKite’s access to its bank account to prevent the lenders from withdrawing payments.
In a lawsuit filed Nov. 5 in the Eastern District of Pennsylvania, Mazzoni argued that the agreements were invalid because they were entered into improperly and had illegally high interest rates. It asked a judge to issue an injunction pausing any attempt to collect the payments, arguing that otherwise the center would go bankrupt.
“We have already consulted with a bankruptcy attorney about that. We are not interested in doing that, but it would potentially be something we would need to do,” Shakir told U.S. District Judge Karen Marston in a Nov. 12 hearing.
Shakir also told the judge he wasn’t aware in the summer of Mazzoni’s dire financial situation and inability to make payroll. He started as Mazzoni’s CEO in January 2022, two years before the nonprofit issued a delayed audit that had a warning of Mazzoni’s poor financial condition.
Marston chastised the center during the hearing for using the money from LCF and FundKite for payroll instead of immediately paying it back.
“And nobody said, OK, here is my salary back, I realize that money should not have been taken,” Marston said.
Mazzoni dismissed the lawsuit on Nov. 27. The center declined to comment on the decision.
The center has also filed a petition in the Supreme Court of New York County asking a judge to stay arbitration between Mazzoni and FundKite. A decision is pending.