Aguila Inc., which once ran more than 40 homeless shelter sites in Manhattan and the Bronx, filed for Chapter 11 bankruptcy in Manhattan federal court after the city cut ties with the troubled organization.

A troubled homeless shelter provider that took in more than $330 million in city contracts over the past decade declared bankruptcy Friday, following years of financial problems and substandard services. 

Aguila Inc., once one of New York City’s largest shelter providers with more than 40 sites in Manhattan and the Bronx, filed for Chapter 11 bankruptcy in Manhattan federal court. Aguila’s chief executive officer, Raymond Sanchez, said the organization had little choice after losing all but one of its shelter contracts while contending with mounting debts and various lawsuits—including a complaint filed earlier this year by embattled ex-CEO Jenny Rivera, who was fired amid an investigation by the state attorney general.

“The immediate benefit of filing is that all current litigation involving Aguila is halted,” Sanchez said in a statement. “My predecessor was incredibly litigious and the plethora of lawsuits squandered resources and inhibited our ability to focus on our mission, which is serving our fellow New Yorkers.”

Past board meeting minutes and executive reports reviewed by City Limits describe Aguila’s struggles to pay subcontractors and building owners for several years, as the Department of Homeless Services (DHS) gradually ended all but one of its lucrative contracts. City Limits first reported last month that DHS planned to terminate Aguila’s contract at their last remaining shelter inside the Park View Hotel on West 110th Street as part of an effort to cut ties with inadequate providers. The Park View site has been used as a “pre-assessment” facility for men who may have been exposed to COVID-19 before they are assigned to longer-term shelters elsewhere in the city.

Sanchez said the agency now has 28 employees, down from 110 when he came to Aguila in August 2020. He said about 50 former employees began working for nonprofit agencies that took over Aguila’s shelter contracts, while about 30 people were laid off.

Aguila has so far received $6.9 million from the city this year, according to the comptroller’s contract database. Since July 1, 2012, Aguila has received a total of $331,500,000 from the city, records show.

The agency’s bankruptcy filing lists a nearly $1 million debt to a private security firm and more than $477,000 owed to cluster site landlord Kalman Tabak, a property owner who has long leased units in his buildings for use as temporary shelter for homeless families with services provided by Aguila. Tabak also created his own nonprofit organization, New Hope Transitional Housing, that provides services in his buildings.

Sanchez, the former counsel to Bronx Borough President Ruben Diaz Jr., said he will try to rebuild the organization after the bankruptcy proceedings. “But without DHS contracts, there’s no Aguila,” he said. “I have to be realistic about the ecosystem we’re working in.”

Sanchez led Aguila in the wake of Rivera’s firing in 2020 and said he sought to reform the agency by bringing on new board members and attempting to adhere to a corrective action plan from the city, in spite of financial constraints.

“Since I’ve taken over I’ve spent so much of my time dealing with litigation,” he said in an interview Monday. “The constant antagonizing of landlords. The constant antagonizing of city agencies. And at the same time, not having a private development person to raise funding.”

Their recent problems include a failed backroom merger with another problem-plagued nonprofit and a state attorney general’s probe into Rivera’s dealings last year.

Rivera, who has not faced criminal charges, sued Aguila in July, claiming the organization owed her $300,000 in salary and $50,000 in benefits after her firing based on the terms of her contract. The contract included a clause that would provide 18 months of compensation following any termination, she said in a complaint filed in Bronx County Supreme Court.

Aguila countered that there was no evidence of a signed employment agreement or that such a contract clause had received board approval. Two months later, however, Rivera produced a signed contract with the 18-month payment clause. Aguila maintains that the board did not actually approve that agreement.

Two other lawsuits relate to a failed deal to fold Aguila into the nonprofit Neighborhood Association for Inter-Cultural Affairs (NAICA), whose own financial problems and lackluster services have also landed it on DHS’s internal watchlist of nine troubled shelter providers. Aguila sued NAICA, accusing the agency of “egregious acts of fraud and misrepresentation in an attempt to compel the acquisition and control of Aguila” while negotiating with Rivera without the board’s knowledge, the lawsuit states. NAICA countersued last year, alleging that they were transparent in their negotiations with Rivera. 

Aguila is also entangled in legal proceedings with landlords at its former shelter sites.

Shortly after publication of this article, Rivera fired back at Aguila, Sanchez, the organization’s board of directors and past executives.

“Aguila’s problems pre-dated my term as CEO, and apparently continue to bloom under the current CEO Ray Sanchez’s leadership,” she said in a statement. “Mr. Sanchez was tasked with turning the agency around but instead he filed for bankruptcy. Maybe he was too busy with his own political ambitions to put Aguila on the right track which is why he seems to be using me as a scape goat.”

“In my tenure as CEO I tried to turn Aguila around, but I was hampered by numerous people including [former Chief of Staff] Joe Sierra and the board of directors, who didn’t seem to have the Agency’s best interests in mind,” she continued. “I believe I was wrongfully terminated which is why I filed suit against Aguila.”

For years, Aguila received large city contracts despite consistent reports of financial mismanagement and unsafe shelter conditions uncovered by the city comptroller’s office. In a 2011 audit, investigators working for then-Comptroller John Liu found that Aguila spent nearly $1 million for “improper purposes” and could not provide supporting documents to account for another $9 million in expenses. They also found that DHS failed to enter into formal agreements with Aguila or inspect their facilities for safety and habitability.

The auditors noted unresolved violations for “rotted, defective, and sagging flooring,” boilers missing safety valves, the absence of sprinkler systems and illegal conversions at Aguila sites.

At the time, Aguila was led by former DHS Commissioner Robert Hess and ran services in several buildings, like the Apollo Hotel and the Aladdin Hotel, owned by brothers Jay and Stuart Podolsky family and their associate Alan Lapes. The three landlords have been accused of failing to maintain safe buildings and using coercion or harassment to drive out tenants in order to score city shelter contracts. The Park View, Aguila’s last shelter, is also a Podolsky-owned property.

A 2019 audit by state Comptroller Tom DiNapoli’s office documented more safety concerns at five of the 24 shelters that Aguila operated at the time. DiNapoli’s inspectors rated conditions “poor” at two of the sites and “very poor” at three after finding cockroaches and rodent feces inside an oven, a broken floor covered in plywood and missing appliances. A year later, New York City Comptroller Scott Stringer’s Office inspected 10 Aguila shelter units during an infant safety audit report and documented “Safety and Health Concerns Due to Unsafe Sleep and Inadequate Unit Conditions” at all 10.

Aguila’s finances were in shambles well before the bankruptcy filing, according to board meeting minutes and executive reports reviewed by City Limits. 

Aguila administrators and board members were discussing the organization’s “financial crisis” as early as January 2019, with their former attorney Jeffrey Underweiser—who also served on the board—urging agency heads to submit new contract proposals to make up for debts of at least $330,000, according to the minutes of a Jan. 15, 2019 board meeting. 

DHS had begun terminating nearly all of Aguila’s shelter contracts by then, prompting cutbacks and staff lay-offs. Aguila got rid of several positions, including the chief operations officer, the IT manager and the head of human resources, board minutes state. 

By April 2019, Rivera had recommended bankruptcy and “rebranding the organization” in an executive report to the board. During the April 16 board meeting, Aguila Chief Financial Officer Michael Whelan said the agency would likely lose $400,000 that fiscal year, following losses of $240,000 in 2018 and $220,000 in 2017.

Rivera advocated for the organization to also halve the $13,000 monthly retainer they paid Underweiser. Underweiser had said he would accept the reduced pay if agency administrators took a pay cut, too, according to the minutes.

But Rivera declined, saying her workload justified her $200,000 annual salary. Another board member, Dolores Batista, questioned when that salary had been approved.

By October 2019, the organization’s financial meltdown seemed irreversible, officials said.

“The risk of bankruptcy is very high,” Whelan said, according to the minutes of that month’s board meeting. “The program losses will cause Aguila to hemorrhage cash in the coming months.”

DHS had notified Aguila that they would be ending their contract at the notorious Aladdin Hotel, a decision that Rivera described as “a political maneuver with Cory Johnson [sic] and the Mayor,” according to board meeting minutes. 

The Podolskys had also notified Aguila that they were terminating their Park View lease within a month, the minutes show. Aguila suspected the property owners were looking to bring their own social services provider to the site instead. 

“When they initially gave us the 30 day termination notice they indicated that they wanted us out and basically an orderly transition into the Podolskys’ own puppet,” said new legal counsel Gerard Vince, who took over the role after Underweiser resigned.

Rivera responded that she believed the agency would resolve the issue and remain in place at the Park View. Aguila later sued to stop the lease termination, and has continued providing shelter services in the building (a DHS spokesperson previously told City Limits that it may retain the site as a shelter, run by a different nonprofit, after Aguila’s contract ends). 

“It is also an eye awakening in terms of what I’ve said in the past that we have to get out of bed with DHS and out of bed with the Podolsky’s [sic],” Rivera said, according to the meeting minutes. “These folks are no good and we have to get out of dealings with them.”  

“It has now been 1.5yr with programs closing back to back and we feel like we are drowning,” she added.