Phoenix Frontier files for bankruptcy

August 14, 2013 Updated Aug 14, 2013 at 3:07 PM EDT

By Tracey Drury, Buffalo Business First

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Phoenix Frontier files for bankruptcy

August 14, 2013 Updated Aug 14, 2013 at 3:07 PM EDT

A nonprofit human services provider in Buffalo has filed for bankruptcy protection, shutting its doors and shifting hundreds of clients to alternate providers.

Phoenix Frontier Inc. filed for Chapter 7 protection on Friday in U.S. Bankruptcy Court, Western District, listing hundreds of creditors.

The agency, housed on Leroy Avenue in Buffalo, provided services to individuals with disabilities, mental health services as well as individuals with traumatic brain injuries (TBI).

According to individuals in the DD sector familiar with the situation, longtime CEO Jack Manganello left the agency in April.

Also in April, a federal lien brought to light the corporation had failed to pay federal withholding taxes since last fall. Days later, board president Timothy Maggio died after suffering a heart attack.

In recent months, remaining board members began meeting with area nonprofit agencies to help turn the agency around, but it was determined the liabilities and debt were too great. Last Tuesday, Aug. 6, the State Office for People with Developmental Disabilities (OPWDD) notified local agencies Phoenix Frontier would be shutting down.

Over the past week, five agencies have helped transition those services, either on a temporary basis via OPWDD or by taking over state and federal contracts:

• Headway for Brain Injured, a program of People Inc., identified alternate providers for 51 people who were receiving TBI services, with at least some of the service coordinators employed by Phoenix hired by those other agencies.

• Community Services for the Developmentally Disabled hired about 20 workers and took on the caseloads about 130 individuals receiving day habilitation program services, including job training. CSDD also agreed to lease the Leroy Avenue building and the agency's vehicles temporarily to house the programs, transport clients and maintain continuity.

• Goodwill Industries of WNY Inc. is taking over contract manufacturing for several private contracts, bringing 80 consumers in the supported employment program and seven staff to its William Street site. The jobs include light manufacturing and packaging for local firms.

• Suburban Adult Services is taking over outside federal janitorial at the three international border crossings, hiring at least two supervisors and five full-time consumers.

• Heritage Centers and its Allentown Industries unit has taken over contracts with New York State for janitorial services at five locations, including the Buffalo City Courthouse and the Psychiatric Center. A total of four staffers and 23 consumers are shifting to the agency.

Rhonda Frederick, COO at People Inc. and president of the Developmental Disabilities Association of WNY (DDAWNY), said the ability for the various agencies to take over the programs so quickly, and maintain employment and programs for clients, has been impressive.

"There's enough providers that I think can do this, but it's just so unfortunate in this climate that Phoenix wasn't able to figure out a way to stay in business," she said. "I think the folks who need the services are going to get what they need."

According to its 990 tax filing, Phoenix Frontier listed a staff of 170 full and part-time workers and revenue of $5.3 million for the 2011 fiscal year, the most recent year for which data was available. Founded in 1965 as the Niagara Frontier Vocational Rehabilitation Center, the agency finished the last two years in the black.

A former board member who returned a Business First phone call said attorneys representing Phoenix Frontier had advised against commenting on the situation. He also pointed out that the board was dissolved in tandem with the bankruptcy filing.

The filing, which lists 30 pages of creditors, states that the majority of debt is primarily business debt. It also estimates that after exempt property is excluded and administrative expenses paid, there will be no funds available for distribution to unsecured creditors.
Attorney William Savino is representing the agency in the bankruptcy filing. Savino, chairman of Damon & Morey LLP's business litigation and insolvency department, said the board of directors worked with the state and other agencies, doing everything possible to keep the doors open right up to the filing.
"The problem was longstanding debt that had only recently been brought to the board's attention," he said. "The problems were just too deep and problematic to come back from."

Prior to the shut-down Friday, Phoenix Frontier mailed letters to its consumers and their families indicating all OPWDD programs would continue, in some cases at the same program site and with the same program staff.

Mark Foley, president & CEO at Community Services, said the transitions took place very quickly over just three to four days, with the new providers meeting with staff and clients as needed to facilitate new employment contracts and other details. But it's been a long, stressful week.

"It's as if you were going to start a business and had less than a week to do it," he said. "This is one of the biggest challenges we've seen in many, many years."

Foley said several agencies, including Community Services, Goodwill and Heritage Centers, tried unsuccessfully to help the Phoenix board right the ship.

"There was no way they could save the business. The debt had grown to an unmanageable size and there was no way they could continue in business," he said.

Lynch said Goodwill knows many of the companies for which it will take over contracts and has enough capacity to make room for the jobs. Adding the contracts will double the size of its workshop, which currently employs veterans, people on public assistance as well as disadvantaged individuals.

He said the ability of the other agencies to work well together, as well as the assistance from the state and from Phoenix workers, have helped ease a difficult situation.

"The Phoenix staff was unbelievable. For people who are potentially losing their job, they really went in and did the right thing for their clients," Lynch said. "The OPWDD guys got decisions made at the state level in record time."

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