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FRIENDSHIP HOUSE FACES PROSPECT OF FILING FOR BANKRUPTCY

One more non-profit agency in Erie County is fighting for survival.

Friendship House, faced with paying a $353,000 sexual harassment award to a former employee, more than $90,000 to the Internal Revenue Service for unpaid payroll taxes and thousands of dollars in unpaid bills, may be forced into bankruptcy.

Ralph Hernandez, who was fired in July as executive director of Friendship House, told The Buffalo News he intends to sue the center "for the more than $100,000 I paid into the pension fund and used to keep programs afloat these last many months."

Despite the mounting problems, Ricardo Estrada, chair of the center's board of directors, has promised "the doors will remain open and we will continue to provide services to the people."

If the center does petition for protection under Chapter 11 of the bankruptcy laws, the Lackawanna non-profit agency will be following in the footsteps of the Father Belle Center in Buffalo that was hit in April with a $181,000 sexual harassment award for three of its former employees.

"We still don't have a final decision from the courts," Modesto Candelario, Father Belle director said, "but filing the petition has protected the funding of our programs so we continue to take care of our people."

Candelario also pointed out the Father Belle Center building "is actually owned by the City of Buffalo so there is little in the way of assets to be seized to satisfy the harassment award."

Friendship House does own two buildings.

The two agencies, like most non-profit agencies, do not have insurance that will cover the sexual harassment awards.

"This is not unusual," John N. Walsh III, Buffalo attorney and member of the Clarkson Center board of directors, said.

"To begin with, this type of insurance requires a very exhaustive application and is very expensive," he said.

Walsh also said that "often the greatest cost in this type of action are the defense costs."

Hernandez said the sexual harassment case cost the center $30,000 in legal fees -- $20,000 remaining unpaid.

The legal costs for Father Belle added up to more than $100,000, according to Candelario.

The Lackawanna human services agency has been attempting to regroup since new board members elected Estrada their chair in February.

Marvin Ruckers, an employee of the St. Augustine Center that went through a $400,000 financial crisis about seven years ago, has been retained as interim director.

"Marvin turned around our home care department that had financial problems," Calvin Waller, St. Augustine's executive director, explained. "We agreed he could go over to Friendship House to see if he could help. What happens in the future with Marvin remains to be seen."

A team of specialists, assembled by the United Way of Buffalo and Erie County, will begin work this week "to salvage what can be salvaged and to reconstruct the center's financial viability," Robert M. Bennett, United Way president, said. "This center is vital to Lackawanna's community."

Upwards of 2,500 people of all ages depend on Friendship House for its program, food pantry, foster care services, recreation or summer camp programs.

It also operates a mental health clinic for minority children in Buffalo and a low-powered television station purchased in 1992 from Medaille.

At one time, the center also offered a basketball league, teen pregnancy prevention and substance abuse programs and an art and music center.

Bennett observed "maybe Ralph (Hernandez) just took on too much."

Hernandez conceded "maybe so, but I cut back and cut back as much as I could but the community center at 264 Ridge Road is something we just could not afford on our own."

"Just the gas bills for the center were overwhelming," Hernandez said, "often more than $10,000 a month during the winter."

Estrada said one of the first moves will be to sell the center's other building at 90 Dona Street, which houses the administrative offices, the foster care programs and unused classrooms that Hernandez had hoped would be one of the first charter schools in New York State.

The tug of war between Hernandez and Estrada centered on the Dona Street building.

Estrada championed the agency's Ridge Road building, which is a community center he spent time in while growing up.

Hernandez supports Dona, an abandoned school acquired and renovated under his stewardship.

Dona, Hernandez insisted, "is receiving some income. The community center has no income to support itself. It is probably the only community center in the county not supported in some way by the municipality it serves."

Estrada said he has already made overtures to Lackawanna government officials asking for financial support for the community center.

Monday quarterbacking on what happened to Friendship House has begun.

The United Way has given the agency a $13,000 advance so it can pay for the most recent audit of its books and unravel the financial records quagmire. To get a handle on the future, the United Way has asked for a 30 day plan outlining how the agency will meet short term issues and payroll requirements, along with detailed financial records for the first six months of 1997.

"Red flags started appearing several months ago," Bennett said, "but we were told that 'everything will be all right. Not to worry.' "

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