A prominent construction-industry nonprofit is being accused by its former financial sponsor of mismanaging more than $850,000 and diverting the cash to a secret bank account. The nonprofit, the Regional Alliance for Small Contractors, denied the accusations, which mark an ugly blow-up of a 26-year relationship.
The Fund for the City of New York filed suit Monday against the Regional Alliance, a group that trains minority- and women-owned construction firms and helps them secure contracts. The Fund managed the Regional Alliance’s finances for more than 30 years through an incubator program, but now claims their relationship soured starting around 2023, when the Regional Alliance began “hemorrhaging money” under a new leader, failed to repay a loan and began diverting money it received from contract payments with outside groups. This led the Fund to terminate the sponsorship in June of last year.
“Rather than undertake the hard work to set the organization back on the right course, Regional Alliance” and its executive director, Zenaida Rodriguez, “embezzled and stole over $850,000 of the Fund’s money,” the Fund alleged in the suit, filed in Manhattan state court.
Owen Stone, a spokesman for the Regional Alliance, called the lawsuit “a stunning misrepresentation of the end of our 30-year relationship with the Fund for the City of New York.”
“Everything we take in supports and advocates for small, women- and minority-owned businesses, and every single penny is accounted for,” Stone said. “Clearly the Fund is upset they are no longer able to charge us exploitative fees for their services. We expected that the legal system at the federal level would be used to attack nonprofit organizations that serve underutilized communities in personal and ugly terms but we never expected it from the Fund for the City of New York.”
‘Growing expenses’
The Regional Alliance is a known player in the city’s MWBE world; last year, the group’s annual luncheon included remarks by Michael Garner, the chief business diversity officer in Mayor Eric Adams’ administration.
Created in the 1960s by the Ford Foundation, the Fund for the City of New York supports other nonprofits by acting as their “fiscal sponsor,” which lets smaller organizations operate under the parent group’s tax-exempt status and lean on them for administrative help. (It is not related to the Mayor’s Fund to Advance New York City.)
The Fund sponsored the Regional Alliance in this way starting in 1998, requiring the Regional Alliance to send all its revenues to the Fund along with a 9% fee. In exchange, the Fund would pay all the Regional Alliance’s expenses and handle its back-office functions like payroll and accounting.
The groups worked well together for decades under longtime Regional Alliance Executive Director Earle Walker, who typically finished each year with a budget surplus, the Fund says. Rodriguez was appointed as the Alliance’s new executive director in 2022, and the lawsuit alleges that financial issues began soon after — with the Regional Alliance reporting a $284,000 deficit at the end of Fiscal Year 2023.
The lawsuit claims the strain came amid “growing expenses — including Rodriguez’s own high salary,” which is not specified. Stone, the spokesman for the Regional Alliance, refuted this — saying that Rodriguez agreed to a $70,000 pay cut last year along with other salary reductions and has since returned to her initial $200,000 salary. (Lisette Nieves, president of the Fund for New York City, was paid $351,681 last year.)
The lawsuit notes that the Regional Alliance lost a significant contract with Delta Airlines, and the Alliance’s spokesman said that Covid-19 restrictions hurt the group’s finances. The Fund agreed to advance the Alliance about $280,000 in late 2023, which was supposed to be repaid by the end of the year.
But the suit alleges that the Alliance failed to repay that loan in addition to a $25,000 advance made in February 2024.
Separately, the Regional Alliance continued receiving payments from groups it had contracts with: the Port Authority of New York and New Jersey, the construction firm AECOM Tishman, and Vantage Airport Group, which is building the new JFK Airport Terminal 6. But the suit alleges that those contractors began paying the Regional Alliance directly between 2023 and 2024 — a change from their longstanding practice of sending checks to the Fund.
The Port Authority, for example, paid the Regional Alliance as much as $620,000 a year to train MWBE firms on applying for contracts, the suit says. After the Fund stopped receiving payments from the Port Authority contracts, it asked the transportation agency for an explanation — but a Port Authority employee responded that “she had been instructed not to communicate with the Fund,” the suit alleges. The Fund claims that Rodriguez had directed the Port Authority not to speak with them.
The suit alleges that those contract payments went to a bank account that Rodriguez “secretly established” for the Regional Alliance. In all, the suit alleges that the Fund is still missing $393,038 from the Port Authority, $54,711 from AECOM Tishman and $15,450 from Vantage, on top of the loans it says were never repaid.
Stone, the Regional Alliance spokesman, acknowledged that the group still owes the Fund money but disputed that the amount is related to contract revenues. Instead, he said, the debt stemmed from the fees the Fund charged to act as the Regional Alliance’s sponsor, which included a 32% fringe markup on payroll.
He added that Rodriguez lacked the authority to instruct private companies not to speak with the Fund. Stone said Rodriguez worked under the guidance of the Regional Alliance’s board, which includes representatives from the Port Authority and other state agencies and private contractors.
The Fund finally terminated its sponsorship with the Regional Alliance in June 2024, as a result of what it called a “theft of Fund resources.” Stone said that the Fund refused the Alliance’s request for a separation agreement at terms it could afford.
Now independent from the Fund, the Regional Alliance managed to restore its employee salaries in November 2024 and get back to a revenue surplus, Stone said.
