LA Homeless Nonprofit Founder Arrested for Diverting $7.5M to Nightclub and Real Estate

A Culver City nonprofit founder and a second defendant were arrested on federal fraud charges for allegedly misappropriating millions in taxpayer funds meant for homeless housing.

Two Arrested in Los Angeles Homeless Funding Fraud Scheme

Federal law enforcement arrested two defendants Tuesday on charges stemming from separate corruption and fraud cases tied to homeless housing programs in the Los Angeles area, DOJ Justice News reports. Among those taken into custody was Michael Young, 46, of Baldwin Hills, a founder of the Culver City-based nonprofit Home At Last (HAL), accused of diverting more than $7.5 million in taxpayer funds into shell companies, commercial real estate, and a nightclub.

The arrests are the latest enforcement action by the Homelessness Fraud and Corruption Task Force, which operates across a seven-county jurisdiction in the Central District of California — covering Los Angeles, Orange, Riverside, San Bernardino, San Luis Obispo, Santa Barbara, and Ventura counties.

Millions Funneled Into Nightclub and Bingo Hall

Young faces a federal criminal complaint alleging wire fraud — a felony carrying a statutory maximum of 20 years in federal prison. According to the complaint, he operated a web of shell corporations and used fraudulent billing practices to misappropriate taxpayer money earmarked for homeless housing, including funds administered by the Los Angeles Homeless Services Authority (LAHSA), the lead agency coordinating housing and social services for the homeless in Los Angeles County.

Among the alleged misuses: more than $1 million spent to open and operate a high-end restaurant and nightclub in Inglewood called Six Seven Five Lounge. Funds were also used to finance the construction of a nightclub and adjacent bingo hall, as well as for commercial real estate purchases.

In total, Young received more than $118 million in public funds through contracts with LAHSA, the City of Los Angeles, the County of Los Angeles, and the U.S. Department of Housing and Urban Development. LAHSA alone paid HAL over $75 million for homeless housing services. Of that total, Young allegedly misappropriated more than $12 million by falsely claiming funds would be used for homeless housing or for vendors serving homeless clients.

Officials Cite Scale of Alleged Fraud

Assistant Attorney General Colin M. McDonald of the National Fraud Enforcement Division said the enforcement action targeted "schemes that stole millions from programs meant to house California's homeless." McDonald stated that through Home At Last, Young received more than $100 million in taxpayer funds and misappropriated more than $12 million. "That scheme is now halted in its tracks," McDonald said.

FBI Director Kash Patel described the defendants as having "systematically divert[ed] over $12 million in taxpayer funds for personal gain," adding that the bureau would "act to hold those responsible accountable for their fraud."

First Assistant U.S. Attorney Bill Essayli for the Central District of California called the scale and brazenness of the alleged fraud evidence of "a profound failure by the State of California and Los Angeles County to safeguard public funds." Essayli said millions intended to house homeless individuals had allegedly financed "private real estate, a nightclub, a bingo hall, and personal expenses."

Special Agent in Charge Darren Lian of the IRS Criminal Investigation's Los Angeles Field Office said the evidence revealed "a deliberate scheme to defraud government programs designed to support vulnerable community members who are experiencing homelessness."

Acting Inspector General Brian D. Harrison of the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG), called the conduct "an attack on the most vulnerable communities provided for by HUD programs."

Three Cases Announced; One Guilty Plea

Tuesday's announcement covers three new criminal cases, along with a guilty plea in a previously charged case. Young is one of three total defendants charged across the separate cases. Two of the three defendants — including Young — were arrested and were expected to make initial appearances Tuesday afternoon in United States District Court in downtown Los Angeles.

The Homelessness Fraud and Corruption Task Force, which brings together federal agencies including the FBI, IRS Criminal Investigation, and HUD-OIG, said it would continue to pursue fraud, waste, abuse, and corruption involving funds allocated toward addressing homelessness in the region.

Source: DOJ Justice News