Feds announce charges alleging LA-based developers misused public homelessness money

Federal officials announced charges against two Los Angeles-based property developers on Thursday in separate cases that allege misuse of government funds meant to address the homelessness crisis.

In one case, federal officials allege Cody Holmes, an affordable housing developer from Beverly Hills, submitted fake financial information to the state to acquire funds to buy, build and run a homeless housing project in Thousand Oaks.

In the other case, Steven Taylor, a Brentwood-based property flipper, allegedly defrauded a money lender, telling them he was going to renovate a Cheviot Hills senior housing complex and use it for himself. In reality, according to federal officials, Taylor had already agreed to sell the property to a homeless housing developer. Though Taylor purchased the property for $11.2 million, the housing developer allegedly purchased it for $27.3 million using public funds from the city of L.A. and the state.

Bill Essayli, the acting U.S. attorney for the Central District of California, said while announcing the charges that the state has made little progress on the homelessness crisis and failed to provide “meaningful oversight” over the people to whom it’s given money to combat homelessness.

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“ They had little to no answers to the public's demand for accountability,” Essayli said at the Spring Street Courthouse in downtown L.A.. “Well, that accountability starts today.”

He added that the cases announced Thursday are “just the beginning” in the federal government’s investigations into the use of billions of public funds for homelessness.

“ We're looking at everyone,” Essayli said. “If you steal money or allow it to be stolen, we will find you, and we will prosecute you.”

The Holmes case

Officials said they arrested Holmes on Thursday morning.

The mail fraud charge lodged against Holmes carries a maximum sentence of 20 years in prison.

According to the complaint, the California Department of Housing and Community Development paid $25.9 million to real estate developer Shangri-La Industries LLC, of which Holmes was formerly chief financial officer.

That money came from Homekey, a state program that aims to convert properties like motels into affordable housing, and it was intended to be used for an affordable housing project in Thousand Oaks.

Federal officials said that in order to get that grant money, Holmes submitted fake financial documents that purported to show Shangri-La Industries had adequate cash to build the Thousand Oaks project, as well as others throughout the state.

The Thousand Oaks project was never completed, officials said Thursday. The complaint against Holmes includes the allegation that he used some of the grant money to pay credit card bills.

“Essentially, he stole the money,” Essayli said.

A spokesperson for the California Department of Housing and Community Development said that the department has "fully cooperated with the U.S. Attorney’s Office in its investigation and will continue to do so."

The Taylor case

Taylor was arrested last month and indicted on similar but unrelated charges, Essayli said. A grand jury on Wednesday superseded that indictment, adding the allegations announced today.

Those include seven counts of bank fraud, one count of aggravated identity theft and one count of money laundering.

Federal officials allege Taylor sold the Cheviot Hills property to Weingart Center Association, a housing nonprofit, without informing the lender.

In response to Thursday's announcement related to Taylor, L.A. Mayor Karen Bass said her administration has "zero tolerance for corruption — period."

"We’re working with the U.S. Attorney’s office to ensure that anyone who engages in fraud against the city will face the full force of the law and my administration’s unwavering commitment to accountability," Bass said.

Taylor is free on a $3.6 million bond.

LAist called the number listed on Taylor's business website and left a message.

The Weingart Center is led by former state Sen. Kevin Murray.

LAist called the Weingart Center and left a message, which was not immediately returned before publication.