Federal task force arrests 2 LA developers for $50M homelessness fraud

As part of a special federal task force investigating where a staggering $24 billion earmarked for homelessness in California ended up, the Justice Department unveiled preliminary findings Thursday, announcing new criminal cases against two Los Angeles-area real estate developers who the federal government says misused nearly $50 million in a mix of federal, state and local dollars earmarked for homelessness.

“This is not a victimless crime,” said Akil Davis, assistant director of the FBI in Los Angeles. “Where millions of lost dollars could have been used for homeless housing or other local priorities funded by California taxpayers.”

Cody Holmes, 31, of Beverly Hills was arrested and charged with federal fraud Thursday morning for allegedly receiving $25.9 million in grant money intended for a homeless housing project that was never built.

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According to court documents, the California Department of Housing and Community Development paid nearly $26 million to Shangri-LA Industries LLC in October 2022 to be used to purchase, build, and operate homeless housing in Thousand Oaks, California.

The government alleges that Holmes, as then-CFO of Shangri-Los Angeles, submitted false bank documents and balance sheets to obtain approval for the grant money. Prosecutors allege Holmes lived a lavish lifestyle and used some of his homeless funds to pay $2 million for American Express cards that included purchases at “well-known luxury retailers.”

“If you steal money or allow it to be stolen, we will find you and we will prosecute you,” said Bill Essay, acting US Attorney for the Central District of California.

Fox News has reached out to Shangri-LA for comment.

In a separate case, federal investigators arrested 44-year-old Steven Taylor of Los Angeles and charged him with seven counts of bank fraud, one count of aggravated identity theft, and one count of money laundering.

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The indictment alleges that Taylor provided false bank statements and records to acquire properties throughout Los Angeles. More recently, prosecutors said he was involved in a 2023 scheme in which he submitted false documents to buy a property in Los Angeles’ Cheviot Hills neighborhood for $11 million. He then quickly resold the property for $27 million.

Tents for homeless people appear on August 6, 2023 on Skid Row in Los Angeles, California. (Frederick J. Brown/AFP via Getty Images)

At the time of purchase, the building was being used as a senior housing facility. Federal prosecutors allege Taylor “misrepresented” that he intended to renovate and operate the Cheviot Hills property himself but was actually “under contract to sell the Shelby property.”

The Department of Justice says the buyer of the property was a well-known Los Angeles nonprofit called Weingart, which used federal and local funds to make the purchase. Weingart is part of the investigation, Al-Asili says.

Weingart’s longtime CEO is former Democratic California Sen. Kevin Murray. Murray has not been named or charged directly. Fox has reached out to Weingart and Murray for comment.

After the charges were announced, Los Angeles Mayor Karen Bass issued a statement saying, “My administration has zero tolerance for corruption. We are working with the US 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.”

Los Angeles Mayor Karen Bass. (Robert Gauthier/Los Angeles Times via Getty Images)

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In April this year, Al-Asili announced the launch of the Displaced Fraud and Corruption Task Force, which aims to investigate how the state spent $24 billion between fiscal years 2018 and 2023.

“California officials failed to provide meaningful oversight of the individuals who received most of this money, and have had few answers to the public’s demand for accountability,” Al-Asili said. “Well, that accountability starts today.”