Federal Charges Unveil Multi-Million Dollar Fraud in Los Angeles Homelessness Funding

Los Angeles, CA – Federal authorities have brought charges against two individuals in separate cases alleging the fraudulent misuse of millions of dollars intended for homelessness and affordable housing initiatives in Los Angeles. The Department of Justice announced these charges as part of a broader federal investigation into the allocation of public funds aimed at addressing the city's pervasive homelessness crisis, prompting Los Angeles Mayor Karen Bass to declare "zero tolerance" for corruption.

Cody Holmes, a former Chief Financial Officer of an affordable housing developer, was arrested for allegedly using false bank records to secure nearly $26 million from the California Department of Housing and Community Development for Shangri-La Industries LLC. These funds, part of the Project Homekey program, were earmarked for an affordable housing project in Thousand Oaks, which was never completed. Instead, Holmes is accused of using the money for personal expenses, including credit card bills and luxury retail purchases.

In a separate but related case, real estate agent Steven Taylor faces charges including bank fraud, identity theft, and money laundering. Taylor is accused of fraudulently obtaining loans and lines of credit, then using the funds to flip a Cheviot Hills home for $11.2 million and subsequently selling it to a homeless housing developer for $27.3 million, utilizing city and state funds. Acting U.S. Attorney Bill Essayli stated, "Essentially, he stole the money," emphasizing that these initial indictments are "just the beginning" of federal investigations into the use of billions of public funds for homelessness in Southern California.

The federal actions come amidst increasing scrutiny over the city's management of homelessness funds. A federal court hearing was held in May concerning allegations that the City of Los Angeles breached its agreement to provide sufficient shelter beds. Furthermore, a November 2024 report by the City Controller identified that at least $513 million in allocated homelessness funding remained unspent, citing inefficiencies and a lack of oversight. Mayor Bass, whose administration oversees many of the city's homelessness initiatives, affirmed, "My administration has zero tolerance for corruption – period."

The FBI's Assistant Director in charge of the Los Angeles Field Office, Akil Davis, highlighted the formation of a Homelessness Fraud and Corruption Task Force, aimed at investigating "fraud, waste, abuse, and corruption" in the use of these critical funds. The ongoing investigations and charges underscore a concerted effort to ensure accountability for taxpayer money designated to alleviate the homelessness crisis in Los Angeles.