Breaking
Federal prosecutors and the FBI announced the arrests of three individuals connected to Los Angeles-area homeless services nonprofits on September 16, accusing them of diverting more than $12 million in public funds intended to shelter and house the region’s homeless population. Michael Young, 46, founder of the Culver City-based nonprofit Home At Last, Lakiya Malone, 48, an employee of the nonprofit Special Service for Groups, and Donye “Danya” Mitchell, 55, chief executive of The Big Blue Umbrella, each face federal charges that could send them to prison for up to 20 years. FBI Director Kash Patel said the defendants are accused of “systematically diverting over $12 million in taxpayer funds for personal gain – robbing hardworking American citizens and directly hurting the people those funds are intended to support.”
Prosecutors say Young’s nonprofit received $118 million in public funding, and he allegedly diverted $7.5 million of it through shell corporations and forged invoices, spending more than $1 million to open the Six Seven Five Lounge, a restaurant and nightclub in Inglewood, along with commercial real estate and a vintage car restoration. Malone is accused in a 21-count indictment of accepting more than $180,000 in bribes from a separate nonprofit executive in exchange for pushing through housing referrals for “ghost” clients who never actually lived at the facilities, using fabricated welcome letters and forged sign-in sheets. Mitchell allegedly secured $1.2 million of a $9 million grant application through misrepresentations about her nonprofit’s capacity, then spent the money on inflated salary payments, bail bond costs, and personal credit card debt.
Details & Background
The arrests are the latest fallout from a homelessness-spending system that has funneled staggering sums through Los Angeles-area nonprofits with what officials themselves admit is minimal oversight. Young’s Home At Last alone took in $118 million in public money. The case also follows the January arrest of Alexander Soofer, former executive director of the South LA nonprofit Abundant Blessings, who is accused of fraudulently obtaining $23 million in homelessness funds — including more than $5 million funneled directly through the Los Angeles Homeless Services Authority (LAHSA) — and pocketing at least $10 million for himself, spending it on a $7 million Westwood home, a $125,000 Range Rover, private jet travel, and a $475,000 vacation property in Greece. Site visits reportedly found homeless clients being fed ramen noodles and canned beans instead of the meals his organization was paid to provide.
The scandal has already shaken Los Angeles’ homelessness bureaucracy. LAHSA’s board voted against renewing its role as regional lead agency, and Mayor Karen Bass stepped down from LAHSA’s governing commission amid the fallout. Los Angeles City Controller Kenneth Mejia said his office has repeatedly warned city leaders about the lack of accountability in homelessness spending. “We get 800 fraud, waste and abuse claims every year in the City of LA and we only have 5 people to investigate it, so we are not even scratching the surface,” Mejia said, adding that his office has asked the mayor and city council for more auditors and fraud investigators.
Reactions
First Assistant U.S. Attorney Bill Essayli, whose office is prosecuting the case, did not mince words about the scope of the failure. “The scale and brazenness of these fraudsters expose a profound failure by the State of California and Los Angeles County to safeguard public funds,” Essayli said. FBI Acting Assistant Director Robert Molvar added that the arrests should serve as a warning to anyone exploiting taxpayer-funded programs. “When taxpayer-funded programs are exploited for personal gain, it undermines public trust and diverts critical resources away from the people who need them most,” Molvar said. The arrests were carried out by the Homelessness Fraud and Corruption Task Force, a federal effort covering Los Angeles, Orange, Riverside, San Bernardino, San Luis Obispo, Santa Barbara and Ventura counties, working alongside the FBI, IRS Criminal Investigation and the HUD Office of Inspector General.
Los Angeles Mayor Karen Bass sought to distance her administration from the scandal, insisting accountability is a priority. “My administration has zero tolerance for fraud – period,” Bass said in a statement. “Any misuse of tax-payer funds meant to help unhoused Angelenos should be met with the full force of the law. We appreciate the efforts of the Department of Justice in protecting public funds and working towards recovering dollars meant to serve Angelenos experiencing homelessness.” Critics note, however, that the fraud went undetected for years even as her administration and the city council continued funneling money through the same nonprofit network.
Why This Matters to You
Los Angeles County and the state of California have spent billions of dollars over the past decade on homelessness programs even as the visible homeless population has continued to grow in many areas, and cases like this one help explain why. When a single nonprofit can receive $118 million in public funds with enough gaps in oversight that a founder can allegedly divert millions into a nightclub and luxury spending, it raises hard questions about who is actually watching the money — and how many similar schemes remain undiscovered. The admission from LA’s own city controller that just five investigators are responsible for 800 fraud complaints a year suggests this case may be the tip of a much larger problem.
The federal government’s decision to stand up a dedicated, multi-county fraud task force signals that Washington sees this as more than a local embarrassment — it is a test of whether federal authorities can force accountability onto state and local homelessness bureaucracies that have resisted it for years. With Soofer’s case moving toward a guilty plea and three more defendants now facing trial, prosecutors say more arrests could follow. For taxpayers nationwide who fund similar programs in their own cities, the Los Angeles case stands as a stark reminder that good intentions and enormous budgets mean little without real oversight — and that federal law enforcement, not local bureaucracies, may be the last line of defense for the public’s money.
