On October 16th, federal prosecutors announced a crackdown on the embezzlement of homeless funds in California, charging two men with fraud for allegedly diverting public funds originally intended for solving homelessness issues and constructing affordable housing.
U.S. Acting Attorney Bill Essayli stated, “Today, we have officially launched a campaign to hold accountable those responsible for misusing billions of dollars in homeless funds. These two criminal cases are just the beginning, as we will actively investigate all leads to prosecute all violators.”
California has the highest number of homeless individuals in the United States. An open California audit report revealed that the state spent $24 billion over a five-year period ending in 2024 to address homelessness issues, but many expenditures lacked traceable effectiveness, constituting a series of obscured expenses.
Essayli mentioned at Thursday’s press conference that his department is currently tracking the whereabouts and uses of “billions of dollars in public funds” in seven Southern California counties, where these funds are often wasted, mismanaged, or even outright stolen.
Cody Holmes from Beverly Hills was formerly the Chief Financial Officer of Shangri-La Industries LLC, a Los Angeles affordable housing developer. He was arrested on Thursday and faces a felony charge punishable by up to 20 years in prison.
According to court documents, in October 2022, the California Department of Housing and Community Development (HCD) allocated approximately $25.9 million for a homeless resettlement project called “Homekey.” Holmes allegedly used falsified bank records to deceive HCD into believing that Shangri-La and its affiliates controlled around $160 million in funds, falsely showcasing his company’s ability to implement the “Homekey” homeless housing project.
However, investigations revealed that the funds Holmes and Shangri-La claimed in the bank accounts were non-existent.
Holmes and Shangri-La also submitted false balance sheets to HCD, falsely claiming that Shangri-La’s affiliates possessed millions of dollars in cash. After receiving this information, HCD gave the green light to Shangri-La. Prior to this, Shangri-La had already received millions of dollars in project funds from the California Housing Department.
Consequently, the funds intended for purchasing, constructing, and operating affordable housing for the “Homekey” project were illicitly diverted. In November and December 2022, over $2.2 million was transferred from a Shangri-La account to Holmes’ personal account, with $2 million used to repay Holmes’ shopping credit card debt at a well-known luxury retailer.
Essayli emphasized at the Thursday press conference, “Despite receiving all state government funding, the developer did not complete the construction of the Thousand Oaks (homeless housing) project. In fact, he embezzled that money.”
The Homekey project was initiated by California Governor Newsom during the pandemic, aiming to assist in acquiring hotels, apartments, and other buildings, transforming them into long-term residences for the homeless, with an allocation exceeding $800 million.
In another case, Steven Taylor, a developer and real estate broker from Brentwood in Los Angeles, was charged with seven counts of bank fraud, one count of identity theft, and one count of money laundering. He was granted release on a $3.6 million bail.
According to the indictment, from August 2019 to July 2025, Taylor operated his real estate business by obtaining loans and credit limits through providing false bank statements and cash documentation. He used the proceeds from fraud to purchase properties in various areas of Los Angeles.
Taylor was also accused of deceiving lenders regarding the purpose of the properties, falsely claiming intent to renovate a property in Cheviot Hills for personal residence. In reality, he had already signed a contract with a homeless housing developer and sold the property at double the price. This transaction involved dual escrow, deliberately concealing information from lenders and other relevant parties.
Prosecutor Essayli stressed on Thursday that Taylor fraudulently sold a property purchased for $11 million for $27 million to a homeless housing developer through deceitful means.
Akil Davis, Assistant Director of the FBI Los Angeles Division, stated that Taylor attempted to expand his business in upscale communities in Los Angeles.
Davis urged the public to provide information to help federal authorities identify and apprehend other individuals and corporate entities potentially involved in fraud and abuse of taxpayer funds.
California annually spends huge sums of money addressing homelessness issues, yet the number of homeless individuals continues to rise, with residents across party lines believing that the state’s homelessness problem has spiraled out of control. Data from the U.S. Department of Housing and Urban Development (HUD) shows that there are approximately 770,000 homeless individuals nationwide, with over 187,000 concentrated in California.
On April 8th, Prosecutor Essayli announced the establishment of a task force to investigate homelessness fund fraud and corruption in Los Angeles, Orange County, Riverside, San Bernardino, San Luis Obispo, Santa Barbara, and Ventura counties.