Federal prosecutors charged three people with looting millions in taxpayer money meant to house homeless Californians, spending it instead on a nightclub, a luxury Tahiti vacation, and a restored vintage car, according to the Justice Department.
FBI agents fanned out across Los Angeles early Wednesday morning and arrested two of the three defendants at their homes. The third, 55-year-old Donye Mitchell, is now a fugitive. A fourth figure in the broader crackdown, nonprofit executive Alexander Soofer, has already agreed to plead guilty to wire fraud and money laundering after admitting he pocketed at least $2 million from $23 million in public funds his organization received.
The cases, announced at a federal news conference Wednesday, center on nonprofits that won government contracts to provide housing and services to homeless residents in one of the most expensive cities in the country. Prosecutors say the defendants treated the money as a personal slush fund, billing for services never delivered, fabricating paperwork, bribing a government-agency employee, and funneling cash into shell companies they controlled.
The largest case involves Michael Young, 46, founder of the Culver City-based nonprofit Home At Last. Federal prosecutors say Young's organization received more than $118 million in public funds through government contracts. More than $75 million of that came from the Los Angeles Homeless Services Authority, the agency responsible for coordinating the city's response to its homelessness crisis.
Prosecutors allege Young misappropriated more than $7.5 million through a sham vendor scheme that used shell companies and fraudulent billing. Where did the money go? The charges lay it out: more than $1 million to open and operate a high-end restaurant and nightclub called Six Seven Five Lounge in Inglewood, nearly $50,000 on a luxury vacation to Tahiti, and $140,000 restoring a vintage Chevrolet Impala.
Assistant Attorney General Colin M. McDonald did not hold back at Wednesday's news conference:
"The taxpayers did not sign up to fund this nightclub."
Lakiya Malone, 48, an employee of Special Service for Groups, faces a 21-count federal indictment. Prosecutors allege she accepted more than $180,000 in bribes and kickbacks from Soofer, the Abundant Blessings executive who has already agreed to plead guilty. In return, Malone allegedly steered priority housing referrals to Soofer's nonprofit, including referrals for "ghost" homeless participants who never actually lived at the housing sites.
The scheme relied on fabricated documentation. Prosecutors say the files included fake welcome letters, forged sign-in sheets, and falsified eligibility forms, all designed to make it look as if services were being provided to real people in real housing. Every forged document represented taxpayer dollars flowing to a bed no one slept in.
Soofer, for his part, admitted obtaining $23 million in public money intended to combat homelessness. At least $2 million went to himself and unrelated businesses, prosecutors said. His guilty plea covers wire fraud and money laundering charges.
The third defendant, Donye Mitchell, 55, ran a nonprofit called The Big Blue Umbrella. Prosecutors allege he obtained more than $1.2 million in grant funding after making false representations about how the money would be used. Instead of housing homeless Californians, Mitchell allegedly spent the grant money on personal expenses, bail-bond costs, credit card debt, transfers to family members, and PlayStation charges.
Mitchell was not at home when agents arrived Wednesday. Federal authorities now consider him a fugitive.
HUD Secretary Scott Turner joined the news conference to signal that the arrests were not a one-off. Turner framed the cases as part of a wider push to root out fraud in federal homelessness spending:
"The days of these wire fraud experts flying on private jets, driving around Beverly Hills in Range Rovers and doing lavish things is over."
First Assistant U.S. Attorney Bill Essayli went further, issuing a direct warning to anyone else who may have diverted homeless-aid dollars:
"If you or someone you know has defrauded money allocated for the homeless, I suggest you report it to law enforcement. If you don't, your door may be the next one we're hitting."
The scale of the alleged theft is worth pausing on. Across the four defendants named so far, prosecutors describe more than $140 million in public funds flowing through organizations that were supposed to be solving one of Los Angeles's most visible and politically charged problems. The amount prosecutors say was diverted, at least $11 million between Young's sham vendor scheme, Soofer's admitted theft, and Mitchell's grant fraud, represents money that was supposed to put roofs over people sleeping on sidewalks.
Los Angeles has spent billions on homelessness over the past decade. The city's homeless population remains one of the largest in the nation. Cases like these raise an obvious question: how did nonprofits receiving tens of millions in public contracts operate sham billing schemes and fabricate entire case files without anyone catching it sooner?
The Los Angeles Homeless Services Authority, which funneled more than $75 million to Young's Home At Last alone, has not been charged. But the sheer volume of money that flowed through these organizations, and the brazenness of the alleged spending, points to a system where oversight lagged far behind the cash. When a nonprofit founder can allegedly open a nightclub and restore a classic car with homeless-services money, the monitoring structure has failed at a basic level.
The pattern is not unique to homelessness programs. Federal fraud cases involving misappropriated public funds have become a recurring feature of the post-pandemic landscape, where emergency spending flooded out of Washington with minimal guardrails. The FTX collapse offered a different version of the same dynamic: Sam Bankman-Fried's ex-girlfriend testified that he directed the misappropriation of approximately $10 billion in customer funds, treating other people's money as his own while donating over $100 million to political campaigns to build influence. The common thread is a system that trusts recipients to police themselves, and acts surprised when they don't.
In Los Angeles, the victims are not cryptocurrency investors. They are taxpayers who funded programs to help the most vulnerable residents in the city, and homeless Californians who never received the housing those programs promised.
Billions flow through government homelessness programs every year. Until the people handing out the contracts start checking where the money actually goes, the nightclubs and Tahiti vacations will keep writing themselves.
