Federal prosecutors charged three people in Los Angeles this week with stealing millions in taxpayer dollars earmarked for homeless services, money allegedly blown on a nightclub, a bingo hall, luxury vacations, and bribes for fake housing referrals. The cases are ugly on their own. But a House oversight lawmaker says they point to something worse: a federally funded system so poorly designed that fraud is practically baked in.
Michael Young, 46, Lakiya Malone, 48, and Donye Mitchell, 55, each face separate federal charges tied to nonprofit organizations that were supposed to help homeless people in Los Angeles get off the streets. Instead, Fox News Digital reported, the defendants allegedly looted the programs they ran, while the Los Angeles Homeless Services Authority funneled more than $75 million in public funds to one of the suspect nonprofits alone.
Rep. Michael Cloud, a Texas Republican on the House Oversight Committee, told Fox News Digital that the charges only scratch the surface.
“The only people really getting upward mobility in these programs, it would seem, is the people running the programs. And that’s not really what the program’s supposed to be about.”
The scale of the alleged theft is staggering. Young, the founder of a nonprofit called Home at Last, allegedly stole $12 million in taxpayer funds. The New York Post reported that he spent the money on a trip to Tahiti, a nightclub, a bingo hall, and a $140,000 vintage Chevrolet Impala remodel.
Malone, a charity worker, allegedly took more than $180,000 in bribes and kickbacks in exchange for fraudulent referrals, including fabricated “ghost” clients who never existed. The scheme let nonprofits bill for services never rendered to people who were never helped.
A separate but related case involves Alexander Soofer, 42, who was arrested on a federal wire fraud complaint. The Washington Examiner reported that Soofer allegedly obtained more than $23 million in taxpayer funds designated to combat homelessness, pocketing at least $10 million for a lavish lifestyle that included a $7 million mansion, a $125,000 Range Rover, private jet travel, and luxury resort stays.
Top LA prosecutor Bill Essayli did not hold back. “That’s where the taxpayer’s money is going, and it’s not going to the homeless,” he said, adding: “We’re working our way up the chain. We’re getting to those who are enabling the fraud, and not just the fraudsters themselves.”
The fraud cases land in the middle of a much larger reckoning over how Los Angeles, and California more broadly, have spent enormous sums on homelessness with dismal results.
HUD reported that LAHSA’s local Continuum of Care received nearly $1 billion in taxpayer dollars over the previous five years. The money was supposed to flow through a “Housing First” framework that prioritized getting homeless individuals into permanent housing before addressing underlying issues like addiction or mental illness.
The results speak for themselves. National Review noted that a California state audit found $24 billion in taxpayer money was spent statewide to address homelessness, and the problem got substantially worse. The state has offered no explanation for the lack of results.
That pattern, spend more, achieve less, demand more, is precisely what Cloud described as a system “incentivized for fraud.” The government, he argued, judges success by “how much money we send out the door” rather than by whether programs are “actually helping people.”
The dynamic creates perverse incentives at every level. Program managers benefit from keeping clients dependent, Cloud said, because it ensures their own job security. He described a structure where the homeless are kept “kind of in a cycle of dependency so that the program manager has job security, in a sense, and gets to live off the government dime.”
That observation has gained new weight as federal fraud crackdowns have expanded across multiple government programs in recent months.
The Department of Housing and Urban Development has not waited for the courts to sort out the criminal cases. HUD, under Secretary Scott Turner, moved this year to suspend LAHSA entirely, citing alleged failures in financial management, internal controls, and safeguards against conflicts of interest.
LAHSA challenged the suspension in court. The outcome of that legal fight remains unresolved.
Meanwhile, Los Angeles Mayor Karen Bass stepped down from the LAHSA commission, a move Cloud cited as an example of Democrat-led resistance to accountability. “You [are seeing], as we begin to look into [waste, fraud and abuse], why is it that these Democrat-led states are saying, ‘No, we don’t want the controls in place,'” he said.
The pattern of public officials distancing themselves from agencies under scrutiny, while resisting the oversight that might have prevented the mess, is familiar to anyone who has watched corruption cases unfold in California in recent years.
In June, Turner announced a $4.04 billion Continuum of Care funding opportunity that explicitly breaks with the Housing First orthodoxy. The new funding includes $1.3 billion set aside for projects prioritizing transitional housing and supportive services, a shift toward requiring treatment and recovery alongside shelter.
Turner was blunt about why the change was necessary.
“The ‘housing first’ experiment failed Americans by warehousing the vulnerable without results. This ideology promised to end homelessness. Instead, billions of taxpayer dollars were spent while homelessness increased to record levels.”
The new funding also includes measures specifically intended to prevent fraud, waste, and abuse, an implicit admission that the old system lacked them.
Cloud pushed further, calling for structural reform that removes the incentives that made the fraud possible in the first place. “We’ve got to take those incentives out and get back to making sure that all these programs have incentives for oversight and that the dollars are managed well,” he said.
The LA homelessness fraud cases do not exist in isolation. Just The News reported that the arrests came just one day after 12 people were charged with stealing more than $10 million in federal childcare aid, part of what appears to be a widening federal effort to claw back taxpayer dollars lost to program fraud.
Brian D. Harrison, acting inspector general at HUD, framed the homelessness theft in stark terms: “Stealing from programs meant to feed, shelter, and support people experiencing homelessness isn’t just a financial crime, it’s an attack on the most vulnerable communities provided for by [these] programs.”
That language matters. The victims here are not abstractions. They are real people living on sidewalks and under overpasses in Los Angeles while the people paid to help them allegedly spent the money on mansions, nightclubs, and trips to Tahiti.
The federal government has been ramping up prosecution of similar fraud schemes across multiple programs, from Medicare to childcare to pandemic relief. The homelessness cases fit a recognizable template: large federal appropriations, minimal oversight, nonprofit intermediaries with weak controls, and political leaders who measure compassion by the size of the check rather than the quality of the result.
The question Cloud and other oversight hawks are pressing is whether the fraud is an aberration or a feature. When a system funnels $75 million to a single nonprofit without catching the alleged theft, when a state spends $24 billion and homelessness gets worse, when the agency responsible for distributing the money gets suspended by HUD for failures in basic financial controls, at some point, the system itself becomes the explanation.
The corruption exposed in these cases also echoes bribery and fraud charges brought against officials in other states where taxpayer dollars flowed fast and oversight arrived late.
The defendants now face the federal justice system. But the deeper accountability question remains unanswered. LAHSA distributed nearly $1 billion over five years. The fraud cases identified so far account for tens of millions. How much more was wasted, misspent, or simply lost in a system that measured success by expenditure rather than outcomes?
No one in LAHSA leadership or Los Angeles city government has publicly answered that question. Mayor Bass stepped away from the commission. LAHSA is fighting its own suspension in court. And the homeless population the money was supposed to serve remains on the streets.
Cloud is right about one thing: the real scandal is not just the stolen millions. It is a system designed so that the money flows out, the results never come in, and the only people who reliably move up are the ones running the programs. That is not a bug. It is what happens when government measures compassion by inputs and punishes no one for outputs.
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