Two Los Angeles real estate developers are facing decades in prison for allegedly defrauding the California Department of Housing and Community Development (HCD) out of millions in grant money intended to help people experiencing or at risk of homelessness.
The first developer, Cody Holmes, received $25.9 million in grants from the HCD’s Homekey program, which funds the purchase or construction of housing for unhoused or at-risk people. The program covers multiple kinds of housing, including hotels, motels, hostels, single-family and multifamily units, adult residential facilities, manufactured housing and commercial-to-residential building conversions.
Holmes applied for the Homekey grants, saying his company, Shangri-La Industries LLC, would buy, build and operate affordable housing projects in Thousand Oaks, Redlands, King City and several other municipalities. The HCD asked Holmes to provide bank statements to prove his company had the capital to finish the projects. However, he allegedly filed falsified statements that listed bank accounts that did not exist. For the accounts that did exist for Shangi-La and its affiliated entities, Holmes exaggerated their balances.
Once he received the grant, Holmes allegedly transferred $2.2 million to his personal bank account. Those funds, the Central District of California U.S. Attorney’s Office said, were used to pay Holmes’ American Express credit cards. The statements for those cards showed purchases at several well-known luxury retailers.
The second developer, Steven Taylor, is accused of a similar scheme, using falsified bank statements and cash representations to secure loans and lines of credit for his real estate business.
The U.S. Attorney’s Office said Taylor received an $11.2 million loan for a 70-plus-unit building in Cheviot Hills, which he claimed he would renovate and use himself. However, Taylor is accused of flipping the building in order to sell it for $27.3 million to nonprofit housing developer Weingart Center Assn., which used local Homekey funds to cover the purchase price.
Prosecutors said Taylor had already contracted to sell the building to Weingart when he applied for the loan, which involved a double-escrow transaction that was hidden from the lender and others. The LA Times said it’s unknown if Weingart knew about Taylor’s alleged deception.
The U.S. Attorney’s Office also accused Taylor of defrauding two lenders by submitting fake bank statements, false cash representations, and misrepresentations regarding liabilities for loans and lines of credit, which he used to purchase properties throughout Los Angeles.
Bill Essayli | Credit: U.S. Attorney’s Office
“Accountability for the misuse of billions of tax dollars intended to combat homelessness starts today,” Acting United States Attorney Bill Essayli said in a written statement on Thursday. “The two criminal cases announced are only the tip of the iceberg, and we intend to aggressively pursue all leads and hold anyone who broke any federal laws criminally liable.”
Federal Bureau of Investigation LA Field Office Assistant Director Akil Davis said Holmes and Taylor “took advantage” of programs used to help “the most vulnerable people in society” and should be reprimanded for their actions.
“The FBI is committed to the Homelessness Fraud & Corruption Task Force to find perpetrators of this insidious fraud and build cases to hold the offenders accountable in court,” he said. “It is my hope that the charges we’re announcing today send a message to others who may be contemplating similar criminal behavior.”
Both men are facing decades in federal prison if they’re found guilty of their alleged crimes.
Holmes is facing a maximum of 20 years for mail fraud, while Taylor is facing a maximum of 30 years for each bank fraud count and a maximum of 10 years for money laundering. The aggravated identity theft count carries a mandatory consecutive two-year sentence.
The FBI and IRS Criminal Investigation are investigating Holmes, and the FBI, IRS Criminal Investigation, and the Federal Housing Finance Agency Office of Inspector General are investigating Taylor.
