There are significant concerns regarding fraudulent activities within the homeless industrial complex, particularly in California, and it now appears that actions are being taken to expose the deceit and hold those involved accountable.
Following a critical independent audit of the City of Los Angeles’ homeless spending authorized by US District Judge David O. Carter, Bill Essayli, the new US Attorney for California’s Central District, has announced the establishment of the Homelessness Fraud and Corruption Task Force. The task force’s objective is to investigate instances of fraud, misuse, mismanagement, and corruption in the allocation of funds designated for addressing homelessness across the Central District of California’s seven counties. It has the authority to make arrests if violations of federal laws are detected.
Essayli issued a statement basically saying, enough is enough:
California has dedicated more than $24 billion in the last five years to combat homelessness. However, the lack of transparency in tracking expenditures and evaluating outcomes has hindered progress, leading to a worsening homeless crisis. Taxpayers rightfully demand clarity on how their contributions have been utilized. Failure by state and local officials to ensure proper oversight and accountability will prompt intervention. Any breaches of federal regulations will result in arrests to uphold the law and safeguard public funds.
New: fresh Trump-appointed US Atty in country’s most populated district — central CA — @billessayli touring infamous Skid Row with Federal district judge David Carter. Both will now audit/investigate where billions in homeless funding is going in LA & SoCal pic.twitter.com/LpMXLKWXKo
— Matt Finn (@MattFinnFNC) April 7, 2025
After receiving the results of the audit he commissioned, Judge Carter called the situation a “slow train wreck,” called the county “the Rocky Horror Picture Show” of homelessness, and threatened to appoint a receiver to oversee spending. That caught the eye of Essayli, who was then a state Assemblyman, who’s long fought for accountability in homelessness spending in Sacramento. So, when Essayli was sworn in as US Attorney about a week after that hearing, it was natural for him to turn his attention to the problem.
Curiously, we have a progressive NGO to thank for this audit and the spotlight on corruption. Here’s why.
In 2020, during the COVID lockdowns, the LA Alliance for Human Rights sued both the City and County of Los Angeles in federal court, alleging that the city’s homeless conditions violated of state and federal law and asking that the defendants be ordered to provide shelters and “wraparound services” for the homeless. Both the city and county entered settlement agreements with LA Alliance for the city to provide 20,000 beds and remove approximately 10,000 tents and vehicles from the streets by July 2027, and for the county to add 3,000 mental health beds and contribute funding to the beds the city agreed to provide. A federal monitor was appointed to assist Judge Carter in overseeing compliance.
Unsurprisingly, despite the massive influx of funding, the city isn’t holding up its end of the bargain, and in late 2024 LA Alliance asked Judge Carter to slap the city with a $6.4 million fine. Instead, Judge Carter asked the city to pay for an independent audit of the last four years of its homelessness spending, and it reluctantly agreed.
Audit Highlights
The entire audit can be read here, but the thumbnail is that basic financial accountability and compliance procedures were completely absent, conflict-of-interest policies were totally ignored, and because of siloing there was duplication of spending and effort. For example:
And, as LAist reported:
There was “a high level of noncompliance” among the small number of service provider contracts that were reviewed, auditors added. And a lack of oversight, they wrote, has “made it challenging” to determine how program funds were used and “whether they achieved the intended outcomes.”
Auditors also revealed that $1.7 million was paid out on a $2.1 million contract to Upward Bound House, where the husband of LAHSA’s now-former Chief Executive, Va Lecia Adams Kellum, is a top executive. Adams Kellum signed the contract and two amendments herself and is listed as the LAHSA administrator for the contract. Obviously, that award was made in violation of ethics rules, and auditors found that no performance reports had been submitted to LAHSA to justify the disbursement.
Prior to starting her job as CEO Adams Kellum herself received a $60,000 no-bid contract from LAHSA to advise LA Mayor Karen Bass on homelessness issues and Bass’ Inside Safe initiative for six weeks (yes, you read that correctly, six weeks) in early 2023. She was paid a base salary of $430,000 a year as CEO of LAHSA, and resigned last week after the LA County Board of Supervisors voted to divest from LAHSA.
We met with @USAO_LosAngeles @billessayli Tuesday hours after he announced a new task force that will investigate possible fraud and corruption within homelessness funds across Southern California pic.twitter.com/zDL8JRxlWe
— Matthew Seedorff (@MattSeedorff) April 9, 2025
Bass’ Reaction
After Essayli’s announcement, Bass called the Task Force a “distraction” while also admitting that she knows the system is broken. Bass has been involved in “addressing homelessness” in Los Angeles for decades, so in light of that and her role in these do-nothing, no-bid contracts, her words ring especially hollow. In an interview with KNX she said:
“We know the system is broken. This is nothing new. The point is to fix the system, to transform the system. But having said that, this is going to be a complete distraction and disruption, and it’s going to sow doubt amongst the public. And if we’re ever going to get people off the street, we need to stay focused on that mission, and we absolutely need to transform the system.”
She then had the gall to say she expected Essayli to work with her to “correct” the system and not look at service providers as potential criminals.
What’s Next?
During the March 27 hearing, Judge Carter declined to appoint a receiver as plaintiffs requested, and instead directed LA Mayor Karen Bass and other officials to come up with solutions to the issues presented in the audit before a May 15 hearing – or else.
“I think as elected officials, you’ve inherited an extraordinarily difficult task. And I imagine you came to court today thinking that hell and brimstone would rain upon you. Quite the opposite. At the end of this, I’m going to be asking if there’s anything that your branch of government can do to resolve the problems that have been presented to you.
. . .
“So unless the two of you [Bass and LA County Board of Supervisors Chair Kathryn Barger] can work this out in some way, the court’s going to have to.”
Of course, that’s just relating to the LA Alliance case and Los Angeles County, where 75,000 of the region’s 100,000 homeless people reside. Carter has requested California Gov. Gavin Newsom’s presence at the next hearing, reasoning that if Newsom has time to “blog,” he has time to attend to this issue:
“I want you to get together and call Gavin down here. He has a blog, and he’s busy blogging.”
And, LA County is already making moves in response to Carter’s concerns, divesting from LAHSA and opting to create their own internal agency.
It’s likely to take US Attorney Essayli’s team a bit longer to get to some conclusions and perhaps make arrests, but given how blatant some of the corruption is, it might not take that long.
Stay tuned – this is an issue we will be following closely.
