Zero Tolerance Rings Hollow as Feds Expose Homekey Fraud City Hall Ignored

(Editor’s note: This story is reprinted with permission from the Westside Current.)

By JAMIE PAIGE

Mayor Karen Bass says her administration has “zero tolerance for corruption.” But for two years, the Westside Current — and many of the communities we cover — were met with silence, spin, or outright denial when we raised the same concerns now at the center of a federal criminal investigation.

On Thursday, Bass released a statement following the arrest of two separate cases alleging the theft and misuse of millions in taxpayer funds intended to combat California’s homelessness crisis.

The arrests come just months after an audit exposed billions in unaccounted homelessness spending—an audit city and county officials fought to keep buried, dragging their feet and doing nearly everything possible to hide the truth. Now, taxpayers are footing the bill as Los Angeles spends millions to defend itself in the fallout.

“My administration has zero tolerance for corruption – period,” Bass said. “We’re working with the U.S. Attorney’s Office to ensure that anyone who engages in fraud against the city will face the full force of the law.”

That statement came two years after our newsroom began asking questions about inflated property values, vacant Project Homekey sites, and opaque financial trails — questions city, county and state officials repeatedly brushed aside.

Federal Charges Confirm What We Reported First

On Thursday, federal prosecutors unveiled two separate criminal cases alleging the misuse of funds intended to combat homelessness.

Cody Holmes, 31, of Beverly Hills, the former CFO of Shangri-La Industries, was arrested for allegedly fabricating $160 million in bank statements to obtain $26 million in Project Homekey grants for a Thousand Oaks site.

That property — among several identified by Westside Current as suspiciously inactive — had received millions from the state’s Department of Housing and Community Development (HCD) but never opened. Prosecutors say Holmes siphoned more than $2 million in public funds to pay his personal American Express bills at luxury retailers.

In a separate case, Steven Taylor, 44, of Brentwood, was charged with nine counts of fraud and money laundering for using falsified loan records to flip a Cheviot Hills senior facility — selling it for more than double his purchase price to a homeless-housing nonprofit funded by the City of Los Angeles and the State of California.

That building, 3340 Shelby Drive, was first uncovered by Westside Current in 2023, when our reporting showed it had changed ownership twice in less than two weeks — a pattern prosecutors now describe as concealment and fraud.

“Accountability for the misuse of billions of tax dollars intended to combat homelessness starts today,” Acting U.S. Attorney Bill Essayli said. “These two cases are only the tip of the iceberg.”

We Warned Them—Again and Again

Our newsroom’s first investigation into Project Homekey began in 2023. We found hundreds of taxpayer-funded units sitting empty — some for years — while agencies continued to tout “progress.”

We visited all 38 Los Angeles Homekey sites, documented the conditions with photos and video, and sent dozens of emails seeking comment from city, county, and state officials.

We asked Mayor Bass’s office about prolonged vacancies, inflated property values, and stalled renovations.

We asked HACLA to explain multimillion-dollar purchases and hidden ownership structures. The agency replied that it had “paid fair market value.”

We asked the governors office why conversions had been delayed for months, even years. The deputy director of the Housing and Community Development confirmed in writing that “a majority of conversions across the state are fully vacated before construction commences,” acknowledging the state was “aware when projects are vacant.”

Even after those confirmations, the denials from local government continued.

The County Tried to Shut the Story Down

When Westside Current published a September 2024 exclusive titled “After Spending $550 Million, Over 70 Percent of Los Angeles County’s Project Homekey Rooms Vacant,” the Los Angeles County CEO’s office responded not with transparency but with a formal request for a correction — effectively an attempt to discredit our findings.

In that letter, a county spokesperson insisted our story was “inaccurate” and “highly misleading,” claiming occupancy at all open and occupied Homekey sites was over 90%. He argued that the program was “operating on a rolling basis,” and that our reporting failed to account for construction timelines.

But the story never said otherwise. It clearly noted that the analysis covered all Homekey properties purchased with taxpayer dollars — not just those ready for move-in.

I personally visited and documented each site twice. Many were dark, empty, or sealed off — some surrounded by overgrown weeds and debris. The public had paid for roofs no one slept under.

I responded directly: “My headline and article is on all sites purchased (with taxpayer money) — not those ready to go online,” I wrote to Veis. “It is accurate to state that of the $550 million spent, 70 percent are empty. I will not make any changes based on what you have provided.”

We stand by that reporting.

Even Neighborhood Councils Called for Investigations

By December 2024, the Westside Regional Alliance of Councils (WRAC) — representing 14 neighborhood and community councils — had seen enough.

In a letter addressed to federal, state, county, and city leaders — including Mayor Bass — WRAC demanded investigations into the use and misuse of taxpayer funds, citing Westside Current’s work directly.

“The humanitarian crisis persists while billions are squandered,” they wrote. “Recent audit reports and investigative journalism have revealed serious and widespread mismanagement, lack of accountability and possible corruption.”

Too Late for Zero Tolerance

Now, Mayor Bass says she has “zero tolerance for corruption.”

But Los Angeles residents should ask: where was that intolerance when red flags were flying? When the public and the press were asking why taxpayer-funded hotels sat empty? When the county tried to suppress coverage instead of confronting it?

The fraud uncovered this week didn’t happen in the dark — it happened in plain sight, while public officials defended the very system that enabled it.

It happened after the city approved inflated acquisitions, after the county spun occupancy statistics, and after the state released millions more based on falsified paperwork.

Bass says her administration will cooperate fully with federal prosecutors. That cooperation should start with the public — full transparency on every Homekey transaction, every appraisal, and every occupancy report. Not another statement. Not another “zero tolerance” slogan after the damage is done.

Holding the Line

For two years, Westside Current stood nearly alone in asking why billions spent on homelessness produced empty rooms, hollow promises, and growing street encampments.

We did the work. We asked the questions. And when officials pushed back, we refused to fold.

The arrests announced this week vindicate what our readers already knew: Los Angeles didn’t just lose money — it lost trust.