They Got $118 Million to House the Homeless. Prosecutors Say Some of It Built a Nightclub.

Los Angeles has one of the most visible homelessness crises in the country. Tents line sidewalks. Encampments fill underpasses. And for years, public money has poured into the nonprofits hired to fix it.

On September 16, 2026, federal prosecutors alleged that some of that money was going somewhere else: into a nightclub, luxury vacations, vintage car restorations and commercial real estate.

These are allegations. None of the people named below has been convicted, and every one of them is presumed innocent unless and until proven guilty in court. But the charges, and the record of oversight failures around them, raise questions every taxpayer in America should be asking.

The charges

The U.S. Attorney’s Office for the Central District of California announced federal cases involving leaders or employees of four Los Angeles-area homeless-services nonprofits. U.S. Attorney’s Office, Central District of California, September 16, 2026.

Michael Young, Home At Last (Culver City). Prosecutors say his organization received about $118 million in public funds from the Los Angeles Homeless Services Authority (LAHSA), the City and County of Los Angeles, and the U.S. Department of Housing and Urban Development. LAHSA alone provided about $75 million. He is charged with wire fraud and accused of misappropriating about $7.5 million, including more than $1 million allegedly spent on the Six Seven Five Lounge, a nightclub and restaurant in Inglewood, plus luxury vacations, vintage car restorations and commercial real estate.
Donye Mitchell, The Big Blue Umbrella (Los Angeles). Prosecutors say the nonprofit applied for $9 million, was awarded $1.2 million through a county-funded organization, and received about $315,000 before the contract was terminated. The alleged spending included inflated salary payments, personal bail bond costs, credit card debt, transfers to family and PlayStation charges. Prosecutors describe Mitchell as a fugitive.
Lakiya Malone, Special Service for Groups. Charged in a 21-count indictment including bribery and kickback counts, Malone is accused of taking more than $180,000 in bribes and kickbacks, disguised as consulting fees paid to an entity called Grateful Hearts Realty & Consulting, in exchange for priority housing referrals and the creation of fabricated “ghost” participants.
Alexander Soofer, Abundant Blessings. Prosecutors say Soofer agreed to plead guilty to wire fraud and money laundering. They allege his nonprofit obtained about $23 million in public funds and that he personally pocketed at least $2 million. They also allege he paid bribes to Malone.

The FBI, IRS Criminal Investigation and HUD’s Office of Inspector General investigated. Wire fraud carries a statutory maximum of 20 years in federal prison per count.

The Justice Department’s national office publicized the cases as well. U.S. Department of Justice, Office of Public Affairs. Assistant Attorney General Colin M. McDonald said, “We will track you down, bring charges where evidence leads, and work relentlessly to reclaim every taxpayer dollar you stole.” First Assistant U.S. Attorney Bill Essayli said the cases expose “a profound failure by the State of California and Los Angeles County to safeguard public funds.”

That second quote is a political statement as much as a legal one. But the paper trail behind it is real.

The warning signs were public

These charges did not come out of a clear sky. Los Angeles had been told, in writing, that its homelessness money was poorly tracked.

In March 2025, a court-ordered audit by the firm Alvarez and Marsal, commissioned at the direction of U.S. District Judge David O. Carter, reviewed $2.4 billion in city homelessness spending. It found that LAHSA had “failed to verify whether the services invoiced were provided,” that payments went out despite missing receipts, and that about 2,300 housing sites could not be verified, with roughly 70% of those contracts showing zero expenses. The auditors found “a high level of noncompliance” among the provider contracts they reviewed and warned that these failures “heighten the risk of tax dollars being misspent.” LAist, March 2025.

Then, on June 11, 2026, HUD suspended funding to LAHSA. The department said nearly $1 billion had gone to the Los Angeles homeless response system over five years and cited a lack of financial management and internal controls, missing conflict-of-interest safeguards, the inability to verify housing sites, and undocumented payments. HUD Secretary Scott Turner said the agency “will fund results, not corrupt failure or the homeless industrial complex.” HUD announcement, June 11, 2026.

HUD’s account is the federal government’s position in an ongoing dispute, and LAHSA and local officials may contest parts of it. But the pattern across a court-ordered audit, a federal funding suspension and now criminal charges is hard to ignore. When nobody can verify where the money went, the people willing to steal it notice first.

Who actually gets robbed

Here is the part that should make you angry regardless of your politics.

The victims of homelessness fraud are not abstract taxpayers. They are people sleeping on concrete. Every dollar allegedly diverted to a nightclub or a car restoration is a dollar that was supposed to pay for a bed, a meal, a caseworker or a door that locks. The “ghost participants” alleged in the Malone case are especially vicious, because a fake client on a housing list can take the place of a real human being waiting for help.

And fraud does a second kind of damage. Every scandal like this hands ammunition to people who want to cut homelessness funding entirely. The honest nonprofits doing hard work with thin budgets pay for the thieves, because public trust in the whole system drops.

The moral line

The Moral Decay Index tracks trust in institutions because trust is what makes public programs possible. Voters agree to tax themselves to help strangers only when they believe the money will reach them. Fraud inside a charity is uniquely corrosive because it exploits compassion itself.

There are two failures here, not one. If the allegations are proven, there is the personal failure of people who looked at suffering and saw a payday. And there is the institutional failure of agencies that handed out billions without the controls to know what they were buying.

What accountability looks like

Follow the money publicly. Every organization receiving homelessness funds should publish what it received, what it spent and what outcomes it produced, in plain numbers.
Pay for verified results. Tie payment to confirmed housing placements and services actually delivered, not invoices alone.
Check the client lists. Independent sampling of participants would make “ghost” clients far harder to create.
Protect whistleblowers. The people most likely to spot fraud are the employees inside these organizations.
Recover the money. Convictions matter, but restitution and asset forfeiture are how the money goes back to its purpose.

The verdict

The courts will decide whether Michael Young, Donye Mitchell, Lakiya Malone and Alexander Soofer committed the crimes alleged. That process deserves respect. But the public does not need to wait for a verdict to reach a conclusion about the system. A court-ordered audit said the money could not be tracked. A federal agency cut off funding over it. And prosecutors now allege that at least some of it ended up in a nightclub.

Compassion without accountability is not compassion. It is an open door.

Sources

Featured photo: Los Angeles City Hall. Michael J Fromholtz, CC BY-SA 3.0, via Wikimedia Commons. The photograph illustrates the location; it is not evidence of the allegations.

If this made you angry, good. Now turn it inward. The Moral Consistency Journal is a 30-day audit of the places where your own standards bend. More Case Files and data breakdowns live at themoraldecayindex.com. Books that go deeper are in our Bookshop.org store, which supports independent bookstores.

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