LA homelessness fraud cases expose deeper problem than stolen millions, oversight hawk warns
Federal charges alleging that millions of dollars were siphoned from Los Angeles homelessness programs are exposing what one lawmaker told Fox News Digital is a deeper failure in the way Washington funds and measures such programs.
The latest cases out of Los Angeles fuel the concern of Rep. Michael Cloud, R-Texas that only are corrupt providers stealing taxpayer money, but that the programs aren't meeting their goal of getting people off the streets.
"The only people really getting upward mobility in these programs, it would seem, is the people running the programs," Cloud told Fox News Digital after a House Oversight hearing examining federally funded homelessness programs in Los Angeles, Seattle and elsewhere. "And that’s not really what the program’s supposed to be about."
Federal prosecutors charged three defendants Wednesday in separate homelessness-fraud cases involving alleged misuse of taxpayer funds, including money allegedly spent on a nightclub and adjacent bingo hall and bribes allegedly tied to fake housing referrals.
Los Angeles’ homelessness agency paid one of the suspect nonprofits more than $75 million, according to federal prosecutors, leading Cloud to seek out the real culprits blazing the money trail.
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Cloud said the fraud itself is only one piece of a broader problem, and that the system appears to reward spending and program activity without adequately measuring lasting outcomes.
Government too often judges success by "how much money we send out the door" instead of whether the spending is "actually helping people" or whether safeguards are in place to ensure taxpayer dollars are being used properly, Cloud said – describing the system as having been "incentivized for fraud."
"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," Cloud said.
Some programs can keep a person "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," Cloud said
"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, pointing to Los Angeles Mayor Karen Bass’ decision to step down from the LAHSA commission.
Los Angeles is not alone, he said, citing what has been called the feds’ "Housing First" philosophy – generally prioritizing placing homeless in housing with less immediate regard for sobriety, mental-health treatment or overall stabilizing services.
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Cloud did not use the term "Housing First" during the interview, but he described the concern behind that critique, arguing that some homelessness programs define success in ways that leave people dependent on government rather than moving toward independence.
Housing First is distinct from HUD’s "Continuum of Care" framework, which is the local funding and coordination structure through which nonprofit providers, state and local governments and other organizations receive federal homelessness money.
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In Los Angeles, LAHSA leads the local Continuum of Care, which HUD says received nearly $1 billion in taxpayer dollars over the previous five years.
Under Secretary Scott Turner, HUD moved to suspend LAHSA this year, citing alleged failures involving financial management, internal controls and safeguards against conflicts of interest. LAHSA has challenged the federal action in court.
"The ‘housing first’ experiment failed Americans by warehousing the vulnerable without results," Turner said in June when HUD announced a $4.04 billion Continuum of Care funding opportunity.
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"This ideology promised to end homelessness. Instead, billions of taxpayer dollars were spent while homelessness increased to record levels."
That funding will focus on organizations aiding treatment and recovery, while setting aside $1.3 billion for new projects prioritizing transitional housing and supportive services and adding measures intended to prevent fraud, waste and abuse.