Feds Arrest Two, Charge Third in Los Angeles Homelessness-Fraud Probe Alleging $12M Diversion

Federal authorities on Wednesday announced the arrests of two Los Angeles-area nonprofit workers and charges against a third in separate homelessness-fraud cases alleging that more than $12 million in taxpayer money meant for housing and services was diverted for personal use, including commercial real estate and a nightclub project.

The Justice Department said Michael Young, 46, of Baldwin Hills, and Lakiya Malone, 48, of South Los Angeles, were arrested Sept. 16 and were expected to make initial appearances that afternoon in U.S. District Court in downtown Los Angeles. A third defendant, Donye Mitchell, 55, identified by prosecutors as the CEO and executive director of The Big Blue Umbrella, was charged but remains a fugitive, according to the department. The three cases involve Young and the Culver City-based nonprofit Home At Last, Malone’s work with Special Service for Groups and referrals tied to Abundant Blessings, and Mitchell’s nonprofit grant applications.

The cases were announced as part of the Homelessness Fraud and Corruption Task Force in the Central District of California. The Justice Department said the three cases together involve alleged diversion of more than $12 million in public money intended for homelessness programs in Los Angeles County, where the Los Angeles Homeless Services Authority, or LAHSA, coordinates one of the nation’s largest homelessness funding systems. A criminal complaint or indictment contains allegations only, and the defendants are presumed innocent unless and until proven guilty.

“Today the Department of Justice, with the full force of the federal government, is announcing charges in a major fraud takedown targeting schemes that stole millions from programs meant to house California’s homeless,” Assistant Attorney General Colin M. McDonald said in the department’s news release.

The largest case centers on Young, whom the Justice Department identified as a founder of Home At Last, or HAL. Prosecutors filed a federal criminal complaint alleging wire fraud and said he carried out a yearslong scheme using sham vendors to misappropriate more than $7.5 million in taxpayer funds.

According to the department, HAL received more than $118 million in public funds from LAHSA, the city of Los Angeles, Los Angeles County and the U.S. Department of Housing and Urban Development. That total included more than $75 million from LAHSA alone, prosecutors said.

Federal authorities allege Young used diverted money to buy commercial real estate, finance construction of a nightclub and adjacent bingo hall, and open or operate the Six Seven Five Lounge, which the Justice Department described as a high-end Inglewood restaurant and nightclub. Prosecutors said more than $1 million was spent on that business and also alleged spending on luxury vacations, vintage car restorations and other personal enrichment. The wire fraud charge carries a statutory maximum sentence of 20 years in federal prison.

Malone, an employee of Special Service for Groups, is charged in a 21-count federal indictment alleging bribery, kickbacks and fraud. Prosecutors allege she accepted more than $180,000 in bribes and kickbacks from Alexander Soofer, the executive director of Abundant Blessings, in exchange for priority referrals, including referrals for “ghost” participants who never lived at the sites tied to the funding.

The Justice Department said Soofer has agreed to plead guilty. According to prosecutors, he admitted in a plea agreement that he obtained $23 million in public money from Special Service for Groups, that some of it was obtained through fraud, and that he pocketed at least $2 million. The department said he also agreed to forfeit ill-gotten gains.

Mitchell is charged in a separate federal criminal complaint with wire fraud. Prosecutors allege he sought more than $9 million in grants in January 2024, then later received more than $1.2 million from Amity Foundation by misrepresenting The Big Blue Umbrella’s capacity to provide services. The department said he used grant money for personal expenses, including an inflated salary and other bills, and is now a fugitive.

The federal action follows earlier administrative steps involving Home At Last. LAHSA said in June that its commission had voted to terminate HAL contracts, with the termination taking effect July 22. LAHSA also said it received an IRS letter in May stating that cash seized from an address linked to Young might be subject to criminal forfeiture and that LAHSA might have a claim to it.

The Justice Department said the cases were investigated by the FBI, IRS Criminal Investigation and the HUD Office of Inspector General. Young and Malone were scheduled to appear Wednesday afternoon in federal court in Los Angeles.