Cody Holmes, whose greed and the position of trust bestowed upon him at the age of 27 combined to threaten the viability of two of the more promising homeless rehabilitation programs undertaken in San Bernardino County and, indeed, the state of California, has been charged by federal authorities with fraud, more than two years after the extent of the embezzlement and other depredations he engaged him became publicly known.
Cody Holmes, 31, of Beverly Hills, was arrested this morning on a federal criminal complaint charging him with mail fraud, a felony offense that carries a statutory maximum sentence of 20 years in federal prison.
Holmes is expected to make his initial appearance this afternoon in United States District Court in downtown Los Angeles. No plea will be taken today.
According to an affidavit filed with the complaint, in October 2022, the California Department of Housing and Community Development (HCD), a state agency, paid approximately $25.9 million in grant money – for a state homelessness project called “Homekey” – to Shangri-La Industries LLC, a downtown Los Angeles-based developer of affordable housing. The grant funds were sent with the provision that the money be used to purchase, construct, and operate homeless housing in Thousand Oaks.
These payments followed many millions of dollars HCD had already paid to Shangri-La to buy, build, and operate housing for the homeless in Redlands (in San Bernardino County) and King City (in Monterey County), among other California cities.
Holmes – as Shangri-La’s CFO – knowingly submitted fake bank records to HCD that purportedly showed approximately $160 million supposedly controlled by Shangri-La and its affiliates to prove that Shangri-La had the capacity to fulfill the homeless housing projects for which it had coapplied for grants from HCD, including the Thousand Oaks project. In fact, the bank accounts Shangri-La and Holmes said contained these funds did not exist.
Holmes and Shangri-La also submitted to HCD balance sheets falsely representing that Shangri-La-affiliated entities held millions of dollars in cash that these entities did not actually have on deposit in the known accounts for those entities. Holmes and Shangri-La submitted these fake bank statements and false balance sheets with the intent that HCD should rely on them and release grant money to Shangri-La.
After these documents were submitted to HCD, HCD paid millions of dollars more in grant money to Shangri-La, including for the Thousand Oaks project.
Some of the Homekey money paid to Shangri-La for homeless housing was used to pay credit card bills for American Express accounts associated with Holmes. In November and December of 2022, more than $2.2 million was transferred from a Shangri-La account to a Holmes-controlled account. Afterwards, from November 2022 to May 2023, more than $2 million was paid towards American Express cards. The charges on those credit card accounts included purchases at well-known luxury retailers. Law enforcement believes these payments were made at least in part for Holmes’s benefit.
The announcement of Holmes’ arrest and the charges against him were made simultaneously with the arrest and filing of charges against Steven Taylor, 44, of Brentwood, who defrauded lenders to aid his property-flipping business, including a Cheviot Hills home that he sold to a homeless housing developer for more than double his original purchase price.
“Accountability for the misuse of billions of tax dollars intended to combat homeless starts today,” said Acting United States Attorney Bill Essayli, “The two criminal cases announced is only the tip of the iceberg and we intend to aggressively pursue all leads and hold anyone who broke any federal laws criminally liable.”
“In both of these cases, defendants took advantage of funds allocated to assist the homeless, some of the most vulnerable people in society and many of whom may be suffering from myriad conditions, including addiction,” said Akil Davis, the Assistant Director of the FBI’s Los Angeles Field Office. “The FBI is committed to the Homelessness Fraud & Corruption Task Force to find perpetrators of this insidious fraud and build cases to hold the offenders accountable in court. It is my hope that the charges we’re announcing today send a message to others who may be contemplating similar criminal behavior.”
“IRS-CI is proud to be an inaugural member of the Homelessness Fraud and Corruption Task Force, which was formed to ensure that funds which were committed to aiding California’s homeless population were spent as intended,” said Special Agent in Charge Tyler Hatcher of IRS Criminal Investigation’s Los Angeles Field Office. “Today’s actions show our commitment to ensuring the public that we will investigate missing funds that were intended to benefit some of the most vulnerable Californians.”