Federal authorities arrested two employees of Los Angeles-area homeless nonprofits on Wednesday as part of a sweeping crackdown on public-funds corruption. Investigators allege the suspects misappropriated millions of dollars intended for housing unhoused residents, diverting taxpayer funds into luxury vacations, shell companies, and the construction of an Inglewood nightclub.
Millions in Public Funds Diverted to Nightclubs and Luxury Cars
Michael Young, the 46-year-old founder of the Culver City-based nonprofit Home At Last, stands accused of using fraudulent billing practices and shell corporations to siphon public money. The nonprofit received more than $75 million from LAHSA for homeless housing services by the Los Angeles Homeless Services Authority.
Instead of securing housing for unhoused Angelenos, Young allegedly spent upwards of a million dollars to open and operate a high-end restaurant and nightclub called Six Seven Five Lounge in Inglewood, complete with an adjacent bingo hall. Federal investigators state the misappropriated capital also funded vintage car restorations, commercial real estate ventures, and private vacations.
“The taxpayers did not sign up to fund this nightclub,” Assistant Atty. Gen. Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division said at a news conference Wednesday. “To those defrauding taxpayer-funded programs created to support vulnerable Americans, know this: Your momentary fraud fling will not be worth it.”
Colin M. McDonald, Assistant Atty. Gen. of the Justice Department’s National Fraud Enforcement Division
The alleged financial drain prompted swift administrative fallout. According to the criminal complaint, LAHSA officials canceled their contracts with Home At Last after discovering strong evidence of wrongdoing and contractual failures.
Bribes, Kickbacks, and Ghost Participants in Housing Programs
Corruption within the safety net extended beyond shell company billing schemes. Federal prosecutors secured a 21-count indictment against Lakiya Malone, an employee working at Special Service for Groups, accusing her of accepting more than $180,000 in bribes and kickbacks.
Malone allegedly collaborated with Alexander Soofer, the executive director of the nonprofit Abundant Blessings. Soofer was charged earlier this year and agreed to plead guilty to wire fraud and money laundering. In exchange for kickbacks, Malone provided priority housing referrals to the nonprofit, including placements for ghost participants
who never actually stayed at the facilities or received services.
In a public statement, Special Service for Groups clarified that it operates as an entity entirely separate from LAHSA. The organization emphasized that it has implemented strict compliance protocols and taken further steps to secure every dollar entrusted to its care.
Federal Manhunt Underway for Nonprofit CEO
Federal law enforcement agencies are actively searching for Donye Mitchell, the 55-year-old CEO and director of the Los Angeles-based nonprofit The Big Blue Umbrella. Mitchell faces federal wire fraud charges after allegedly securing more than $1.2 million in grant money from a county-funded nonprofit under false pretenses.
Investigators claim Mitchell utilized the fraudulent grant awards for personal enrichment. The criminal complaint outlines expenditures that include paying bail bond costs following a 2024 domestic violence and assault arrest, covering credit card debt, funding family transfers, paying personal rent, and even purchasing video game console charges on PlayStation networks.
Agency Scrutiny Intensifies Amid Leadership Changes and Luxury Towers
The federal arrests arrive at a time of severe institutional friction for Los Angeles homeless oversight. Last year, the L.A. County Board of Supervisors voted to remove county funds from LAHSA to establish an independent county department. The decision followed two critical audits revealing that the joint city-county agency failed to properly track its funds, leaving programs vulnerable to waste and fraud.
At the Wednesday news conference, United States Department of Housing and Urban Development Secretary Scott Turner delivered a sharp critique of the agency’s operational history. Compounding public frustration, recent reports revealed that LAHSA operates out of a luxury downtown high-rise featuring high-end amenities like saunas and cold plunges, even as the agency faces a steep budget cut of 40 percent from $829 million.
While investigators continue their search for outstanding suspects and trace the flow of misspent public capital, federal prosecutors stress that safeguarding resources for vulnerable populations remains the priority. The ongoing criminal cases underscore deep structural vulnerabilities in how municipal and federal housing dollars are monitored across the region.
