Embattled LA developer accuses its financial chief of looting $40 million intended for homeless housing – Daily News

Shangri-La Industries, the Los Angeles developer that took $114 million from the state to convert the motel into housing for the homeless, has left a trail of unpaid loans, unfinished projects and threats of foreclosure, now in its former Accusing the Chief Financial Officer of embezzlement. Spent millions of dollars to fund an extravagant lifestyle.

Shangri-La, which is State housing authorities are being sued A lawsuit alleges former CFO Cody Holmes, 29, with Shangri-La's lenders, banks and brokers in 2022 and 2023, for violating the terms of his agreement under the Project HomeKey program signed by Gov. Gavin Newsom. Involved in bank fraud and check kiting.

The lawsuit, filed last month in Los Angeles Superior Court, seeks more than $40 million in damages and other costs.

According to the lawsuit, Holmes allegedly transferred large sums of company cash and assets to bank accounts and shell companies he established and controlled and to his suspected ex-girlfriend, Madeline Witt, 28, who is a defendant in the lawsuit.

He used the money to host lavish parties, cover the $46,000-a-month rent on a leased home in Beverly Hills, travel regularly on private jets, lease exotic cars — including a 2021 Bentley Including a Bentayga and a Ferrari Portofino – and even gave $12,000 to cover a student. Loan payments, the lawsuit alleges.

Additionally, Holmes purchased high-dollar luxury items for herself and Witt, including two Birken handbags worth approximately $128,000, Chanel and Louis Vuitton handbags worth more than $14,000, a $127,000 Riviera diamond necklace, $35,000. This included an Audemars Piguet diamond watch and 20 VIPs. According to the lawsuit, passes for the 2023 Coachella Music and Arts Festival cost more than $53,000.

Holmes and Witt did not respond to multiple emails, telephone calls and text messages requesting comment.

legal maneuver

Attorneys representing Shangri-La, its affiliate businesses, and Chief Executive Officer Andrew Meyers Abdul Wahab, who uses the pseudonym “Meyers” professionally, filed suit seeking a temporary restraining order that would bar Holmes from his Will stop withdrawal of money from nine bank accounts under control.

Shangri-La fired Holmes in January after an internal investigation, according to court records.

Lawyer Brian A. “For the past two years, defendant Cody Homes has plundered public funds earmarked for Shangri-La and its subsidiaries for Shangri-La's affordable housing projects,” Sun said in the motion filed March 6. ) will prevent public funds embezzled by Holmes from being used to hide, withdraw, or finance extravagant expenses.”

According to his motion, Sun said Holmes continued to make extravagant purchases even after being fired from Shangri-La, including leasing a 2024 Porsche Taycan and renting another luxury home in the Hollywood Hills.

A judge denied Sun's request on March 7, but the lawyer said he planned to pursue the issue by filing another motion.

In a telephone interview, Sun said that Holmes “is destroying property as we speak.” He is selling the property.”

homekey program

Since 2020, the state Department of Housing and Community Development has provided Shangri-La Industries with more than $114 million in HomeKey funds to convert motels up and down the state into permanent supportive housing for the homeless.

Shangri-La has partnered with Step Up on Second, a Santa Monica-based nonprofit that provides support services to the homeless, in its efforts to purchase and upgrade motel properties and establish housing operations for the homeless.

Problems began to emerge when lenders and general contractors and subcontractors stopped getting paid. Dozens of mechanic's liens A total of millions of dollars have been filed in the last year in county recorder offices where Homekey projects were located.

Alone in the San Bernardino County Recorder's office, More than $2 million in liens Were filed from March 7 to May 3, 2023 by contractors and suppliers who were not paid for work completed at the former Good Night Inn in Redlands, now known as Step Up in Redlandsand the former All Star Lodge in San Bernardino, now Step Up in San Bernardino.

Step into the Redlands, which Opened in January 2023And Step up in San Bernardino, which opened in March 2023, are the only two of Shangri-La's seven Homekey-funded projects that were completed and are now operating.

The developer's other Homekey project, in the former Salinas Inn, has 44 units and is about 95% complete, Sun said.

state action

In January, the state Department of Housing and Community Development sued Shangri-La Industries and its partners in the Homekey projects, including San Bernardino County, the city of Redlands and Step Up on Second.

The state charged Shangri-La and its co-defendants breached its obligations, Granting and recording deeds of trust to secure loans from third party lenders, without obtaining the written authorization of the state required under homekey agreements.

Newsom launched Project Homekey in June 2020 to protect homeless individuals from the threat of the coronavirus pandemic. The state has allocated more than $3 billion to cities and counties to buy motels, hotels, vacant apartment buildings and other properties to provide permanent housing to the homeless.

The state alleges in its lawsuit that for each of its Homekey-funded projects, Shangri-La used each motel's address to create undercapitalized shell companies to engage in misconduct. According to the lawsuit, all hotel properties face possible foreclosure, with a status conference scheduled for April 17.

Department of Housing and Community Development officials did not respond to requests for comment. It could not be determined whether the state was conducting a criminal investigation.

career trajectory

According to the lawsuit, Holmes began working as an intern at Shangri-La in 2014 while an undergraduate at USC. He earned a master's degree in finance while working as a finance director at the company.

According to the lawsuit, when the company's chief financial officer left in 2019, Meyers named Holmes its new CFO.

“Meyers promoted Holmes to CFO because Meyers believed Holmes to be an intelligent problem solver and resourceful employee. Most importantly, according to the lawsuit, Meyers trusted Holmes. “Holmes took advantage of that trust and knowingly defrauded Plaintiff to enrich himself and his then-girlfriend, Defendant Witt.”

accused of fraud

The lawsuit alleges that on March 22, 2023, Holmes recorded a fraudulent trust deed on one of Shangri-La's Homekey properties, the Salinas Inn, located at 1030 Fairview Avenue. He falsely represented that the property owed money to one of Holmes's alleged shell companies. According to the lawsuit, Millennium Partners Inc., which was doing business as 310 REIT.

In June 2023, Meyers and Shangri-La's partners received notice from a lender that one of its Los Angeles properties, a vacant lot at 1228 Normandie Avenue, was in default, even though Shangri-La and its partners had paid for the property. Paid in cash. September 2021 and it was completely debt free.

The lawsuit accuses Holmes, “without Plaintiff's knowledge or permission, of incurring the debt on the property and then allowing the loan to default.”

The lawsuit alleges that Holmes also used the identity information of others, including Meyers, to misappropriate funds from Shangri-La and its affiliated businesses.

According to the lawsuit, in April 2022, Holmes forged Meyers' signature on the lease of a 2021 Bentley Bentayga and created a fake email account to communicate with the lender. Two months later, Holmes allegedly forged Meyers' signature again, this time on a lease agreement for a $46,000-a-month rental home in Beverly Hills.

Additionally, the lawsuit accuses Holmes of engaging in check kiting by drafting checks drawn on the bank accounts of his alleged shell companies and depositing them into the bank accounts of Shangri-La and/or its affiliates, knowing that Even though there were insufficient funds to cover that. Checks.

14 cases on unpaid loans

The lawsuit alleges that Holmes's conduct is responsible for at least 14 lawsuits filed by lenders and general contractors up and down the state involved in Shangri-La-affiliated motel conversion projects, who claim they were never Payment was not made. Half of the lawsuits were filed in San Bernardino County and involved the San Bernardino and Redlands projects.

Other Homekey projects include three in Salinas, one in Thousand Oaks and another in King City.

According to the lawsuit, “Many projects remain incomplete due to Defendant Homes' financial mismanagement and mismanagement.”

Some contractors who filed mechanic's liens and/or sued Shangri-La for nonpayment or breach of contract were stunned to learn of Holmes' alleged violations.

“I would be really surprised if this guy doesn't make it to the Bahamas. It's shady,'' said Adolfo Gominger, owner of Monrovia-based AG Flooring Inc.

Gominger said his company is still owed $93,000 for demolition and metal framing work his company did at the former All Star Lodge in San Bernardino.

“It sounds like a movie script. It's very crazy. It's unfortunate,'' Gominger said, adding that he has been in touch with Shangri-La representatives, who have assured him he will be paid. However, for now, Gominger said he's counting it as a loss.

Gino Gjoka, managing partner of Northstar Development & Construction Inc. in Ontario, who worked as a “supercontractor” on Homekey projects in Redlands, San Bernardino and Salinas and has filed three separate lawsuits against Shangri-La, said Gominger Echoed the sentiments.

“They should make a Netflix show out of this whole thing. There's a lot of nonsense going on,'' Gjoka said in a telephone interview.

He said he was concerned about subcontractors who put their “blood, sweat and tears” into projects but did not get paid. Some contractors used their own money and credit lines to complete the work, Gjoka said.

He remains skeptical about Shangri-La's allegations against Holmes, and questions the developer's own culpability.

“I don't buy any of it,” Gjoka said. “Suddenly they are turning against each other. I don't know what kind of business owner would let another employee do all this without paying attention. “It doesn’t feel right.”

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