Housing Counseling Agency Sues Its Founder For Alleged Fraud

Housing Counseling Agency Sues Its Founder For Alleged Fraud

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A nonprofit housing counseling company that was paid greater than $12 million by the state of California to assist renters and householders has sued its former management crew, alleging that it perpetrated fraud by overstating the companies it supplied.

The Nationwide Asian American Coalition (NAAC), a HUD-approved housing counseling company, filed go well with towards founder and former CEO Religion Bautista and different departed executives on Could 9, saying an eight-month investigation revealed that solely a small proportion of almost 16,000 counseling classes NAAC billed the state had been truly supplied.

The NAAC mentioned Bautista and two former officers named within the lawsuit — the coalition’s former CFO and director of housing — had been positioned on administrative depart final yr, and the group says it has filed a report with the California Lawyer Normal’s workplace.

Bautista — who can also be the president and CEO of the Nationwide Range Coalition and final yr based a tv community, ChimeTV, that she allegedly pushed NAAC to purchase a stake in — didn’t instantly reply to requests for remark.

“In embarking on this shameless conspiracy to defraud NAAC and the State of California, defendants profited handsomely on the expense of NAAC and in the end on the expense of California’s taxpayers,” the lawsuit alleges. “To guard the charity from additional hurt, NAAC now takes the unlucky however crucial step of suing its personal founder and her co-conspirators to drive them to return each penny they selfishly siphoned from this charitable group and to assist NAAC resolve its reimbursement obligation to the State of California.”

The California Housing Finance Company (CalHFA), which administers the Nationwide Mortgage Settlement counseling program via HUD-approved regional intermediaries, didn’t instantly reply to a request for remark.

Funding for the counseling program was supplied by California’s share of a $25 billion settlement with mortgage mortgage servicers in 2012, the Nationwide Mortgage Settlement, which was aimed toward serving to people and communities exhausting hit by the subprime mortgage meltdown and Nice Recession of 2007-2009.

In line with CalHFA, the state’s 2020-21 funds supplied $300 million in Nationwide Mortgage Settlement funds for housing counseling and mortgage help. CalHFA says it has allotted $91.5 million for HUD-certified housing counselors to assist residents who’re in peril of eviction or foreclosures, with 50,120 households receiving counseling via the tip of 2022.

CalHFA allocates NMS funds to collaborating housing counseling businesses (HCAs) via three HUD-approved Intermediaries: UnidosUS, HomeFree USA and BALANCE. The HCAs are reimbursed $750 for a shopper’s first one-on-one counseling session and an extra $750 if the identical shopper returns for a second session or if extra in-depth counseling is required.

In its lawsuit, NAAC mentioned that the “most brazen and surprising a part of defendants’ scheme was their submissions of faux counseling classes to HomeFree and in the end CalHFA,” with housing counselors allegedly receiving incentive charges of $100 per file to “discourage staff from questioning any noticed discrepancies or errors.”

An outdoor audit discovered that solely a small proportion of counseling classes NAAC billed the state for had been legitimate and supported by the required documentation, and that the variety of counseling classes supposedly carried out was “absurdly unimaginable.”

Whereas a counseling session and associated work usually take a minimum of an hour, one was credited with conducting 45 counseling classes in a single day. One other counselor earned greater than $900,000 supposedly conducting 80 classes in a single five-day workweek, the lawsuit reads.

Bautista performed an important position a decade in the past in advocating that California use a part of its share of the Nationwide Mortgage Settlement to offer home-ownership counseling companies, reasonably than to fill a gap within the state’s funds, in keeping with the NAAC’s lawsuit.

After NAAC and two different nonprofits sued the state in 2014, California lastly moved to make funding out there in 2019. Bautista “noticed this as her deserved alternative to cash-in on her effort to safe these funds,” NAAC mentioned in its lawsuit towards her. “She then launched into a plan to do precisely that.”

Bautista persuaded NAAC’s board of administrators to change her compensation in order that bonuses had been tied to income, which “gave her a perverse incentive to inflate revenues with out rising bills,” the lawsuit alleges. Though Bautista allegedly claimed she was owed a $953,259 bonus for 2021, she in the end agreed to just accept $530,000, solely $300,000 of which was paid earlier than the “fraudulent scheme was uncovered and she or he resigned,” the lawsuit alleges.

To “entice them into the conspiracy,” NAAC’s CFO and director of housing had been additionally granted larger salaries and “back-door kickbacks,” the lawsuit claims, and Bautista and her crew “grew to become extra brazen and began utilizing outdoors companies they owned to skim more cash for themselves.”

An organization allegedly owned by Bautista, Floradema LLC, was paid $1.5 million in funds NAAC acquired from the Nationwide Mortgage Settlement program, regardless that it “didn’t render any legit and reimbursable counseling companies,” the lawsuit alleges.

Though Bautista had hoped that NAAC, flush with money, would purchase a 20 p.c stake in her tv community, Chime TV, for $2.5 million, the settlement was by no means finalized, the lawsuit reads — forcing Bautista to repay $2.5 million in funding First Republic Financial institution supplied for the community.

Final summer season, an outdoor audit “uncovered quite a few procedural and substantive crimson flags and deficiencies,” the lawsuit reads, and the three executives had been positioned on administrative depart. By the tip of the yr, all three had both resigned or retired.

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