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 owners has sued its former management group, 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 in opposition to founder and former CEO Religion Bautista and different departed executives on Might 9, saying an eight-month investigation revealed that solely a small share of almost 16,000 counseling periods NAAC billed the state had been truly supplied.

The NAAC stated 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 12 months, and the group says it has filed a report with the California Legal professional Common’s workplace.

Bautista — who can also be the president and CEO of the Nationwide Range Coalition and final 12 months 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 power them to return each penny they selfishly siphoned from this charitable group and to assist NAAC resolve its compensation 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 geared toward serving to people and communities arduous hit by the subprime mortgage meltdown and Nice Recession of 2007-2009.

In accordance with CalHFA, the state’s 2020-21 finances 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 top of 2022.

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

In its lawsuit, NAAC stated that the “most brazen and surprising a part of defendants’ scheme was their submissions of pretend counseling periods 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 share of counseling periods NAAC billed the state for had been legitimate and supported by the required documentation, and that the variety of counseling periods supposedly carried out was “absurdly unattainable.”

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

Bautista performed an important function a decade in the past in advocating that California use a part of its share of the Nationwide Mortgage Settlement to supply home-ownership counseling companies, quite than to fill a gap within the state’s finances, in accordance with the NAAC’s lawsuit.

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

Bautista persuaded NAAC’s board of administrators to switch 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 simply 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 increased salaries and “back-door kickbacks,” the lawsuit claims, and Bautista and her group “turned extra brazen and began utilizing exterior companies they owned to skim extra money for themselves.”

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

Though Bautista had hoped that NAAC, flush with money, would purchase a 20 % 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 pink flags and deficiencies,” the lawsuit reads, and the three executives had been positioned on administrative depart. By the top of the 12 months, all three had both resigned or retired.

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Electronic mail Matt Carter

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