Newsom Won’t Cut Ties To Homeless Fraudster Firm

Authored by Susan Crabtree via RealClearPolitics.com,

Borrowing from novelist James Hilton, who coined the word “Shangri-La” to describe a Tibetan utopia in a 1933 novel, Franklin Roosevelt gave that name to the peaceful retreat we know as Camp David.

For California Gov. Gavin Newsom and Los Angeles Democrats, Shangri-La hasn’t become synonymous with a place that connotes peace on earth. It stands for a hellish homeless housing nightmare, eye-popping fraud, and the ease and scale with which con-artists rip off taxpayers.

In October, federal agents arrested Cody Holmes, the 31-year-old former CFO of Shangri-La Industries, a downtown Los Angeles-based developer who was supposed to be providing housing for homeless people in Southern California. First Assistant U.S. Attorney Bill Essayli for the Central District of California, a Trump appointee, charged him with mail fraud.

Holmes, who pleaded not guilty, is accused of embezzling more than $2 million in taxpayer funds slated for homeless housing construction to host extravagant parties; a $46,000-per-month Beverly Hills mansion; private jet travel; leases of exotic cars; high-end handbags totaling $128,000; a $35,000 diamond watch; and 20 VIP passes for the 2023 Coachella Music and Arts Festival.

Meanwhile, Shangri-La Industries executives showered Newsom and Los Angeles County Democrats with political donations as they were applying for some $100 million in state contracts that the CFO later allegedly looted to fund his and his ex-girlfriend’s lavish lifestyle.

Even after federal prosecutors exposed the massive fraud, Newsom and L.A. Democrats haven’t severed ties with the embattled developer and have kept political donations from the firm’s executives. Newsom has also allowed the construction firm to continue to tout his endorsement on its social media.

Powerful Friends

Holmes allegedly defrauded the California Department of Housing and Community Development by submitting fabricated bank accounts in its applications for state contracts to build homeless housing. Acting on behalf of Shangri-La, Holmes allegedly falsified $160 million in assets controlled by Shangri-La and its affiliates to demonstrate that the firm had liquid funds to contribute to the construction projects.

According to the government, most of those funds never existed. The FBI traced only an estimated $24,000 that the developer had on hand at the time of the applications for Newsom’s signature Homekey contracts, a program launched amid the COVID pandemic lockdowns that converted empty motels into homeless housing. Holmes is accused of providing false bank statements for Shangri-La Industries to acquire the more than $100 million in state grant money for seven Homekey projects, according to an affidavit filed with the complaint and other court documents.

Shangri-La Industries has historic roots to billionaire Steve Bing and Bill Clinton, whom the Bing-led company paid more than $2.5 million to serve as a strategic adviser. Bing died by suicide in 2020, more than a decade after founding the investment, entertainment, and philanthropic empire.

California housing authorities are also suing Shangri-La Industries for breaching contracts under Newsom’s signature Project Homekey homeless housing project in a likely futile attempt to recover the missing millions. Yet, no criminal action was taken against anyone involved until Essayli issued his indictment against Holmes last fall.

Shangri-La Industries CEO Andy Meyer, who also goes by Andy Abdul-Wahab, according to court documents, has blamed Holmes for the bank and mail fraud and filed a lawsuit against him. The suit accuses Holmes, his former intern, of embezzling company funds by moving the money to accounts and shell companies that he controlled while allegedly also transferring money to Madeline Witt, his then-girlfriend. Witt is named as a co-defendant in the suit.

Newsom, L.A. Dems Mum on Returning Shangri-La Donations

Newsom’s office did not respond to an inquiry into whether he planned to return any of the funds Shangri-La employees have donated to his campaigns over the last decade. A RealClearPolitics review of campaign donations found at least $18,000 from Abdul-Wahab to Newsom’s campaigns for governor and lieutenant governor.

Newsom’s office also did not say whether he stands by a quote endorsing Shangri-La Industries and its partner, Step Up On Second Street, which Shangri-La has used on its now-defunct website under the heading, “What Our Customers Are Saying,” and on its active Instagram account.

“In a matter of months, not years, Shangri-La and Step Up gave some of the most vulnerable Californians the dignity of a key, a lock, a door, a place to call home,” the Newsom quote states in reference to a homeless housing project in San Bernardino. California’s campaign finance database also shows a mysterious $30,000 donation from Shangrila Investment LLC in support of Newsom’s signature Proposition 1 homeless ballot initiative. The initiative, which barely passed with 50.2% of the vote in March 2024, approved a $6.4 billion bond for more state homelessness spending and attempts to address related mental health and addiction for the first time.

In the final days of the mail-in voting election, as the outcome hung in the balance, both sides, Newsom and those opposing the ballot measure, urged voters whose ballots may have been rejected to fix their signatures.

Yet, so far, Newsom’s “CARE court” project, attempting to address mental health and addiction, has reportedly fallen far short of expectations. Other controversial donations to the homeless ballot initiative include $100,000 from Edison International and affiliated entities, the parent company of SoCal Edison, whose equipment caused the Eaton fire that killed 19 people last year; and $250,000 from PG&E and affiliated entities, the Northern California utility that caused the 2018 Camp Fire, the deadliest fire in state history, responsible for 84 deaths.

It’s unclear whether this $30,000 donation from Shangrila Investment LLC is related to Shangri-La Industries or other affiliated entities that court documents connect to the embattled developer. Neither Newsom’s office nor Capitol Compliance, the D.C.-based entity that helps run Newsom’s ballot committee, returned repeated requests for comment.

Asked if the donation made by Shangrila Investment LLC is affiliated with the Shangri-La developer at the heart of the fraud scandal, Holmes’ high-powered attorney Michael Freedman, who has represented Harvey Weinstein and Bill Cosby, replied only: “No comment.”

State campaign-finance records show that Abdul-Wahab also showered donations on state and local officials, including $30,000 to the Los Angeles County Democratic Party in 2022, when the developer was trying to win the homeless contracts. The Los Angeles County Democratic Party did not respond to an inquiry about whether it planned to return the funds.

Other donations from Meyer Abdul-Wahab went to former Assemblywoman Wendy Carillo, who represented Glendale and parts of East Los Angeles and is the first former illegal immigrant to be elected to the state Assembly. Additional donations went to Assemblywoman Cecilia Aguiar Curry, who represents a west Sacramento district that includes areas of parts of Napa and is serving as majority leader of the Assembly; Sen. Sabrina Cervantes of Riverside and parts of San Bernardino County; Assemblywoman Jacqui Irwin who represents the city of Thousand Oaks; Sen. John Laird of Santa Clara and Monterey; Assemblyman Alex Lee of Fremont, Milpitas and West San Jose; and Assemblywoman Buffy Wicks of the East Bay.

In December 2021, U.S. Rep. Robert Garcia, a Democrat and the former mayor of Long Beach, where Meyer Abdul-Wahab resides, returned two Shangri-La donations during Garcia’s run for lieutenant governor, according to Cal-Access, the state campaign donations database.

Lobbyists for Shangri-La Industries include Panorea Avdis, partner at Sacramento Advocates, a public affairs and lobbying firm, along with several other firm associates, according to a state lobbying database. Before becoming a lobbyist, Avdis was chief of staff to Lt. Gov. Eleni Kounalakis, and previously served a stint as a director of external affairs at California’s housing department during the administration of GOP Gov. Arnold Schwarzenegger, as well as the state’s Business and Economic Development office under Democratic Gov. Jerry Brown. Sacramento Advocates did not return requests for comment about its relationship with Shangri-La Industries.

At least two of the Homekey motel conversion projects in Southern California have been renovated and are now fully occupied: a 98-unit former Good Nite Inn in Redlands (now called Step Up in Redlands) and a 76-unit former All-Star Lodge in San Bernardino (now Step Up in San Bernardino).

Shangri-La Stiffed Subcontractors

Subcontractors and suppliers to the San Bernardino and Redlands projects filed $2 million in liens for unpaid work and materials, and at least some contractors say they have yet to be paid and are growing increasingly doubtful that they ever will be. Shangri-La Industries allegedly illegally obtained more than $50 million in new loans for several Homekey properties across the state without notifying the state housing department.

Adolfo Gomringer Sr., who owns AG Flooring, told RCP that he has yet to receive $93,000 that Shangri-La owes him for metal framing, drywall, demolition, and flooring work his company performed for the San Bernardino motel conversion in 2023. Gomringer said he has written to Newsom, L.A. Mayor Karen Bass, and L.A. and San Bernardino County officials, asking for their help, but has not received a response.

“Unfortunately, I didn’t hear back from anybody, so I just gave up hope,” Gomringer told RCP this week. “Honestly, it’s just shocking that there was nothing in place to protect us—the contractors actually doing the work on these jobs.”

Gomringer said he doubts that Holmes is the only Shangri-La employee in on the fraud, adding that the extent of the deception may not be fully realized. He referred to a call with a bond company claiming to have received a wire confirmation from Shangri-La that his company had been paid in full, which Gomringer said is completely inaccurate.

“I said, ‘Please send me a picture of that wire, because I am the owner of the company, and I can tell you frankly, that’s not true,’” he said.

According to the FBI agent’s affidavit used in the criminal complaint against Holmes, the young CFO completely fabricated a Bank of America account statement showing $59 million that did not exist.

Richard Staropoli investigated bank fraud cases for years as a Secret Service agent, then went on to serve as chief information officer and head of risk for the international hedge fund Fortress Investment Group. Staropoli told RCP that the California housing department should have performed basic due diligence practices to verify the bank accounts Shangri-La claimed to have, and the exact amounts in them.

“Are you kidding me?” Staropoli said in reaction to the FBI’s investigative findings in the Holmes case. “Are you telling me that at this level of the amounts of money that’s involved here, nobody’s checking this? This just speaks to the incredibly poor practices of California’s housing authorities.”

In early January, Essayli warned that more arrests are coming after finding “massive” fraud in California’s homeless services.

In mid-January, police arrested Alexander Soofer, who allegedly used millions of taxpayer dollars slated to house and feed hundreds of homeless to purchase a $7 million mansion in Westwood, pay for private jet travel, lavish spending at luxury resorts across the United States, a vacation property in Greece, his children’s private school tuition, and a $125,000 Range Rover.

Soofer is also accused of feeding 600 homeless people—which his organization, Abundant Blessings, housed—Ramen noodles, canned beans, and breakfast bars instead of the three healthy meals a day the contract required.

“California is the poster child of rampant fraud, waste, and abuse of tax dollars,” Essayli said, referring to the more than $24 billion the state has spent on fraud without demonstrating any impact from the investment. “The state has facilitated the spending of billions of dollars to combat homelessness, with little to show for it and almost no oversight.”

“Thankfully, the federal government has begun auditing California’s spending, and today’s is just one example of how fraudsters have swindled millions of dollars from taxpayers,” he added. “This money should have gone to those in need, instead it lines the pockets of individuals subsidizing their lavish lifestyle.”

In a testy email exchange last week, Essayli labeled Newsom the “king of fraud” for failing to provide basic oversight measures to protect taxpayer funds and blasted him for claiming the homeless fraud isn’t his fault.

Newsom’s press office, responding to a conservative influencer blasting the governor over homeless fraud after Essayli’s indictments against Soofer, denied any culpability.

“TOTALLY FALSE to imply the Governor was responsible for this fraud! Fraud is unacceptable—and unlike Donald Trump, who pardons fraudsters, Newsom demands anyone who steals taxpayer dollars be prosecuted to the fullest extent of the law.”

“WRONG,” Essayli responded in an X post. “You and the California legislature facilitated this fraud by handing out billions in tax dollars to these nonprofits with zero vetting and zero state oversight.”

Billionaire Bing’s Ties to Shangri-La Industries

Shangri-La Industries—the firm ensnared in the homeless fraud scandal—originally was created by billionaire entertainment mogul Steve Bing, a Democratic Party mega-donor, film and music producer, and the grandson of Manhattan real estate developer Leo Bing.

At 18, Bing inherited a $600 million fortune from his father, then dropped out of Stanford University in his junior year to move to Hollywood and produce and invest in movies. Along the way, he also fathered British actress and model Elizabeth Hurley’s son Damian in 2002.

Bing gave at least $50 million to candidates and California ballot measures over two decades, including Newsom, former Health and Human Services Secretary Xavier Becerra, who is running for governor, Sen. Alex Padilla, as well as Hillary Clinton, John Kerry, Al Gore, and Nancy Pelosi. He formed Shangri-La Entertainment, Shangri-La Music, and Shangri-La Construction, which later became Shangri-La Industries. Besides the $2.5 million Shangri-La Industries paid to Bill Clinton in 2009 and 2010, according to Forbes magazine, Bing also gave between $10 million and $25 million to the William J. Clinton Foundation in 2008.

Bing’s death is still shrouded in mystery. When the 55-year-old jumped to his death from the 27th floor of a luxury apartment building in Century City, he was nearly broke with only $300,000 in assets. Friends suggested he was depressed because of a lack of contact with people during the COVID lockdowns, but the true reason remains unknown.

Bing’s daughter, Kira Kerkorian, in a lawsuit filed against Abdul-Wahab, alleged that Bing sold Shangri-La Construction to him in 2017, but accused Bing of never paying the agreed-upon amount. The lawsuit, however, was dismissed without prejudice, meaning that a judge terminated it, but Kira Kerkorian could decide to amend it and refile.

So far, Kerkorian hasn’t refiled. She was essentially disowned and disinherited by two fathers. Her mother, former tennis pro Lisa Bonder, was married to casino and media mogul Kirk Kerkorian, who was 48 years her senior, for only 28 days in 1999. When Bonder became pregnant, she insisted Kerkorian was the father and secured a $100,000-per- month child support agreement and established a $7 million trust for Kira.

But private detective Anthony Pellicano swiped a piece of dental floss used by Bing, a former boyfriend of Bonder, proving through DNA testing that Bing was Kira’s father. Kira was left with $8.5 million when Kerkorian died in 2015 at age 98.

One day after Bing died, Shangri-La Construction’s Instagram account eulogized Bing in a post titled, “With Heavy Hearts We Remember: Steve Bing.”

“Endlessly generous and passionate about the people and causes he loved, he was truly a rolling stone—he belonged to nobody, but he gave a piece of himself to everyone and everything he crossed.” The post also promised that Shangri-La Industries would “never forget his passion for helping people,” and promised to “continue to advance this mission every day.”