S.F. Files Suit, Claims $1 Million Stolen From City Funds
In the suit, San Francisco City Attorney Dennis Herrera alleges Rehab Financial has "similarly converted the funds of at least 12 other California cities and counties, resulting in the misappropriation of several million dollars intended for use as loans and grants to lower income residential homeowners" for programs that "protect and promote the health and safety of these lower income homeowners and tenants and their families."
SF Weekly's call to Huntington Beach-based Rehab Financial was not picked up. San Francisco's suit claims the office recently ceased all communications with the city and was abruptly closed last week. Its phone message box, unsurprisingly, was full.
Rehab Financial is an escrow agent which has been contracted by the city since 1990; its duties included establishing escrow accounts which were then filled by funding from the Mayor's Office of Housing; releasing city funds from its bank accounts to "contractors or other vendors performing rehabilitation work on the properties" of the program's low-income participants; and collecting loans from those participants.
On March 24, however, the city claims it became aware that Rehab Financial closed its Huntington Beach office without warning and removed millions from its accounts without authorization -- including $1 million in San Francisco funds. Only some $58,000 remains in accounts the city as late as last week thought contained $1.1 million.
The suit -- which names Rehab Financial as well as its owner/employees Belinda Exon, Barbara Wood, Cheryl Isaacson, and Gayle Bloomingdale -- grows stranger still.
It notes that, on March 24, an employee of the city of Pomona grew frustrated by Rehab Financial's failure to return calls relating to that city's funds, and drove to the Huntington Beach office. She discovered the office was abandoned -- and neighbors claimed Wood and Isaacson had been physically moving office materials "and other effects" out of the building on March 20. Also on March 24, continues the suit, San Francisco officials learned that several other businesses owned by co-defendant Barbara Exon "precipitously shut down, severing all communication or access."
In response to a note from the city, Exon's attorney last week sent back a letter of the sort cities hate to receive. It stated "Rehab Financial Corporation is encountering certain financial difficulties and will be forced to cease its operation immediately." What's more, "No further payments will be issued by Rehab Financial Corporation ... on behalf of San Francisco."
In its week-long sprint of fact-finding about an agency it had entrusted with millions over the years, San Francisco learned things it would have been nice to know earlier. The city claims it discovered last week that Exon and Rehab Financial are the subjects of an ongoing criminal investigation conducted by the U.S. Attorney's Office and the Inspector General of the U.S. Department of Housing and Urban Development concerning alleged "theft and embezzlement." Sadly, the city did not know this when it sent Rehab Financial its most recent payment of $73,705 on March 23. As of yesterday, $65,057 of that had been withdrawn -- without the city's required authorization.
All told, San Francisco accuses the defendants of absconding with at least $1.02 million in city funds -- and perhaps more. The city is, not surprisingly, demanding its money back -- plus penalties, legal fees, and damages.
"This theft," says the suit, "threatens the fiscal integrity of the City and its continued ability to provide necessary rehabilitation funds and financing to qualified lower-income homeowners."
Read the full suit here.
H/T | Courthouse News