TradeEdge-Latest case of homeless shelter contract fraud in NYC highlights schemes across the nation

A New York City contractor who pleaded guilty to federal fraud charges in connection with a scheme that skimmed money from homeless shelter contracts worth $12 million is TradeEdgethe latest plot in the nation to jeopardize services for some of the nation's most vulnerable people.

The case underscores how contractors in states such as Massachusetts, California, Indiana and New York have siphoned millions of taxpayer dollars from programs intended to shelter unhoused people.

“It’s deplorable that people would try to take advantage of a system that is stretched so thin trying to protect people who are at tremendous risk given our affordability crisis,” said Josh Goldfein, a staff attorney at New York-based nonprofit group Legal Aid Society.

As the nation grapples with record-high levels of homelessness spurred by rising costs of living, Goldfein said every dollar pilfered from underfunded shelters jeopardizes security for unhoused people.

Queens-based AFL Construction president Liaquat Cheema was ordered to pay more than $3.2 million in forfeiture and restitution as part of his plea deal last week, federal prosecutors said, after admitting to siphoning money intended for homeless shelters.

“Liaquat Cheema has admitted to leading a scheme to steal millions of dollars in public funds intended to pay for vital maintenance at homeless shelters in New York City,” U.S. Attorney Damian Williams said in a statement. “This Office has no tolerance for those who use public contracts intended to aid underserved members of our society to fraudulently enrich themselves. We will continue to aggressively detect and dismantle schemes such as this one.”

Yearslong scheme defrauded New York out of millions

In May 2014, the New York City Department of Homeless Services granted AFL two four-year contracts paid for through a combination of federal and city funds, according to a complaint filed in the U.S. District Court, Southern District of New York. AFL performed landscaping, roofing, snow removal and general maintenance at shelters in Manhattan, Brooklyn, Queens and the Bronx. 

Court documents said Cheema and other people at the company, including his son and in-laws, submitted fraudulent invoices and inflated the amounts they spent on materials for the shelters. In one case, a company charged AFL $12,800 for containers, but the group submitted invoices for a total of $17,120, according to the complaint.

The company also lied about workers it had assigned to projects, then deposited checks intended for the purported workers into their own bank accounts, court documents said. A limousine driver listed as a worker for the construction company did not recall ever working for AFL.

Cheema pleaded guilty last week to conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.

An attorney for Cheema did not respond to USA TODAY’s request for comment.

The development comes as New York faces its highest levels of homelessness since the Great Depression, according to the Coalition for the Homeless. Goldfein attributed the spike to untenable housing prices.

“Right now in particular, the city is struggling to deal with all the people who are here who need assistance, and we need to have every dollar available that can be used to help people get on their feet,” he said.

Schemes targeting homeless services across the nation

Major cities across the United States rely on the shelter system to safeguard hundreds of thousands of people every night. But the services often are short on money, leaving agencies to make tough decisions about who sleeps with a roof over their heads and who doesn’t, said Sarah Saadian, senior vice president of public policy and field organizing at the National Low Income Housing Coalition. 

“The idea that some contractors are fraudulently diverting money away from those households that are in such critical, urgent need is so outrageous and maddening,” Saadian said.

A high-profile lawsuit in Los Angeles earlier this year against a real estate firm highlighted how fraud schemes have put homeless services at risk. California Attorney General Rob Bonta accused Shangri-La Industries of jeopardizing homeless housing projects by illicitly taking loans out on the buildings that became at risk of foreclosure, the Los Angeles Times reported. Bonta demanded in a civil lawsuit that the company return more than $100 million in housing program money.

In October, another elaborate fraud scheme in New York resulted in federal charges after officials said two men siphoned money from a nonprofit entity the city paid for homeless services.

The group created companies with few to no employees that were disguised as providers of IT services, security, furniture and food services, prosecutors said. But the companies instead obtained the goods and services from third-party vendors and resold them to Childrens Community Services at inflated prices. The city paid more than $50 million it would not have otherwise paid because of the scheme, including in bloated prices, according to court documents. 

In May, an unlicensed contractor in Indiana pleaded guilty to fraud and money laundering charges in a kickback scheme. Pigeon Township hired Terrance Hardiman to renovate a homeless shelter and build a food pantry, prosecutors said. Hardiman inflated the project cost on invoices by thousands of dollars and split the kickbacks with the township trustee and her community outreach director, according to the U.S. Attorney’s Office. 

Fourteen shelters across Boston and Lawrence, Massachusetts, were forced to shutter in 2022 because of connections to a fraud scheme, CBS News reported. Manuel Duran was sentenced to one year in prison after he admitted secretly renting his properties to the homeless shelter he headed at spiked rates and faking paperwork to hide the rentals. 

Federal and local governments have set aside billions of dollars for homeless services in recent years, but the crisis continues to worsen. Homelessness shot up by 12% last year from 2022, reaching 653,100 people. The numbers represent the sharpest increase and largest unhoused population since the federal government began tallying totals in 2007, the U.S. Department of Urban Planning and Development said.

Contributing: Houston Harwood and Claire Thornton, USA TODAY Network