10/14/2022
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The Spokesman-Review
Shawn Vestal: In midst of city’s housing crisis, Woodward leaves millions on table
RangeMedia
KXLY
The Center Square
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The Spokesman-Review
Shawn Vestal: In midst of city’s housing crisis, Woodward leaves millions on table
About a month ago, a federal housing official sent a letter to Spokane Mayor Nadine Woodward, all but begging her to develop a plan to spend $6 million in federal funds meant to address affordable housing and homelessness.
The Department of Housing and Human Services had offered that money to Spokane a year ago, under the American Rescue Plan Act, part of an overall $5 billion allocated for cities available to buy or build affordable housing, provide rental assistance, offer services to prevent or eliminate homelessness, and other uses.
As of Sept. 15, HUD was still waiting for Spokane to act like it wanted the money.
“The need for … services, shelter and housing in communities across the country is urgent and growing, and it is critical for (these) resources to be deployed expeditiously,” wrote Marion Mollegen McFadden, HUD’s principal deputy secretary for community planning and development.
Imagine being offered $6 million to address a pressing need for your constituents – and then having to be begged a year later to please, please, please take our $6 million.
This is only one representative example of the Woodward administration’s tendency to ignore, mismanage or fail to seize on opportunities to address housing and homelessness. These failures were enumerated in blistering detail by the recently departed head of the Department of Neighborhood, Housing andHuman Services, John E. Hall, in an exit letter. The letter included the HUD letter above, and other similar communications.
Hall, who was on the job for a mere three months before leaving for another position, offered an evaluation of the strengths, weaknesses, opportunities and threats of the department he led. He made a variety of different points and presented them politely and in a productive spirit, but his critique of the lost opportunities to address housing and homelessness problems in Spokane is brutal.
In some passages, Hall pointedly lays the blame for this at the feet of the city staff.
But that is a very long way from where the buck stops.
Hall’s letter details the above-mentioned $6 million in unclaimed funds – which might now be “at risk of being lost,” he wrote. Worse still, the city’s approach to spending some federal funds means it’s “leaving (another) $8.5 million on the table” in further HUD funding.
This was one example of several. Hall said the city should be considering a federal loan program – repayable out of future federal funding allotments – that could bring $15 million more to “meet the urgent needs of the community,” he wrote.
In addition, another $5.4 million that has flowed to the city from a different grant program – also available for housing support – has built up, unspent, in city coffers for three years running.
“This funding can be used to preserve and/or create affordable housing, provide down payment and closing cost assistance to first-time homebuyers, as well as tenant-based rental assistance, among other uses,” Hall wrote. “In the last three years, nothing has been done.”
There’s more. The city is out of compliance with the requirements for another big multimillion-dollar pot of federal money that could go toward housing needs, Hall wrote. And even in an area where the city has budgeted and approved money for housing projects – the projects have stalled at the starting gate.
“For instance, City Council awarded $10 million in affordable housing funding on Aug.1 for 11 projects to yield nearly 220 units of housing,” he wrote. “These projects, along with 15 others, have not been executed to date.”
All in all, Hall’s letter paints a picture of an administration that is failing – through some combination of inexperience, mismanagement, understaffing, and philosophical indifference – to seek and deploy millions and millions of dollars available to address a crisis.
The mayor’s spokesman, in a news story Thursday, defended the city against the criticisms, and particularly defended the staff involved in these issues at City Hall. He noted that Spokane hasn’t yet lost any funding.
But the problems enumerated by Hall, even if they grow from a staffing crisis or lack of urgency among the staff, as he suggested, are the ultimate responsibility of the mayor, and they fit into a pattern of her unwillingness to seek concrete solutions.
Last year, for example, other cities in Washington lined up to apply for state funding offered to buy properties for housing projects. Vancouver got $5 million for a shelter. A West Side nonprofit got $25 million for permanent supportive housing.
Spokane didn’t apply. As the focus and attention around homelessness has been directed toward Camp Hope, it’s easy to forget that it remains a citywide problem, and a citywide problem that has reached this stage through chronic inaction. Camp Hope represents a lot of people – but it’s far from the entire population of unhoused people.
And the people living on a razor’s edge – unable to afford an apartment, waiting months for subsidized housing, a paycheck away from their own personal emergency – are at risk of becoming tomorrow’s homeless people in a market with far too few affordable options.
What do you say about a government that, when facing a need of this magnitude, must be begged to accept money for solutions?
Whatever you say about it, don’t say it’s the staff’s fault.
The buck stops upstairs. Shawn Vestal can be reached at (509) 4595431 or at shawnv@spokesman.com.
SHAWN VESTAL
SPOKESMAN COLUMNIST
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RangeMedia
Carl Segerstrom
Despite the confession, the employee was kept on staff and was even listed as the “financial representative” of record on the $6.5 million Trent contract, raising questions about the Guardians’ internal processes and the city’s financial controls.
The former Guardians Foundation employee accused of wire fraud wrote and delivered a confession letter to the Guardians office on August 11, 2022. The handwritten letter, which was read by RANGE Media in person, describes how money was moved from the Guardians to a personal account among other personal details.
Despite that admission, the confessor, Mary Ellen Smith (who also goes by Ellen Smith), was still listed as the Guardian’s “Financial Representative” on the $6.5 million dollar Spokane city contract to operate the new Trent shelter. That contract was signed by Guardians’ CEO Mike Shaw on September 13 — over a month after the confession was signed.
According to the Guardians, Smith’s last day with the organization was September 23, 2022 and she has not had access to the bank accounts since mid to late May.
These revelations raise serious concerns about the financial controls employed by the organization, the financial oversight conducted by the city and the city’s contracting process. City officials are concerned that the timeline undermines the organization’s contracts with the city for both the Cannon and Trent shelters. If the timelines described by the Guardians are correct, city leaders said the city should begin searching for a new shelter operator.
RANGE cannot confirm the details of the transactions or whether or not public money was stolen. We can confirm that the person fired was Smith and that RANGE has read a confession note with personal details written in cursive on yellow paper, signed “Ellen Smith” and dated August 11, 2022. RANGE has spoken with people with knowledge of her handwriting and other personal details from the letter who confirmed that the cursive handwriting and other personal details describe Smith.
[We have debated whether or not to maintain the anonymity of Smith because she is a private citizen and innocent until proven guilty. RANGE has called Smith three times and texted three times. She did not respond to a request to confirm that she wrote the letter. Ultimately, we decided that, because this story relies on and refers extensively to public records bearing her name, it didn’t make sense to not name someone so clearly visible in publicly available documents.]
A brief timeline of the fraud allegations. (Illustration by Valerie Osier)
THE LETTER
According to Guardians staff who were present as RANGE read the letter, and helped provide additional context as it was read, the letter was delivered to the front desk of the Guardians’ office the day it was signed. The letter describes family emergencies and other personal struggles as a motivation for taking the money.
In the letter, Smith said she expected to be caught after the hiring of Lisa Arellano full-time in April. According to Arellano, she was responsible for all accounting duties for the Guardians almost immediately after her full-time start date on April 4, 2022. Despite that, Smith’s name remained on the Trent Shelter contract and invoices to the city into September.
According to Arellano, the organization has identified $118,000 in money stolen from the organization since January 2020. Shaw said that the only person who had access to the organization’s finances when the fraud was committed was Smith. He also said that there’s no suspicion of other fraudulent activity in the organization at this time.
Smith accepts responsibility for much of the other financial chaos that has engulfed the organization in the letter. For example, Smith admitted that she had been doing a poor job of keeping up on critical tasks including the late filing of 990 tax forms — required reporting documents for all 501(c)3 nonprofits. RANGE reviewed three belated years of Guardians 990s, which were submitted between April and September this year.
The Internal Revenue Service has not publicly indicated that they have approved the tax documents, and according to the IRS website, the Guardians’ nonprofit status was automatically revoked this July.
Now that the status has been revoked, merely filing the late tax documents is not enough to have the organization’s non-profit status reinstated. Guardians will have to go through a detailed reinstatement process, pay the associated fees, and wait for the IRS to sign off.
In the confession, Smith accepts full responsibility for the fraud and repeatedly apologizes to Shaw and the organization. RANGE was not allowed to take pictures of the letter, but in it Smith says she can’t justify any of her actions including the theft, the cover-up and running from the consequences. Smith says it was a betrayal of everyone at Guardians, especially Shaw.
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THE FRAUD
The method Shaw described for the theft of funds bears a low-tech resemblance to the scheme of 1990s cult classic film Office Space. According to Shaw, a review of the financials shows that Smith would submit invoices for, say, $38.00 for personal expenses like gas, but would transfer herself $3,800 instead. Shaw said the first hint of the fraud was detected in February 2022 when the organization began their annual audit.
If the organization conducts annual audits though, it’s unclear how a pattern of theft the organization says traces back to January 2020 was missed or overlooked in previous years.
Shaw believes that the money that was stolen was essentially taken from the foundation, not from any public funds. Shaw said the city money the organization receives is audited by the city every two weeks. If something was wrong with those invoices, then the city should have caught it when they accepted the requests for reimbursement, Shaw said.
If the city was aware of the fraud before September 29, when Shaw says he told the administration and police,, there’s no indication the city did anything to address the issue. In fact, the city was still signing documents with Smith as the financial representative through September, according to the Guardians, months after she was removed from any financial decision-making at the organization.
“The last invoice we submitted had [Smith’s] name on it originally, but then [we] realized it and changed it after it had been submitted for payment,” Arellano explained. “We have had to fix things and send it back in a few times. It’s a learning process.”
It’s unclear what exactly the organization had to fix and how that reflects the city’s understanding of the Guardians internal awareness of the fraud. What’s clear is that Spokane and the organization have years of financial unraveling to do.
In response to previous requests for comment on the investigation, Spokane Police Department public information officer Nick Briggs said: “This is a matter of considerable interest and we will provide updates as appropriate.”
SHAW
Shaw started the Guardians Foundation in 2011, after returning from active duty in Iraq. Three years later he won Idaho’s Brightest Star Award for service to the veteran and homeless community.
Right now, he said, he’s dying of terminal heart failure.
Over the last few months, Shaw has been in and out of the hospital with complications related to his heart condition. He’s currently getting around with a motorized wheelchair and says his feet hurt so much it feels like they’re in hot coals.
In conversations with RANGE, Shaw defended the handling of the organization’s internal fraud investigation and the delay in reporting it to the city and law enforcement. He repeatedly stated that he makes no money from the Trent shelter and has committed $200,000 of his own money in order to open the shelter. RANGE couldn’t independently verify that number, but the Guardians current bookkeeper, Arellano, backed up Shaw’s claim that he isn’t making money directly from Trent shelter, and that he financially supports the shelter.
Guardians first contracted with the city in 2018 according to city documents reviewed by RANGE. According to the tax documents RANGE was shown, from 2017 to 2018 the organization’s total revenue jumped from about $336,000 to nearly $874,000. 2019 revenues grew again, to approximately $1.05 million. Shaw and Smith got large raises in 2019 — a $38,000 increase for Shaw and $78,000 increase for Smith.
According to Shaw, Smith was the only person with access to the organization’s finances and software like Quickbooks. Shaw explained that the idea was to compartmentalize the finances so that, if there were any irregularities, it would be clear who was responsible.
To some extent, based on the signed confession, conversations with other Guardians employees and Shaw — that compartmentalization worked because it appears to be clear who committed and benefitted from the fraud.
But other non-profit leaders we spoke with said this kind of isolation is not a bookkeeping best practice, and generally organizations have multiple people who cross-check, verify and sign-off on expenses, especially for amounts in the thousands of dollars.
The point is to have several sets of eyes discouraging fraud, not one set of hands you can easily identify after fraud has been found — especially if it takes years to notice.
We asked Mayor Woodward, Administrator Johnnie Perkins and the city communications department if the city has any process for vetting or verifying the financial controls of city contractors like Guardians. They did not respond to those and many more specific questions.
According to Shaw, Smith remained employed at Guardians for months after the fraud was discovered, and more than a month after her confession was signed. He said that was because the organization needed to gather additional information from her.
“If she just picked up her bags and left on the 11th, I'd be screwed in a whole bunch of areas,” Shaw said. He said that financial information that Smith had exclusive access to was more important to the health of his organization than the Trent Shelter itself. Shaw explained that, in his mind, keeping Smith around to help fix her mistakes was the lesser of two bad options.
Arellano corroborated Shaw’s description of the finances, and all manners of the organization’s business, being in disarray. “There was issues with the 990s,” Arellano said. “[Shaw] didn't know that we'd been revoked. We didn't have that letter yet because [Smith] messed up us getting our mail. She messed up everything she could mess up.”
Shaw’s personal health has also clearly been a factor. It’s even cited as a cause for the delay in reporting their 990s on the forms. From all indications, Shaw’s health problems are affecting the organization, and, according to Arellano, these revelations are further eroding Shaw’s health.
“Since I've been there and since he's known all the different things [regarding the fraud], it's made him go in the hospital and almost die at one point.” Arellano said. “And that was really, really traumatic for me because — here I am, I know this information, and he literally almost dies that weekend … So that was really freaking awesome.”
Shaw said that through the whole ordeal his focus was on opening the shelter and getting people a place to stay. “I can't say I can justify my actions,” Shaw said. “All I know is I did the best job I could based on the information I had and on what I needed to get done.”
“I'm getting tired of people picking on me like I'm trying to do something fucked up or hide or run,” Shaw said. “What I've been trying to do is serve 250 homeless people.”
Two key pages of the contract the city signed with Guardians. (For the full contract go here)
THE CITY
It appears that the details of the Trent shelter contract, which included Smith as the financial representative, were an afterthought to Shaw.
He told RANGE he has operated shelters for periods of time without signed contracts before, because the needs of unhoused people took precedence over whatever risk he might be taking on personally or the Guardians might be taking on as an organization by doing so.
“I have no idea when I'm gonna get a contract back to sign,” he said. “In the past I've operated like three months as the operator without a contract signed.”
While Shaw may have been comfortable operating without a contract at times, it’s unclear who at the city would allow such a thing to happen. Among many other requirements of contracts like these, is proof of insurance provided by the grantee (the Guardians in this case) with the city listed as an additional insured party. This arrangement ensures that if there’s a lawsuit or some other claim made, the city is also covered by the contractor’s insurance.
While it appears the city did not know about Smith’s confession when their name appeared on the Trent shelter contract — it was not disclosed by Guardians at the time — it’s unclear why a basic contractor vetting process didn’t uncover the Guardians’ loss of nonprofit status in July or, if the loss was discovered, why the city continued moving forward with the contracting process.
Moreover, Smith appearing on the contract for the Trent shelter is more than a formality. The “Grantee’s Financial Representative” on contracts like this is the person who would track expenses and send invoices to the city for reimbursement to Guardians.
According to non-profit executives who have contracted with the City of Spokane in the past, the grantee’s financial representative “would have a lot of responsibility for the financial relationship with the funder.” In this case, the City of Spokane. The representative’s power in financial matters, in the eyes of the contract and therefore the city, is second only to an organization’s executive director.
That relationship isn’t easily transferable, either. Technically, if any of the signatories leaves the position for any reason, you would need to re-sign the contract, according to multiple interviews with executives with knowledge of this process. And, they said, that process doesn’t always happen, but it’s supposed to.
Although Smith had been sidelined from the organization once she confessed to the theft and had no access to the organization’s money after May, it’s unclear why Shaw would have left the name on the contract. Why not, say, amend it to Lisa Arellano, who had taken over financial duties from Smith in April?
Shaw said he doesn’t remember details regarding the timeline.
“I don't know where my head was at on August 11th or August 12th. I don't know where my head was on the 13th or 14th. I do not know where my head was. I do not know. Sitting here in my chair right now, I cannot say I can tell you where my head was,” he told RANGE. “But, it certainly wasn't in the vein to deceive anyone.”
What Shaw could confirm was that the employee who now invoices the city started working at Guardians three weeks ago. The Guardians also confirmed that Smith’s name appeared on their last invoice to the city, which was later amended to remove her name, as described by Arellano.
It’s unclear to what extent the city required Guardians to redo their invoices and if that process was because Smith’s name was on the documents.
RANGE called Communications Director Brian Coddington and sent a detailed list of questions to Coddington, Mayor Nadine Woodward, City Administrator Johnnie Perkins and Communications Manager Kirstin Davis.
Coddington responded by email this morning: “The fact-finding process is still in progress. The City is actively engaged in both an internal review and criminal investigation. We must allow time for both to play out. We will communicate further once additional information is available.”
In the interest of transparency, we are publishing our full list of unanswered questions at the bottom of this story.
When RANGE contacted Council President Breean Beggs, he asked us more questions than we asked him.
He said that, while the administration “has actually given us quite a bit of information” since Councilmember Stratton raised the issue of potential fraud last Friday, key elements of the timeline still remain unclear. “I would still like to know exactly when, to who at the city, and how much information Mike Shaw provided the administration,” Beggs said in a conversation by phone.
When RANGE laid out the timeline of when the confession came in, and when Shaw signed the contract bearing the accused’s name, that was the first Beggs had heard of it.
He said he would need to verify the facts of what we told him, but in general, that would raise red flags with him.
“If someone puts down as their financial representative a person they know to have stolen from them on a contract with the city,” Beggs said, “that would be a violation of any city policy — and best practices — for them [to continue] to be a contractor with the city.”
“That should bring serious consequences and we should begin looking for a new [shelter] operator.”
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KXLY
Posted: October 13, 2022 6:26 PM Updated: October 13, 2022 8:11 PM byBrontë Sorotsky
SPOKANE, Wash. — Time is running out for people at Camp Hope. Winter is getting closer and there’s a push to find housing for people at the camp.
The situation at Camp Hope is complex, as state, city, and county officials continue to disagree on a timeline to move people out. Now, the Spokane County Human Rights Task Force is calling on all officials to put politics aside.
“We want to make sure that we center the homeless community specifically in this conversation so that we all remember as a community that these are people, they deserve dignity and respect and not to play politics with them,” said Paul Schneider, President of the task force.
The human rights task force sent a release to 4 News Now, saying that they would like to see city, county, and state officials work together to house everyone in the camp.
“Being able to be housed and feel like you have dignity in a community is a human right so we figured it was the time…as we remind our community of our obligations to people,” Schneider said.
The city says they do agree with county and state officials on many things and agree on the need to get people to shelter before winter.
“We’re very much concerned about winter weather coming, we are in the bonus days right now of summer and early fall and we know just based upon history that the harsh winter days are coming. So we want to make sure that all gets accomplished in a timely manner so that people don’t suffer through the winter,” said Brian Coddington, Spokesperson for the City of Spokane.
Coddington says the only concern or disagreement they’ve had with other state and county agencies is a timeline to clear people from the camp.
“There’s so much more discussion to happen, much of that is around the details, timeline, and any kind of deadline.” He says the city speaks regularly with state and county officials about this timeline. He added the pressure is on as the air starts to get cooler.
“Everyone shares that same interest in trying to get people connected to services to housing, it’s all about the details at this point. The conversation is all about the timeline and how quickly we can get that done,” Coddington said with winter rapidly approaching they’re working rapidly to figure out how to connect people to services.
What still remains unclear, is how, and when everyone inside the camp will be moved to other housing.
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The Center Square
Camp Hope formed in Spokane on Washington State Department of Transportation land near Interstate 90 last December and has grown to include 400-600 people. Local officials are meeting with state entities to discuss the plans of Sheriff Ozzie Knezovich to empty the camp by Nov. 10 because it poses a "chronic nuisance."
(The Center Square) - The Washington State Department of Transportation is now providing around the clock security at Camp Hope. That action has been taken in response to declarations by Spokane Police Chief Craig Meidl and Spokane County Sheriff Ozzie Knezovich that the site is a hub for criminal activity and “unfit for human habitation.”
“This camp is really state sponsored unlawful assembly,” said Knezovich about the fact that WSDOT owns the East Central land where 400-600 are now camping.
Meidl reports that, within a 56-day period this year, there were 384 calls for service at the property, and that the officer response alone has cost the city more than $500,000 in overtime patrol hours. He said the camp is a “chronic nuisance” that needs to be dealt with.
“We are having conversations on all fronts,” he said of meetings between city and county officials, WSDOT and the Department of Commerce, which offered local governments $24.3 million to come up with housing solutions for camp residents.
“It is our hope that we will get to the point that we don’t have to take enforcement action,” he told The Center Square.
Meidl said local leaders are very aware of the grim situation that residents and businesses near the camp have been dealing with since the camp formed in December.
“There has been a lot of crime tied to the camp,” he said. “My concern is that if we come up with solutions, some of these businesses will not make it much longer.”
WSDOT responded to Knezovich’s stated intent to dismantle the camp at Third Avenue and Freya Street by hiring Security Services Northwest personnel to help control activities there. Security personnel are attempting to control access now that an 8 p.m. to 8 a.m. curfew has been established.
Knezovich told The Center Square that WSDOT’s security personnel “do not have teeth” to deal with the vast number of law enforcement problems at the camp. He questions why WSDOT and Jewels Helping Hands, a nonprofit that provides services to the homeless, seem so intent on keeping the camp open.
“No other property owners would get away with what WSDOT is doing - and paying a security team $30,000 per week is not the answer,” he said.
WSDOT and Jewels have publicly stated that the camp needs to stay put until more housing solutions are available for its residents.
“What they are doing is setting one part of the community above all others and that is just wrong,” said the sheriff. “Since this camp formed, law-abiding residents and business owners have paid the price.”
He said a letter was hand-delivered on Wednesday to the local office of the state auditor requesting a review of all public expenditures involving Camp Hope. He said if entities are receiving funding to provide services at the site, they are not likely to be motivated to relocate people and cut off an income source.
“We need to know what is really going on at this camp and how much of a burden it is on taxpayers,” he said.
Last week, WSDOT and Jewels volunteers installed a chain link fence around the camp located in a field near Interstate 90.
Meidl is thankful for the fence because of the message it sends that lawlessness will not be tolerated. However, he said it is too early to tell if the fence and curfew are making a difference
He also supports WSDOT establishing an identification badge system because it will also provide an accurate count of residents and help managers weed out problem campers.
“I do want to acknowledge that they are taking those steps,” said Meidl.
Knezovich believes more effort needs to be put into planning for relocation of the campers and less on temporary fixes to accommodate them.
“What is being done to help the residents and businesses who are trapped in this leftist Marxist social experiment?” he asked. “If you are a hardworking family there is no help coming your way.”
Well, help is coming care of the police, he amended.
Knezovich said Camp Hope will be disbanded by Nov. 10.
“I’ve never said anything I didn’t intend to do, so that camp will be vacated,” he said. “This is the state’s mess and I’m going to clean it up.”
The sheriff said Mayor Nadine Woodward and County Commissioners Mary Kuney, Al French and Josh Kerns are onboard with his plan, as is Meidl.
Knezovich blames Lisa Brown, director of the Department of Commerce, for giving local entities only a month to come up with a relocation plan in order to qualify for funding assistance. He said Commerce also joined WSDOT in a recent letter blaming Woodward’s administration for not doing enough to remedy the situation.
“We should not be put in the position of having to fight the state to get this done,” he said.
According to Knezovich, the process to obtain a nuisance abatement warrant to speed up that process is underway and he expects to be able to take action soon.
Meidl said winter is coming and plans need to get made as soon as possible about where the people at Camp Hope will find shelter.
“We want to see the folks have a smooth transition,” he said.