When Shangri-La Industries (SLI), a real estate and development firm in Los Angeles, ceased converting hotels into homeless shelters but retained all the government money they were granted to do so, California’s attorney general sued them. Now, in recent legal proceedings filed by SLI against its former CFO Cody Holmes, the company alleges Holmes took a portion of that money, along with equity in the business and unapproved financing, to finance a lavish lifestyle.
According to the lawsuit, Holmes’ actions include purchases of a Beverly Hills home, a Ferrari, chartering private jets, VIP Coachella tickets, and a quarter of a million dollars of gifts for his now former girlfriend.
Project Homekey, Fraud, and Embezzlement
Project Homekey, a state-sponsored program in California that grants taxpayer dollars to private real estate developers to create housing for the homeless, granted SLI between $114 to $117 million for development. The company was tasked with seven Homekey property renovation projects.
Instead of allocating grants towards the projects, Holmes’ fellow executives are accusing him of transferring to himself “vast sums” of both cash and property of SLI, as well as ownership of the company itself. They also alleged that Holmes forged CEO Andy Meyers' signature on multiple documents and lease agreements to complete the transactions and obtain financing in the organization's name.
There are currently 14 lawsuits — a majority filed by lenders and contractors — claiming SLI owes them money. The company is in various stages of default on tens of millions of dollars of loans taken out against its Homekey properties which were supposed to be involved in housing development.
With taxpayers left out to dry as of now, the state of California is attempting to step in and halt foreclosure auctions. Through the courts, the state aims to ensure lenders who collect the properties in default proceedings use them for affordable housing as originally intended.
Financial Controls Failure
SLI is the only company Holmes has ever worked for in corporate finance. He began as an intern in 2014, worked with the company through college and Master’s programs, and was named director of finance in 2019. However, lawsuits allege that Holmes’ misappropriation of funds and forging of documents goes back as far as 2018.
The lawsuit notes that Meyers trusted Holmes completely, allowing him to establish policy, operations, and oversight over several finance functions. Holmes managed SLI’s finances, its affiliates, and SLI Projects. Holmes oversaw SLI’s accounting departments, applying for and overseeing the receipt of millions in public and private financing, negotiating with grant program managers, managing project expenses, overseeing payrolls, and ensuring timely repayment to SLI’s creditors. Holmes oversaw all financial reporting.
It is alleged in 2018, Holmes made changes to legal documentation without approval, giving him ownership of exactly half of the company. He is also accused of denying controllers access to company bank accounts and creating fake email accounts and phone numbers in the CEO’s name that would filter any communication with lenders and developers directly to Holmes.
In an interview late last year, Meyers, who was presumably misled by Holmes at the time, blamed the state for his company’s slow progress of work.
Madeleine Witt, Holmes’ ex-girlfriend and beneficiary of the lavish lifestyle allegedly created by Holmes, is named in lawsuits as well. The company claims Witt had a company email address and access to company bank accounts without ever being an employee. Witt’s name is attached to $7.3 million in funds that were in joint accounts controlled by her and Holmes.
Holmes also used a now-bankrupt LLC to buy his $13.4 million Beverly Hills mansion in 2022. On top of using company money to pay $48,000 a month for another house in Beverly Hills, court documents allege another $5,000 of company money was being used to pay monthly lease payments on a Ferrari Portofino.
To obtain lease financing for a 2021 Bentley Bentayaga, Holmes allegedly forged his CEO’s signature on the paperwork; something he is also accused of doing to purchase a third Beverly Hills home. And an additional $300,000 amount specified in the court filings suggests Holmes spent these funds on diamond necklaces and multiple handbags, including a Himalaya Birkin from Hermès, a six-figure pocketbook.
This story will be updated as court proceedings continue.