An embattled homeless shelter provider has secured at least $1.9 million in city funding while being under federal investigation on allegations that its executives used taxpayer cash to enrich themselves, the Daily News has learned.
CORE Services Group, which was founded in the mid-2000s and used to be one of the biggest shelter operators in the city, has faced the federal probe since at least December, according to paperwork filed in Manhattan Supreme Court by former Mayor Bill de Blasio’s administration.
The feds raided CORE’s offices in DUMBO, Brooklyn, on Dec. 7 as part of the investigation, which is described as “criminal” in nature, the court papers detail. The probe is being jointly conducted by federal authorities and the city Department of Investigation.
The DOI declined to comment Friday, as did a spokesman for the U.S. Attorney’s office in Brooklyn.
The details about the criminal probe were contained in a lawsuit de Blasio’s administration filed against CORE on Dec. 13.
The suit asked a judge to allow the city to set up certain court-monitored conditions as it began severing all ties with CORE in the wake of a New York Times report that found the company’s founder and chief executive, Jack Brown, had steered millions of dollars in city funds to for-profit subsidiaries he controlled. Brown also used taxpayer cash to bankroll generous salaries for several relatives as well as company perks like cars and gym memberships, according to The Times.
Despite the alleged self-enrichment, de Blasio’s administration argued in its lawsuit that CORE should continue to receive public funds in the interim so that it could maintain operations at its shelters while the city moved to transfer ownership of them or relocate their more than 1,400 residents who would otherwise be homeless.
The administration requested that an independent monitor be appointed to oversee the spending of public cash at CORE since “the existence of a criminal investigation involving DOI and federal authorities reaffirms and heightens the City’s concerns regarding the misuse of City funds by CORE.”
But an independent monitor was never assigned, as the presiding judge pushed back a deadline for the city and CORE to submit arguments for and against it until April, court records show.
In the meantime, taxpayer cash has kept flowing to CORE — including since Mayor Adams’ election.
According to a document submitted in court by a CORE lawyer, as of March 9 the company had gotten the go-ahead from Adams’ Department of Homeless Services to receive $1.9 million in public funds.
That same day, the city wired roughly $1.4 million of that cash to CORE, a lawyer for the city Law Department wrote in a letter to the judge.
Another $2.4 million was under review by the Department of Homeless Services to be allocated to CORE as of March 9, the company’s lawyer said in his filing.
CORE, which is fighting the city’s allegations of misuse of taxpayer cash in court, said the municipal government actually owes the company far more money — at least another $30 million — for payroll and other expenses.
In a statement to The News, CORE blamed de Blasio for the federal investigation and suggested that the ex-mayor’s “finger-pointing campaign” is belied by the fact that his administration named the company the city’s homeless shelter “provider of the year” in 2019.
“Then-Mayor de Blasio stood up and told the world that CORE had misled him, so of course officials wanted to look into his baseless allegations,” the statement read. “But CORE has documents and receipts. It quickly went to court to dismiss de Blasio’s false claims. CORE filed hundreds of pages of documentary evidence that showed de Blasio and DHS were lying and that the allegations were false. Everyone should read it.”
CORE also disputed the notion that Brown enriched himself via the subsidiaries, which included food providers, and said the relationship with those companies was formed because the city’s “refusal to pay on time made it virtually impossible to work with outside vendors.”
In lieu of an independent monitor, the only caveat on the taxpayer cash that has been making its way to CORE since the federal investigation launched is that funds can’t be transferred directly to Brown, according to an agreement first reached by the city and the company on Dec. 27 — five days before de Blasio left office.
That agreement has been renewed three times since Adams took office, most recently on March 15, court records show.
Julia Savel, a spokeswoman for the Department of Homeless Services, declined to say Friday exactly how much money the city has given to CORE since the federal probe came to light.
But she said any payments to CORE in recent months have been made to fulfill old contracts.
“They have not received any new contract; on the contrary, we have closed sites and transferred sites to different providers,” Savel said, adding that the Adams administration expects CORE to no longer perform shelter services on behalf of the city by March 31.
Though the issues with CORE predate his administration, Adams has connections to the company.
CORE executives donated $4,200 to his 2021 mayoral campaign, according to campaign finance records. Among the contributors was Curtis Brown, the founder’s brother.
While serving as Brooklyn borough president in 2017, Adams came to CORE’s defense after Crown Heights residents opposed the company’s plans to open a shelter in the neighborhood. Residents complained that they already had several shelters and raised concern about CORE’s track record, but Adams urged them to rethink it.
“I want to use this as a moment to change the conversation on homelessness,” Adams wrote in his weekly newsletter. “Instead of saying ‘we don’t want them here,’ I want to move toward ‘adopting’ shelters.”
