New York CIty Council Member Ben Kallos

Wall Street Journal Investigation of New York City Shelter Operator Grows by Katie Honan

Investigation of New York City Shelter Operator Grows

New York City officials have expanded their investigation into a top nonprofit contractor that operates homeless shelters after discovering it has alleged undisclosed ties to a second for-profit company.

Last month, the city’s Department of Investigation launched a probe into Acacia Network Housing Inc., a Bronx-based nonprofit, over its executives’ alleged undisclosed connection to a for-profit security company.

Since 2010 the nonprofit has received more than $1 billion in contracts from the city’s Department of Homeless Services to run shelters, including $50 million in contracts so far this year.

The Wall Street Journal previously reported that the organization gave $12 million in 2017 to SERA Security Services LLC to provide security at shelters but didn’t reveal its business ties to SERA. Raul Russi, Acacia’s CEO, founded SERA, and other Acacia employees are connected to the company, state incorporation records show.

The city expanded its probe earlier this month after learning of Acacia’s ties to Distinctive Maintenance, a for-profit company and an affiliate of the nonprofit. Since 2015, Acacia has also given more than $17 million to Distinctive Maintenance for cleaning and maintenance of its shelters and rehabilitation centers, federal tax records show. Distinctive Maintenance is the second-highest-paid vendor for Acacia during the last three years, the records show

Yet Acacia didn’t file the appropriate paperwork or disclose its relationship with Distinctive Maintenance, the city said. Acacia also didn’t list the company as an affiliate on its federal tax records.

City rules require contractors and its principals to disclose any business connections.

“When doing business with the city, all vendors must be transparent in their representations, in accordance with the law,” Laura Feyer, a spokeswoman with Mayor Bill de Blasio ’s office, said in a statement.

“We expect our partners to live up to and uphold the standards we set—and the city investigates any misrepresentations or omissions thoroughly to hold them accountable,” she said.

A city official said officials were completing a plan for Acacia to correct these oversights and have asked the nonprofit to explain why it didn’t originally reveal it was affiliated with Distinctive Maintenance.

A spokesman for Acacia said Distinctive Maintenance has its own management team, and Distinctive Maintenance filed disclosure forms with the city to be a registered vendor on Aug. 14, the nonprofit and the city said.

“All of us at the Acacia Network have strived for transparency,” a spokesman for the nonprofit said in a statement. “We’ve always acted in good faith and have honored every contract we’ve signed.”

No Acacia employees receive any money from the maintenance company, the spokesman said. The city funds paid to Distinctive Maintenance by Acacia are used for operations, payroll and other business costs, he said.

Distinctive Maintenance is managed by a team that includes Ruben Medina as the managing director, according to the Acacia spokesman.

Mr. Medina is the former CEO of Puerto Rican Organization to Motivate, Enlighten and Serve Addicts, a nonprofit affiliate of Acacia. Neither he nor Distinctive Maintenance’s management team could be reached for comment.

After the city launched its initial investigation, City Councilman Ben Kallos, a Democrat who represents parts of Manhattan, called for a hearing on nonprofit city contractors.

He said the city should not have to worry about “self-dealing,” especially with funding for the city’s neediest. The hearing hasn’t yet been scheduled.

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