Chicana Service Action Center executives charged in $8.5-million fraud case

For decades, the Chicana Service Action Center received millions of dollars in taxpayer money to help some of the county's most disadvantaged residents: the homeless, the unemployed, victims of domestic violence, foster youth looking for work.

The nonprofit organization also played a pivotal role in launching the political career of former County Supervisor Gloria Molina, who described herself as one of the group's earliest supporters. In the last few years, its influence had gone far beyond its Eastside origins, extending its reach from downtown to the eastern edge of the San Gabriel Valley.

Now, prosecutors have charged three of the group's executives with embezzlement and conspiracy, accusing them of participating in a "billing scam" that defrauded the county of more than $8.5 million, according to the district attorney's office.

Dist. Atty. Jackie Lacey's office alleges that Sophia Esparza, the Chicana center's chief executive officer, used public funds to pay for expensive cars, homes, meals and even a political campaign fundraiser. Roughly $1.8 million went toward Esparza's "lavish" lifestyle, prosecutors say, including season tickets to the Dodgers and Clippers and rent on a home in affluent San Marino.

The district attorney's complaint says Esparza improperly used $35,000 in taxpayer funds to charter a yacht in Seattle; $81,873 to purchase a 2010 Jaguar in Pasadena; and $145,653 to cover five years' of rent at the Visconti, an apartment complex in downtown Los Angeles. None of those purchases were authorized by the group's board of directors, the complaint states.

Prosecutors also allege the three defendants created "fraudulent records and/or client files" to support the monthly invoices that were sent to the county's Department of Public Social Services.

The three defendants — Esparza, Chief Financial Officer Silvia Gutierrez and Vice President Thomas Baiz — are scheduled to appear in court Wednesday for a preliminary hearing. Deputy Dist. Atty. Marian Thompson said in a statement that the defendants "tainted the reputation" of a long-standing nonprofit organization and "betrayed the people they were supposed to help."

Lawyers for Esparza, 63, and Gutierrez, 69, issued a joint statement Tuesday saying the allegations are "based on a misunderstanding of the facts and a misinterpretation of the law by an overzealous prosecutor."

"The result is that a wonderful organization has been destroyed leaving hundreds, if not thousands of people without services," said attorneys Michael Nasatir, Victor Sherman and Matthew Lombard. Chicana Service Action Center, they said, has "cooperated with this investigation from the beginning. We are confident that an objective review of the evidence will demonstrate that they are innocent."

An attorney for Baiz, 60, did not respond to requests for comment.

The nonprofit received more than $16 million in county funds between 2007 and 2014, operating job training, domestic violence counseling and other programs in locations such as Pomona, San Gabriel and East L.A., according to county officials.

The group attracted high-level political support. Last year, Los Angeles City Councilman Jose Huizar took part in a ribbon-cutting for a Chicana Service job center in Boyle Heights. At the time, he boasted that he had helped secure $440,000 in city funds for the facility. Molina, for her part, made an unsuccessful effort two years ago to help the group, after county managers opted not to renew the group's contracts.

County officials said the district attorney's criminal case was prompted by a review conducted in 2011 by the Department of Community and Senior Services, which found billing irregularities in invoices submitted by the group. The Office of County Investigations, which examines allegations of fraud and works closely with the district attorney's office, initiated a probe of the nonprofit days later.

In March 2013, Molina made a last-ditch effort to help the group secure more job-training funds, saying the nonprofit did good work and was on the verge of collapse. Her four colleagues on the Board of Supervisors rejected that idea.

On Tuesday, Molina said she was unaware of the embezzlement allegations at the time. Molina said that when she advocated for the group, she thought the organization's problems stemmed from less serious missteps, such as using incorrect zip codes for some clients in its filings with the county. The group, she said Tuesday, had acknowledged those errors and refunded money to the county.

"This is really a huge disappointment, particularly because I did defend them," Molina said. "And I defended them with the idea that they were doing the work they were paid to do."

Molina said her involvement with the organization dates back to the 1970s, when she and other activists were searching for ways to provide job training and other services for Latinas. The group, she said, empowered many of the women who volunteered for her 1982 campaign for the state Assembly.

Prosecutors contend that Esparza improperly provided herself and her fellow executives salary and compensation packages by creating fraudulent Board of Directors' meeting minutes. Esparza, according to the criminal complaint, listed several people as being members or board members without the individuals' knowledge or permission.

Esparza also is accused in the district attorney's complaint of using taxpayer money for groceries, restaurant bills and other expenses in Santa Fe, N.M., where she had a vacation home, and using public funds for a May 2011 fundraiser for a city councilman.

Prosecutors declined to name the politician. Los Angeles Ethics Commission records show that Baiz, the Chicana Service group's vice president, contributed $500 to Huizar's reelection bid on May 27, 2011. That same day, Huizar received $500 from Fernando Cerda, owner of a Boyle Heights upholstery shop, according to Ethics Commission records.

In their complaint, prosecutors said Cerda provided upholstery work for Esparza's home, cars and a boat. Those services were paid for with public funds, prosecutors said.

Cerda and his attorney had no comment. Huizar referred questions about Chicana Service Action Center to spokesman Rick Coca, who did not respond to emails from The Times.

david.zahniser@latimes.com

abby.sewell@latimes.com

Copyright © 2016, Los Angeles Times
58°