The Fullerton Observer was alerted to alleged misconduct at the Illumination Foundation-operated “Recuperative Care Navigation Center” on Commonwealth Ave. in Fullerton – including a lack of caseworkers, drug use on the premises, and several fentanyl deaths at the facility.  Fullerton Police confirmed that two fentanyl deaths had occurred. In an attempt to further verify or disprove the other allegations, the paper requested a tour of the facility.

The request was denied by Illumination Foundation officials, who stated that they don’t provide tours to reporters. The paper then notified officials at the City of Fullerton, who were able to visit the facility along with officials from Buena Park. A report from the city is expected soon. Because we want shelter organizations to succeed in helping solve the issues of homelessness and because the shelter uses public funding – oversight is an important component. (See financial information at the end of this article.)

Allegations of sexual harassment, substandard living conditions, violations of rights, and retaliation against those who speak up are not new in Orange County. As previously reported in the Observer, the ACLU filed a lawsuit in Superior Court in December 2020 against shelter operators Illumination Foundation for its La Mesa Shelter and Mercy House Living Centers, which currently operates the Bridges at Kraemer Place Shelter to which Fullerton contributed funding (and also ran the Armory cold weather shelter in Fullerton for years before it closed in 2019). Other defendants are Midnight Mission for its Courtyard Shelter in Santa Ana.

Protection America Inc., which provided security services,  and the City of Anaheim and the County of Orange, which help fund and oversee the named shelters. (The Recuperative Care Navigation Center operated by Illumination Foundation, which opened in August 2020, was not named in the lawsuit.) Upcoming hearings for the case are scheduled for August 11, and September 8, 2023, before Judge Sherman in OC Superior Court Dept. CX105 in Santa Ana. (You can follow this case by visiting occourts.org and clicking on Case Access for # 01174005 (2020))

The issue of people living on the streets and efforts to help them are ongoing across the nation.  Locally, the OC Continuum of Care, which oversees the distribution of local, state, and federal homeless funding countywide, reported funding of $28 million/county, $29 million/state, and $60.5 million/federal for 2021 as laid out in the OC Grand Jury 2022 report “How is OC Addressing Homelessness?” The report found that emergency shelter capacity grew by over 40%, providing temporary shelter to 2,665 in 2017 and 3,756 in 2021.  During the same period, however, permanent housing increased by only 13%.  From 2018 to 2021, only 30% of those leaving shelters were placed in permanent homes. The report shows that Orange County is making some progress but also concludes that there are not enough supportive and rehabilitative services or housing affordable to those in need. (Read the report by visiting ocgrandjury.org).

While waiting for the ACLU case to resolve and the expected city report on the Navigation Center operations, Observer staff looked into the required IRS Form 990s and audits performed on the two groups operating in Fullerton that were named in the lawsuit. Below are some interesting notes from those documents.

Illumination Foundation (Sources:  IRS 990, and audit for the fiscal year ending June 2022 available at propublica.org)

• Revenue: $37 million in public funding last fiscal year, primarily from federal and state grants ($21.6 million). The next highest source of revenue ($11.3 million) is listed as “program service fees,” with the remainder coming from contributions and special events. $39 million in expenses, including over $14.7 million in salaries plus $1.6 million in employee benefits (highest-paid employees are CEO Paul Leon ($176,000); COO Pooja Bhalia ($160,000); COO Jack Toan ($150,000); and CFO John Ing ($150,000).  $8.3 million was spent on direct client care, $1.2 in rent, parking, and occupancy, and $12.7 million listed as buildings and leasehold improvements.

• The Illumination Foundation recuperative care program is funded through contributions from individuals, corporations, and grants from non-profits and the government, including $5.9 million from California Advancing & Innovating Medi-Cal, $4.3 million from DHS Greater LA Area, $785,890 from County of Orange, $794,347 from Inland Empire HP, and $37,790 in fees for service from various SoCal hospitals discharging homeless patients.

•In February 2021, the organization funded tenant improvements for the Riverside Recuperative Care facility through a loan from IHLLC. In June and April 2021, it refinanced two Anaheim properties at 213 N. Gilbert and 10881 Mac Street. In February 2020, Illumination Foundation entered into a 15-year lease agreement with the City of Fullerton for a facility on Commonwealth to house a recuperative care and navigation center. The monthly payments are $31,551 (plus an $11,250 installment for the remainder of a $1.125 million security deposit – $450,000 was paid upfront).

•In January 2020, the organization became a member of Illumination Housing, LLC, a real estate investment entity created to acquire and own properties (under separate limited liability company names) for serving people experiencing homelessness. The foundation is the sole managing member of these entities, including four Limited Liability Companies (formed to purchase a residential facility in Santa Ana).

Mercy House Living Centers (Sources:  IRS 990 for MHLC and Audit for the fiscal year ending June 2021 available at propublica.org)

7/2019-6/2020 revenue: $29.1 million. Expenses totaled $28.2 million, including $7.1 million for emergency shelter operations; $6.9 for living assistance;  $9.8 million in employee salaries and benefits, including highest paid employee CEO Larry Haynes $104,000; CFO Patti Long $66,052; and Director James Brooks $63,000.

•Mercy House Living Centers (MHLC) was incorporated as a California non-profit based in Santa Ana in June 1988 to provide housing and comprehensive supportive services for the homeless and has since partnered with various other groups to purchase and build permanent supportive rentals and affordable housing for chronically homeless households. The group also provides homeless street outreach, homeless prevention, transitional and low-threshold emergency shelters, and rapid re-housing and owns and operates several housing units in OC and the City of Ontario for low-income individuals and families.

•Mercy House operates the Kraemer Place year-round shelter (Bridges) under a 20-year lease from the County of Orange for no rent. The non-profit also operates Assisi House and Ontario Access Center and leases office space in Santa Ana.

•In Dec 2020, CHDO purchased the Vagabond Inn in Oxnard as an emergency shelter for $15 million, funded by $10.9 million from the CA Department of Housing & Development, $3.5 million from the County of Ventura, and a $1.5 million bank loan.

•Vista Mercy House CHDO, LLC was incorporated on Jan. 11, 2021, to enter into a limited partnership with National Core to develop real property in Riverside County to provide affordable rental housing for homeless and low-income households.

•42% of revenue in 2020 was from grants from the US Dept of Housing and Urban Development, the City of Santa Ana, and the County of Orange. Mercy House and Affiliates received grants from US HUD, Federal Cares Act Emergency Solutions, the state, County of Orange, Ventura, and San Bernardino, and the cities of Anaheim, Ontario, Garden Grove, Santa Ana, Costa Mesa, Buena Park, Fullerton, La Habra, Lake Forest, Tustin, and Riverside.

•The audit for the year ending June 2020 found a $646,000 net understatement in Accounts Receivable and a $591,000 understatement in Accrued Liabilities. The recommendation was to hire a new Controller and Accounting Manager, which Mercy House did.