New York City Is Investigating Top Homeless-Shelter Operator - JuniperCivic.com
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New York City Is Investigating Top Homeless-Shelter Operator

Thursday, July 18, 2019 - Wall Street Journal

by Katie Honan

New York City officials say they are investigating one of the city's top homeless-shelter operators over alleged undisclosed ties to a for-profit security firm.

The Bronx-based non-profit Acacia Network Housing, Inc., has received more than $1 billion in contracts from the city's Department of Homeless Services to run shelters since 2010, according to the city comptroller's online database.

So far in 2019, it has received nearly $50 million in new contracts.

Acacia's top subcontractor for the last few years has been SERA Security Services, LLC. In 2017, it paid more than $12 million to SERA to provide security services at some of its shelters, according to the non-profit's most recent federal tax filing.

SERA was founded by Acacia's CEO, Raul Russi, state incorporation records show. Mr. Russi received more than $815,000 in compensation in 2017 as the head of Acacia, its umbrella non-profit, Acacia Network Inc., and other non-profit affiliates, the tax filing shows. He also has a direct role in managing SERA staff, a former SERA employee recently alleged in a lawsuit.

SERA, which also has its own direct contracts with the city, listed Jose Rodriguez as its CEO in its most recent disclosure forms with the city's contract records system. Mr. Rodriguez also serves as the chief legal officer for Acacia.

Although Mr. Rodriguez's role at SERA appears in the city's contract records system, Homeless Services said it wasn't aware of the relationship between the non-profit and SERA until The Wall Street Journal inquired about the connection last month. The department said it also wasn't aware of Mr. Russi's connection to SERA.

City rules require a contractor and its principals to disclose any business affiliations. What was disclosed didn't explicitly define Mr. Russi's affiliation with SERA, according to a city official.

Homeless Services has since asked the city's Department of Investigation to review the relationship, according to a person familiar with the matter.

"We are re-reviewing all disclosures and representations in coordination with the Mayor's Office of Contracting Services and have referred this matter for further investigation," Isaac McGinn, a spokesman for the Department of Homeless Services, said in a statement.

A spokeswoman for the Department of Investigation said it was aware of the matter but declined to comment further.

Acacia's chief of staff, Lymaris Albors, said in an email that there wasn't any conflict of interest between Acacia and SERA.

Mr. Russi said in an interview that SERA was chosen as an Acacia subcontractor through a competitive bidding process. "We followed all the procurement rules on anything we bid it as, we created distance to make sure that the company would bid and be a fair bid and compete with everybody else," Mr. Russi said.

Mr. Rodriguez didn't respond to multiple requests for comment.

Acacia wasn't forthcoming about it ties to the city a year ago. The Wall Street Journal reviewed an Aug. 2, 2018, letter that Mr. Rodriguez sent in his role as Acacia's chief legal officer to city officials, stating that the only person holding roles at both SERA and the Acacia Network was Felix Cabreja. Ms. Albors didn't respond to questions about the letter.

However, Ms. Albors said last month in a statement to the Journal that SERA was run by a management committee comprised of Mr. Cabreja, Mr. Rodriguez and Milton DeRienzo, who is Acacia's chief financial officer. She declined to say what role Mr. Cabreja has at Acacia.

In the same statement, Ms. Albors said, "I want to make it clear that no officer or director of Acacia Network Housing Inc. or Acacia Network Inc. has any beneficial interest in SERA or receives any financial benefit." SERA only earns a modest profit, Ms. Albors said. She declined to say the specific profit amount or where the money goes.

Acacia first began working with the Department of Homeless Services in 2005, records show. It provides shelter housing and supportive services to thousands of people in more than 100 locations across New York City, according to its most recent tax filing. The nonprofit also has joined with developers to build affordable housing.

The non-profit's tax filings show it has contracted with SERA since 2011. Mr. Russi said in an interview that he started SERA to provide jobs for Bronx residents. It was incorporated in 2011. SERA also holds contracts to provide security personnel at city shelters that aren't operated by Acacia.

Mr. Russi said he wasn't involved in the daily operations of the security company. In a lawsuit filed last month, a security guard, Chante Anderson, said she was fired after she became pregnant in 2017 and listed Mr. Russi as her supervisor, according to the lawsuit.

Ms. Albors said Mr. Russi wasn't her direct supervisor, and Ms. Anderson's lawyer didn't respond to a request for comment.

SERA has been sued at least six times over allegations that its security guards either used excessive force on residents at city shelters—including ones run by Acacia—or that it didn't provide adequate security. In legal responses to each lawsuit, SERA and Acacia denied the allegations.

Jheri Lewis, a former resident of a Long Island City, Queens, shelter operated by Acacia, sued the nonprofit and SERA in state court in February, saying she was set on fire by her roommate in 2018. She had second- and third-degree burns over her face and couldn't speak for a month, and is still recovering. Ms. Lewis accused SERA security guards of not keeping the shelter safe and allowing her roommate to bring in flammable materials.

Her lawyer declined to comment on the continuing litigation. SERA and Acacia also declined to comment about the lawsuit.

Write to Katie Honan at Katie.Honan@wsj.com