City sues firm that allegedly took $1 million 

San Francisco is suing a Huntington Beach escrow company that allegedly took off with more than $1 million in city funds that were set aside for San Francisco housing programs, according to a lawsuit filed in San Francisco Superior Court.

The City filed the suit Tuesday, claiming that Rehab Financial Corp. closed its doors last weekend and took off with money from Mayor Gavin Newsom’s Office of Housing, along with funds from 35 other California jurisdictions, said Doug Shoemaker, director of the Office of Housing.

The City has been contracting with Rehab Financial for more than a decade.

Shoemaker said the office received a call last week from a city in Southern California asking if they had seen or talked to anyone from Rehab. A week before, San Francisco had cut a check to Rehab for more than $70,000, Shoemaker said.

After a preliminary investigation, it appeared the company had withdrawn the $1 million in city funds and is nowhere to be found, Shoemaker said.

“We are trying to find out what’s going on and recover the money,” Shoemaker said.  “We’ve taken steps to freeze bank accounts and notify borrowers.”

The plot thickened when city officials then learned that the owner of the company has property in Arizona, so there is some suspicion that city funds have been carried across state lines, Shoemaker said.

“There was no reason to believe there was something like this occurring,” Shoemaker said. “It’s very upsetting.”

Despite the fact the money is gone, Shoemaker said The City will still grant qualified homeowners and renters money for these programs, which include removing lead-based pain from homes.

esherbert@sfexaminer.com

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