(This article has been updated to add new information.)
A Riverside County grand jury has indicted Queer Works CEO Jacob Rostovsky on 53 felony counts, including grand theft and money laundering. Prosecutors allege he stole $940,000 from the city of Palm Springs, Riverside County and others.
Rostovsky ran the nonprofit organization, which accepted $700,000 from the city of Palm Springs to develop a guaranteed income pilot program. City administrators eventually grew suspicious of Rostovsky’s spending and launched a compliance audit, before involving the Riverside County District Attorney’s Office.
The charges filed against Rostovsky include grand theft, misappropriation of public funds, insurance fraud, perjury and money laundering.
Rostovsky surrendered to the DA’s Office last week, posted $944,000 bail and pleaded not guilty to all charges in court Wednesday as the case was unsealed.
In addition to city funds from Palm Springs, Rostovsky is alleged to have misused funds from Riverside County grants. In July 2021, Queer Works received grant funding from Riverside County to aid homeless individuals and victims of domestic violence, according to a press release from the DA’s Office.
Palm Springs provided Queer Works with $200,000 in March 2022 for a guaranteed income pilot program, approving an additional $500,000 that July. The program was supposed to provide 180 participants monthly stipends of $800 each.
However, the DA’s Office says an investigation revealed a longstanding pattern of fraud by Rostovsky, including 89 separate instances of making false statements and submitting forged documents to Riverside County and Palm Springs. Instead of paying for those programs, the DA’s Office alleges Rostovsky used a portion of the funding to make purchases at Disney, Burberry and the Beverly Garland Hotel.
Additionally, the DA’s Office claims Rostovsky collected $90,000 by impersonating a Queer Works client and filing a fraudulent insurance claim against Queer Works. Using an alias, Rostovsky allegedly negotiated a settlement with Queer Works’ insurance carrier, Philadelphia Insurance. He later directed the payout from the settlement to himself, according to the DA.
District Attorney Mike Hestrin called out potential government misconduct in relation to the alleged Queer Works fraud.
“I am calling on the Riverside County Civil Grand Jury to investigate any potential government malfeasance or misconduct that may have occurred in the administration of these contracts,” he said in the press release. “It is simply unacceptable that public funds are handed out with the lack of due diligence or oversight that is alleged in this case. The people of Riverside County deserve better from their public officials who have a duty to act as responsible stewards of taxpayer dollars.”
The Palm Springs City Council is in the midst of updating its financial policies to tighten control of grant disbursements in an apparent response to the Queer Works scandal. Last month, the council considered eliminating lump sum payments over $75,000 and requiring organizations receiving over that amount to submit to an independent audit. The council plans to take up the issue at a future meeting.
Part of the reason city officials felt comfortable distributing funds to Queer Works was the support of DAP Health, a far larger and older health-oriented nonprofit organization.
DAP initially advocated for the program alongside Queer Works, using its reputation in the community to bolster the chance of receiving city funding. The city at first granted both Queer Works and DAP Health $200,000 to run the program. The two organizations later returned to the city to ask for an additional $500,000 to be used as matching funds for a state grant.
In May 2022, both DAP Health and Queer Works signed an agreement which committed them to maintaining financial records of the program for three years. However, DAP Health officials have pointed to an October 2022 amendment to the agreement authorizing the $500,000 city payment, which is only signed by Queer Works. DAP argues because they are not a signatory to the amendment, DAP’s involvement with the program ended at that time.
DAP Health has not been accused of wrongdoing and has taken over administration of the guaranteed income program, using its own funds.
The California Department of Public Health has also recently distributed funds to Queer Works. CDPH awarded Queer Works a $500,000 grant for gender affirming care in September 2023, beginning quarterly payments in February of this year. In a recent email to The Desert Sun, Rostovsky said all funds from CDPH were used appropriately, but he did not provide details when asked.
The indictment does not allege any misuse of the CDPH funds.
In total, CDPH gave $153,864.14 to Queer Works, stopping payments on June 30. CDPH initially said payments ceased at the request of Queer Works. But after a story in The Desert Sun published earlier this week, the agency provided more details.
“Upon learning in July 2024 of the local investigation into Queer Works’ use of public funding, CDPH staff reached out to the organization and was notified it wished to terminate its grant agreement with CDPH as of July 1, 2024. No additional funds were issued,” the CDPH Office of Communications said in a statement to The Desert Sun. “While an initial analysis of progress reports provided to CDPH by Queer Works revealed no inconsistencies in their expenditures related to their grant agreement with CDPH, the Department is in the process of determining whether additional actions are required.”
Sam Morgen covers the city of Palm Springs for The Desert Sun. Reach him at smorgen@gannett.com.
This article originally appeared on Palm Springs Desert Sun: Charity CEO charged with stealing $940,000 in Palm Springs scheme
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