Queer Works CEO indicted in fraud scheme involving Palm Springs universal basic income pilot program

Jacob Rostovsky, the CEO of the local non-profit Queer Works, has been indicted on 53 felony counts in a fraud scheme surrounding a universal basic income pilot program in Palm Springs, the Riverside County District Attorney's office announced.

District Attorney Mike Hestrin said a jury returned a 53-count indictment against Rostovsky on Tuesday.

Rostovsky, 33, was indicted on a variety of charges including fraudulent claims, grand theft, misappropriation of public funds, insurance fraud, perjury, and money laundering, according to the DA's office.

The indictment includes an aggravated white-collar crime enhancement due to the significant economic loss of the scheme.

Rostovsky surrendered at the DA’s Office on October 17 and posted $944,000 bail, authorities confirmed.

“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,” Hestrin said. “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 grand jury indictment was unsealed when Rostovsky was arraigned Wednesday at the Hall of Justice in Riverside. Queer Works, founded by Rostovsky, was purportedly set up to provide mental health services to the transgender and nonbinary community.

In July 2021, Queer Works received grant funding from Riverside County for various programs aimed at assisting homeless individuals and victims of domestic violence.

In March 2022, the City of Palm Springs agreed to provide Queer Works with $200,000 to develop a universal basic income pilot program. In July 2022, the Palm Springs City Council approved a request for an additional $500,000 in matching funds for a universal basic income grant that Queer Works intended to pursue with the State of California.

The universal basic income program was supposed to provide 180 participants monthly stipends of $800.

According to the DA's office, financial reviews by Riverside County Housing & Workforce Solutions (HWS) into the Riverside County grants revealed discrepancies in expenses reported by Queer Works and showed Rostovsky altered financial documents submitted to Riverside County. Additionally, checks issued by the Riverside County Treasury were deposited into Rostovsky's personal checking account.

Based on the findings by HWS, the matter was referred to the Riverside Auditor Controller and ultimately to the DA’s Office.

An investigation by the DA’s Office revealed that Rostovsky engaged in a longstanding pattern of fraud, including 89 separate instances of making false statements and submitting forged documents to the County of Riverside and the City of Palm Springs to obtain over $840,000 intended for housing assistance and basic income payments.

The DA's office alleges that Rostovsky used a portion of the funds, intended for individuals in need of assistance, on personal expenses, including purchases at Disney, Burberry, and the Beverly Garland Hotel.

Additionally, Rostovsky is accused of collecting an additional $90,000 by impersonating a Queer Works client and filing a fraudulent insurance claim against Queer Works. Rostovsky, using his fraudulent alias, then negotiated a settlement with Queer Work’s insurance carrier, Philadelphia Insurance, the proceeds of which were ultimately directed to Rostovsky himself.

Rostovsky is also accused of engaging in multiple acts of money laundering in relation to the allegedly illgotten funds.

On Tuesday, News Channel 3 reported that the California Department of Public Health confirmed Queer Works was still getting grant funds while it was under investigation for misuse of public funds.

The department says the grant agreement was ended once it learned of the investigation.

The City of Palm Springs issued a statement in response the Wednesday's announcement:

The City of Palm Springs fully supports the Riverside County District Attorney’s efforts in investigating and indicting Mr. Jacob Rostovsky for allegedly defrauding the taxpayers of our city, our county and state out of hundreds of thousands of dollars. The 53-felony count indictment includes fraud, grand theft, and misappropriation of public funds.  While the City recognizes that all criminal defendants are presumed innocent until proven otherwise, we are deeply concerned by these charges, particularly the misuse of taxpayer dollars, and will cooperate fully with the investigation to ensure accountability.

While the indictment includes allegations involving various government entities, including Riverside County and the State of California, we recognize that six of the felony counts explicitly refer to the City of Palm Springs’ Universal Basic Income Pilot Program. The City is committed to ensuring full accountability for public funds and has already taken significant steps to prevent such incidents from occurring in the future.

Proactive Measures Taken by the City of Palm Springs:

In light of the allegations, the City has implemented a number of stringent protocols to enhance oversight and accountability for the management of public funds. These include:

1.    Elimination of Lump-Sum Payments: Grants exceeding $75,000 will no longer be distributed in lump sums. Instead, funds will be paid through a reimbursement process or split into multiple payments contingent on progress reports and financial documentation.

2.    Mandated Regular Reporting: Organizations receiving city funds will be required to submit regular progress reports and invoices. Funds will only be released upon receipt and verification of this documentation.

3.    Enhanced Vetting Process: All new organizations requesting funds will be required to meet strict eligibility criteria, including good financial standing and compliance with local, state, and federal laws. This includes submitting financial audits, tax documentation, and verification from multiple oversight bodies.

4.    Independent Audits: Organizations receiving over $75,000 in city funding must submit an independent audit annually to ensure financial transparency.

5.    Designated Oversight: City staff members will be assigned to oversee each grant or contract, ensuring compliance with reporting requirements and financial reviews.

6.    Staff Training: City staff responsible for managing grants will undergo enhanced training on best practices for financial oversight, reporting, and fraud prevention.

The City of Palm Springs remains dedicated to upholding the highest standards of transparency and fiscal responsibility. We will continue to work closely with the Riverside County District Attorney’s Office and other involved agencies to ensure that those who defraud the public are held accountable and brought to justice.

Stay with News Channel 3 for continuing updates on this case.