by Jennifer Berry Hawes

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Upheaval at the nation’s top disaster agency is raising anxiety among state and local emergency managers — and leaving major questions about the whereabouts of billions of federal dollars it pays out to them.

The Federal Emergency Management Agency still has not opened applications for an enormous suite of grants, including ones that many states rely on to pay for basic emergency management operations. Some states pass on much of that money to their most rural, low-income counties to ensure they have an emergency manager on the payroll.

FEMA has blown through the mid-May statutory deadline to start the grants’ application process, according to the National Emergency Management Association, with no word about why or what that might indicate. The delay appears to have little precedent.

“There’s no transparency on why it’s not happening,” said Michael A. Coen Jr., who served as FEMA’s chief of staff under former Presidents Barack Obama and Joe Biden.

FEMA’s system of grants is complex and multifaceted and helps communities prepare for and respond to everything from terrorist attacks to natural disasters.

In April, the agency abruptly rescinded a different grant program that county and local governments were expecting to help them reduce natural hazard risks moving forward. The clawback of money included hundreds of millions already pledged. FEMA also quietly withdrew a notice for states to apply for $600 million in flood mitigation grants.

On top of that, on June 11, U.S. Department of Homeland Security Secretary Kristi Noem began requiring that she review all FEMA grants above $100,000. That could slow its vast multibillion grants apparatus to a crawl, current and former FEMA employees said.

FEMA did not answer ProPublica’s questions about the missed application deadline or the impact of funding cuts and delays, instead responding with a statement from DHS Assistant Secretary Tricia McLaughlin that Noem is focused on bringing accountability to FEMA’s spending by “rooting out waste, fraud, abuse, and working to ensure only grants that really help Americans in time of need are approved.”

The memo announcing the change arrived the day after President Donald Trump said he wants to begin dismantling FEMA at the close of hurricane season this fall.

All of this has left states — some of which rely on the federal government for the vast majority of their emergency management funding — in a difficult position. While Trump has sharply criticized FEMA’s performance delivering aid after disasters strike, he has said almost nothing about the future of its grant programs.

“It’s a huge concern,” said Lynn Budd, president of the National Emergency Management Association and director of the Wyoming Office of Homeland Security, which houses emergency management. The state agency gets more than 90% of its operating budget from federal funds, especially FEMA grants. “The uncertainty makes it very difficult,” she said.

In North Carolina, a state hit hard by a recent natural disaster, federal grants make up 82% of its emergency management agency’s budget. North Carolina Emergency Management leaders are pressing state lawmakers to provide it with “funding that will sustain the agency and its core functions” and cut its reliance on federal grant funding, an agency spokesperson said.

A forced weaning off of federal dollars could have an outsize impact in North Carolina and the other states that pass on much of their FEMA grants to county and local agencies. Many rural counties have modest tax bases and are already stretched thin.

In May, ProPublica published a story detailing the horrors of Hurricane Helene’s impact on one of those counties, Yancey. Home to 19,000 people, it suffered the largest per capita loss of life and damage to property in the storm. Jeff Howell, its emergency manager, was operating with only a part-time employee and said that for years he had been asking the county commission for more help. It wasn’t until after the storm that county commissioners agreed with the need.

“They realized how big a job it is,” said Howell, who has since retired.

But even large metropolitan counties rely on the grants. The hold upin opening the grant applications concerns Robert Wike Graham, deputy director of Charlotte-Mecklenburg Emergency Management, which serves an area of 1.2 million people and is home to a nuclear power plant. The training and preparation FEMA grants help the agency pay for are critical to keeping the community safe in the face of a nuclear catastrophe.

Yet Graham said he has resorted to scouring social media posts and news reports for bits of clues about the grants — and the future of FEMA itself.

“We’re all having to be like, hey, what have you heard? What do you know? What’s going on? Nobody knows,” Graham said.

Trump is on his second acting FEMA administrator in five months, and the director who coordinates national disaster response turned in his resignation letter June 11. More than a dozen senior leaders, including the agency’s chief counsel, have left or been fired, along with an unknown mass of its full-time workers.

“Every emergency manager I know is screaming, ‘You’re screwing the system up.’ We’ve all been calling for reform,” Graham said. “But it’s too much, too fast.

Vulnerable to Political Shifts

Shortly after President Jimmy Carter created FEMA in 1979 to centralize federal disaster management, the agency began to dole out grants to help communities grappling with large-scale destruction. Over the years, its grants ballooned, especially after the terrorist attacks on Sept. 11, 2001, when huge new programs helped states harden security against this alarming new threat.

Today, FEMA operates roughly a dozen preparedness grant programs. Among other things, the money serves as a financial carrot to ensure that even spending-averse and tax-strapped states and counties employ emergency managers who help communities prepare for and respond to terrorist attacks and natural disasters.

Former FEMA leaders said states have been largely content to sit back and let the feds pay up. As a result, they said, the grants have created a system of dependence that leaves emergency managers vulnerable to ever-shifting national priorities and, at the moment, a president set on dismantling the agency.

Across the country, the percentage of state emergency management agencies’ budgets paid by federal funding ranges from zero to 99.4%, a 2024 National Emergency Management Association report says. A spokesperson declined to provide a state-by-state breakdown, so ProPublica canvassed a few.

Wyoming tops 90%. Texas’ agency gets about three-quarters of its operational budget from federal funding. Virginia gets roughly 70%. South Carolina comes in around 61% federal funding for day-to-day operations.

Most state emergency managers agree that their states need to depend less on the federal government for their funding, “but there’s got to be some glide path or timeline where we can all work toward the goal,” Budd said.

Some states would need upwards of a decade to prepare for such a seismic shift, especially those like Wyoming that budget every other year, she added. Its Legislature is in the middle of budget negotiations for fiscal year 2027-28.

Get in Touch

ProPublica is continuing to report on the aftermath of Hurricane Helene in North Carolina. If you are an emergency manager who would like to tell us about your needs or share your experience with recovery efforts, please email helenetips@propublica.org.

If emergency managers instead are scrambling, “the effects that we’re going to see down the line is a lack of preparedness, a lack of coordination, training and partnerships being built,” Budd said. “We’re not going to be able to respond as well.”

A key reason states have become so dependent on FEMA grants despite the risk of national political upheaval is that state legislatures and local elected leaders haven’t always prioritized paying for emergency management themselves despite its critical role. With FEMA’s grants, they haven’t had to.

W. Craig Fugate has seen reluctance to wean off FEMA grants from all levels of government. He served as FEMA administrator under Obama and, before that, as head of Florida’s emergency management division under then-Govs. Jeb Bush and Charlie Crist.

“My experience tells me locals will not step up unless they are dealing with a catastrophe,” Fugate said.

Because most of the preparedness grants require no match from state or local governments, he said, it strips away any motivation for them to do so — especially with other pressing needs vying for those dollars.

“The real question is how much of this is actually critical and should be the responsibility of local governments to fund?” Fugate said. “Neither local governments nor states have been very forward in funding beyond the minimums to match federal dollars.”

Small-Town North Carolina

After Hurricane Helene, North Carolina’s Emergency Management agency commissioned a report that pointedly criticized the state’s “over-reliance on federal grants to fund basic operations.” Only about 16.5% of the state agency’s budget comes from state appropriations.

The report noted that this reliance had led to an inadequate investment by the state in its emergency management staffing and infrastructure. A staff shortage at the agency “severely compromised the state’s response to Hurricane Helene.” Among other things, a lack of staff hampered the State Emergency Response Team’s ability to maintain a 24-hour operation that was supposed to support local and county officials who were overwhelmed by the massive storm.

North Carolina state Rep. Mark Pless, the Republican co-chair of the House Emergency Management and Disaster Recovery Committee, said the state’s conservative spending and $3.6 billion in reserves have “afforded us the ability to fund ourselves for preparedness” if FEMA suddenly yanks its grants.

But Democratic Rep. Robert Reives, the House minority leader, worried that any financial flexibility would dry up if planned and potential tax cuts in the years ahead create a budget shortfall, as some have predicted.

In mostly rural Washington County, along North Carolina’s hurricane-prone coast, Lance Swindell is a one-man emergency management office. His county, home to 11,000 people, lacks a big tax base.

Like other emergency managers across the state, Swindell said he supports cutting FEMA red tape and waste, but “grant funding is a major funding source just to keep the lights on.”

One of the grants in the FEMA program that blew past its deadline for opening applications pays half of his salary. That grant can fund core local operations such as staffing, training and equipment. It is critical to local emergency management offices: Almost 82% of counties across the country report tapping into it.

Cuts to this particular grant under the Biden administration already reduced what North Carolina gets — and therefore what gets passed down the governmental food chain to people like Swindell. North Carolina was allocated $8.5 million in fiscal year 2024, down from $10.6 million two years earlier.

Looking ahead, Swindell is still waiting for the applications to open while wondering if FEMA will more drastically slash the grants — and, if so, whether his county could find the money to continue paying his full-time salary.

Mollie Simon contributed research.

by Eric Umansky and Vernal Coleman

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What Happened

Senators this week called for a federal investigation into the Trump administration’s killing of hundreds of contracts for the Department of Veterans Affairs. Democrat Richard Blumenthal of Connecticut and Angus King, a Maine independent, wrote to the agency’s inspector general on Monday asking for an investigation into the administration’s cancellation of the contracts and the consequences for veterans.

The senators highlighted “damning reporting from ProPublica” on the cancellations, including how the Department of Government Efficiency used an artificial intelligence tool that marked contracts as “MUNCHABLE.”

The senators wrote that DOGE’s use of AI to scrutinize contracts “adds an entire new level of unease connected to the decision-making, security, governance, and quality control of the entire process.”

VA officials have said they’ve killed nearly 600 contracts after DOGE’s review but have declined requests by lawmakers and ProPublica for details.

“Despite repeated requests in letters to the Secretary, questions at hearings, and dozens of emails to VA officials,” the senators wrote, “the Department has not provided a single briefing or a complete and accurate list of the contracts it has cancelled.”

Blumenthal and King wrote that the VA shared a list of contracts in May, but it was “riddled with errors and inaccuracies.”

What They Said

Amid the administration’s “stonewalling,” Blumenthal said in a statement, “ProPublica’s reporting revealed these cancelled contracts were delivering essential services to veterans and exposed the cruel and dumb AI formulas DOGE bros used to cancel contracts.”

Blumenthal added, “Veterans and all Americans deserve transparency around decisions being made at VA.”

Background

As ProPublica detailed, a DOGE staffer with no background in government or health care created the AI tool used to mark contracts as “munchable.” Among the contracts that were tagged and later killed was one to maintain a gene sequencing device for improving cancer treatment. Another was for blood sample analysis in support of a VA research project. And a third was to help measure and improve nursing care.

In another story, we reported how VA doctors and other staffers across the country have raised alarms about how the killing of contracts could threaten veterans’ care. In internal emails, hospital staffers warned about canceled contracts to maintain cancer registries, where information on the treatment of patients is collected and analyzed. DOGE had marked one such contract “for immediate termination.”

Why it Matters

The VA is one of the nation’s largest health care providers, charged with the care of more than 9 million veterans. President Donald Trump has long promised to prioritize former service members. “We love our veterans,” he said in February. “We are going to take good care of them.”

The administration has reiterated that stance even as the VA has been shedding employees and contracts. Amid the cutbacks, Trump’s pick to run the agency, Secretary Doug Collins, said earlier this year, “Veterans are going to notice a change for the better.”

Response

The VA has not responded to our request for comment about the senators’ letter. Previously, press secretary Pete Kasperowicz said that decisions to cancel or reduce the size of contracts are made after multiple reviews by VA employees, including agency contracting experts and senior staff.

He also said the VA has not canceled contracts that provide services to veterans or work that the agency cannot do itself without a contingency plan in place.

by Margaret Coker, The Current

This article was produced for ProPublica’s Local Reporting Network in partnership with The Current. Sign up for Dispatches to get stories like this one as soon as they are published.

Congressional Republicans, looking for ways to offset their proposed tax cuts, are seeking to mandate that millions of Americans work in order to receive federally subsidized health insurance. The GOP tax and budget bill passed the House in May, and Senate Republicans are working feverishly to advance their draft of federal spending cuts in the coming days.

Georgia, the only state with a Medicaid work mandate, started experimenting with the requirement on July 1, 2023. As the Medicaid program’s two-year anniversary approaches, Georgia has enrolled just a fraction of those eligible, a result health policy researchers largely attribute to bureaucratic hurdles in the state’s work verification system. As of May 2025, approximately 7,500 of the nearly 250,000 eligible Georgians were enrolled, even though state statistics show 64% of that group is working.

Gov. Brian Kemp has long advocated for Medicaid reform, arguing that the country should move away from government-run health care. His spokesperson also told The Current and ProPublica that the program, known as Georgia Pathways to Coverage, was never designed to maximize enrollment.

Health care analysts and former state Medicaid officials say Georgia’s experience shows that the congressional bill, if it becomes law, would cost taxpayers hundreds of millions of dollars in administrative costs as it is implemented while threatening health care for nearly 16 million people.

Here’s how proposed federal work requirements compare to Georgia’s — and how they may impact your state:

How will states determine who is eligible?

What Congress proposes:

The House bill, H.R. 1, and draft Senate proposal require all states to verify that Americans ages 19 through 64 who are receiving Medicaid-funded health coverage are spending 80 hours a month working, training for a job, studying or volunteering. These new verification systems would need to be in place by Dec. 31, 2026, and would have to check on enrolled residents’ work status twice a year. That means people who already receive coverage based on their income level would need to routinely prove their eligibility — or lose their insurance.

The federal work requirements would apply to more than 10 million low-income adults with Medicaid coverage as well as approximately 5 million residents of the 40 states that have accepted federal subsidies for people to purchase private health coverage through what’s commonly known as Obamacare.

The House bill exempts parents with children under 18 from the new requirements, while the Senate version exempts parents with children under 15. Neither bill exempts people who look after elderly relatives.

Georgia’s experience:

Georgia’s mandate applies to fewer categories of people than the proposed federal legislation would. Even so, officials failed to meet the state’s tough monthly verification requirement for Pathways enrollees due to technical glitches and difficulty confirming the employment of those who work in the informal economy such as house cleaners and landscapers because they may not have pay stubs or tax records. The challenges were steep enough that Georgia has decided to loosen its work verification protocols from monthly to once a year.

What this means for your state:

The Congressional Budget Office estimates that H.R. 1 would result in at least 10 million low-income Americans losing health insurance. Health care advocates say that’s not because they aren’t working, but because of the bureaucratic hoops they would need to jump through to prove employment. Research from KFF, a health policy think tank, shows that the vast majority of people who would be subject to the new law already work, are enrolled in school or are unpaid stay-at-home caregivers, duties that restrict their ability to earn a salary elsewhere.

Arkansas is the only state other than Georgia to have implemented work requirements. Republican state lawmakers later changed their minds after data showed that red tape associated with verifying eligibility resulted in more than 18,000 people losing coverage within the first few months of the policy. A federal judge halted the program in 2019, ruling that it increased the state’s uninsured rate without any evidence of increased employment.

House Speaker Mike Johnson (Tom Williams/CQ Roll Call via AP)

House Speaker Mike Johnson, a Louisiana Republican, says Medicaid work requirements in H.R. 1 are “common sense.” He says the policy won’t result in health coverage losses for the Americans whom Medicaid was originally designed to help because the work requirements won’t apply to these groups: children, pregnant women and elderly people living in poverty. He points to the $344 billion in a decade’s worth of projected cost savings resulting from Medicaid work requirements as beneficial to the nation’s fiscal health. “You find dignity in work, and the people that are not doing that, we’re going to try to get their attention,” he said earlier this year.

Who will pay for the work verification system in each state?

What Congress proposes:

The House bill allocates $100 million to help states pay for verification systems that determine someone’s eligibility. The grants would be distributed in proportion to each state’s share of Medicaid enrollees subject to the new requirements — an amount health policy experts say will not be nearly enough. States, they say, will be on the hook for the difference.

Georgia’s experience:

In the two years since launching its experiment with work requirements, Georgia has spent nearly $100 million in mostly federal funds to implement Pathways. Of that, $55 million went toward building a digital system to verify participants’ eligibility — more than half the amount House Republicans allocated for the entire country to do the same thing.

Like other states, Georgia already had a work verification system in place for food stamp programs, but it contracted with Deloitte Consulting to handle its new Medicaid requirements. Georgia officials said the state has spent 30% more than they had expected to create its digital platform for Pathways due to rising consultant and IT costs. Deloitte previously declined to answer questions about its Pathways work.

What this means for your state:

All states already verify work requirements for food stamp recipients, but many existing systems would need upgrades to conform to proposed federal legislation, according to three former state Medicaid officials. In 2019, when states last considered work requirements, a survey by the nonpartisan Government Accountability Office showed that Kentucky expected administrative costs to top $200 million — double what H.R. 1 has allocated for the country.

Rep. Buddy Carter (Justin Taylor/The Current GA/CatchLight Local)

Rep. Buddy Carter, the Republican who represents coastal Georgia and chairs the health subcommittee of the House Energy and Commerce Committee, which had recommended Medicaid cuts in H.R. 1, said that upfront costs borne by states would be offset by longer-term savings promised in the House bill. Some congressional Republicans concede that the cost savings will come from fewer people enrolling in Medicaid due to the new requirements. Savings from work mandates amount to 43% of the $793 billion in proposed Medicaid cuts, according to the Congressional Budget Office.

How will states staff the program?

What Congress proposes:

Medicaid is a federal social safety net program that is administered differently in each state. Neither H.R. 1 nor the Senate legislative proposal provides a blueprint for how states should verify eligibility or how the costs of overseeing the new requirements will be paid.

Georgia’s experience:

Georgia’s experience shows that state caseworkers are key to managing applications and work requirement verifications for residents eligible for Medicaid. The agency that handles enrollment in federal benefits had a staff vacancy rate of approximately 20% when Georgia launched its work requirement policy in 2023. Georgia at the time had one of the longest wait times for approving federal benefits. As of March, the agency had a backlog of more than 5,000 Pathways applications. The agency has said it will need 300 more caseworkers and IT upgrades to better manage the backlog, according to a report submitted to state lawmakers in June.

What this means for your state:

Former state Medicaid officials and health policy experts say Georgia’s staffing struggles are not unique. In 2023, near the end of the COVID-19 public health emergency, KFF surveyed states about staffing levels for caseworkers who verify eligibility for federal benefits, including Medicaid. Worker vacancy rates exceeded 10% in 16 of the 26 states that responded; rates exceeded 20% in seven of those states.

Adding caseworkers will mean higher costs for states. Currently, 41 states require a balanced budget, meaning that those state legislators would either need to increase taxes and revenues to verify Medicaid enrollees are working or lower enrollment to reduce costs, said Joan Alker, executive director of Georgetown University’s Center for Children and Families.

In about half a dozen large states where county governments administer federal safety net programs, the costs of training caseworkers on the new verification protocols could trickle from states to counties.

“There are provisions in there that are very, very, very challenging, if not impossible, for us to implement,” Sen. Lisa Murkowski, an Alaska Republican, told reporters in June of the costs facing her state to meet the House bill requirements.

by Adam Friedman, Tennessee Lookout

This article was produced for ProPublica’s Local Reporting Network in partnership with Tennessee Lookout . Sign up for Dispatches to get stories like this one as soon as they are published.

ProPublica and the Tennessee Lookout are continuing to investigate Harpeth Financial, which owns Flex Loan operator Advance Financial and online sportsbook Action 247. To tell us about the experience you had with either or both companies, call or text reporter Adam Friedman at 615-249-8509.

Jeanette Thomas had just made her first payment on a loan from payday lender Advance Financial when she said the company emailed her with “good news.” She could borrow $206 more.

The solicitation was a relief to Thomas, a 62-year-old grandmother who had already exhausted the $783 disability check she receives each month since her health conditions render her unable to work.

Over the next few months, Thomas made the required minimum payments on what started in 2019 as a $400 loan to buy Christmas presents. But each time she did so, the company invited her to borrow almost all of the payment back, she said, with emails or letters like “Access Your Cash Today” or “You’re Already Approved.”

“They kept trying to rope me in,” Thomas said.

In the months that followed, the company continued to expand her credit, allowing Thomas to borrow close to $1,600 in total. In the emails and letters that Thomas kept, Advance never stated how much it would cost if she continued to reborrow.

Thomas had read her original loan documents warning that the loan carried a high 279.5% interest rate and would be challenging to pay off. But as the loan balance grew, Thomas came to realize she was trapped. By the spring of 2021, Thomas had paid Advance almost $4,000, yet she still owed more than $1,000 and was paying more than $200 a month to cover the interest, depleting the disability checks that were her only source of income.

Until the Flex Loan, reborrowing or rolling over payday loans was against the law. Tennessee lawmakers first banned reborrowing when they passed the state’s payday lending law in 1997. They reaffirmed that protection in 2011 when they updated that law.

When Tennessee lawmakers passed a 2014 law allowing Flex Loans, they included no such provision.

Instead, the bill’s sponsor, current House Speaker Cameron Sexton, said the loans could be better for borrowers because it required them to make a monthly minimum payment that covered all fees, interest and 3% of the principal. This key provision would ensure that borrowers would always be paying down the principal on the loan.

Thomas and more than a dozen borrowers told the Tennessee Lookout and ProPublica that Advance has encouraged them through emails and notifications to borrow back the value of almost all of the payments they made, tearing a hole in the safety net the law tried to put in place.

All but one of the 14 borrowers who spoke to the newsrooms for this story reported having reborrowed at least once as part of their Advance loan. As with Thomas, Advance made them eligible to borrow more shortly after paying, even though they were often making the minimum payments and almost immediately borrowing the money back to cover the cost of the payment they just made. Advance went on to sue 12 of these borrowers once they stopped being able to afford the loan.

Advance Financial sent ads to several borrowers telling them they were eligible to borrow more. (Obtained by Tennessee Lookout and ProPublica. Highlighted and redacted by ProPublica.)

Andrea Heady, 45, was sued by Advance in Knoxville for over $7,300, despite having paid the company nearly double what she ultimately borrowed. She initially took out $750 through a Flex Loan after the hours at her university job were slashed in June 2020.

“I’ve always sent money home to my mom,” who was taking care of Heady’s sister, she said. “It was COVID. My aunt and uncle were very sick, then they passed away and I just needed money.”

Heady said Advance would send her notifications letting her know she could borrow more. One email appeared as a financial statement, but included in bold and large text was the amount she had available to borrow. The statement did not provide a payment schedule, a new loan amount, the total cost of the loan or how long it would take to pay off making minimum payments, information a lender would have been required to provide if she'd been borrowing on a credit card.

Andrea Heady reborrowed on her Flex Loan over a dozen times after receiving notifications from Advance saying that she could borrow more. (Stacy Kranitz for ProPublica)

Heady reborrowed on her Flex Loan over a dozen times over the next 18 months as Advance increased her credit limit seven times. She stopped paying when her monthly payments of $650 equaled a quarter of her paycheck.

Heady hoped the company would forget about her, but it didn’t. In 2024 Advance sued and won a wage garnishment against her. Ultimately, Heady will end up paying Advance over $14,000 on the $3,850 she borrowed.

David Hill, a 36-year-old from Nashville, started by borrowing $175 from Advance in February 2020. Each month he would repay the full borrowed amount, including interest and fees, and reborrow the principal, often on the same or next day. Over 18 months, he reborrowed almost 80 times.

“COVID happened and I was going through financial trouble,” Hill said. “I would get a check and pay it off. But then I would have to borrow it back to have money.”

David Hill received emails from Advance encouraging him to borrow more money, which he ultimately did almost 80 times. (Stacy Kranitz for ProPublica)

Via email, Advance kept increasing his credit limit and encouraging him to borrow more. “Dear David,” started two of the emails, which contained notes like “good news — you have $645 available.” Hill eventually reached a point where he couldn’t afford the minimum payment, totaling over $400 a month.

He stopped paying and the company sued him in 2023 for over $4,700.

The Lookout and ProPublica sent detailed questions to Cullen Earnest, the senior vice president of public policy at Advance Financial. Earnest repeated what he said in a previous statement, that the company has an A+ rating from the Better Business Bureau. He added that the Tennessee Department of Financial Institutions has received just 91 complaints about flexible credit lenders since 2020, representing less than 0.001% of all new flex loan agreements, and that this data reflects the satisfaction of the vast majority of Advance’s customers.

The Tennessee Lookout and ProPublica previously reported that the company has sued over 110,000 Tennesseeans since it began offering the Flex Loan in 2015, making it one of the largest single plaintiffs in the state. One of the subjects in that story reborrowed on her Flex Loan over a dozen times, turning $4,400 in borrowed cash into more than $12,500 in payments to Advance. The company sued her and won a judgment that led to the garnishment of her wages.

Christopher Peterson, a senior official with the federal Consumer Financial Protection Bureau from 2012 to 2016 and a contributor to multiple reports about payday loans, said the agency sought to limit reborrowing on payday and title loans because the desire to borrow again often indicated that borrowers couldn’t afford the loans and would be paying them off forever. That is especially true of the Flex Loan in Tennessee, he said.

“It’s a nasty loan,” he said.

A Better Loan?

The CFPB began targeting high-interest lenders in 2013, releasing a report on the dangers of payday loans and how reborrowing often led to debt traps.

With the threat of federal regulation looming, Advance Financial Chairman Michael Hodges started working with Tennessee lawmakers to create a new type of high-interest loan that would avoid federal oversight, he told the Nashville Business Journal.

In Tennessee’s state House, Advance and other high-interest lenders turned to Sexton to sponsor the legislation.

Sexton was then the majority whip, a position typically reserved for ambitious state House members hoping to travel up the party’s ranks. Sexton also knew banking. He worked at a local bank as a business development executive, a position he still holds today, along with having a seat on its board.

Cameron Sexton, now the speaker of the Tennessee House, sponsored the Flex Loan legislation in 2014. (John Partipilo/Tennessee Lookout)

Starting in the spring of 2014, Sexton began guiding Flex Loan legislation through Tennessee’s state House committees. On the surface, the bill appeared to be a new type of loan with a 24% interest rate, which would be significantly cheaper than the triple-digit interest on payday and title loans. But the actual cost could be found in the bill’s details, which gave lenders the right to charge a 0.7% daily customary fee, which over a year adds another 255.5%.

Official video recordings from legislative committee hearings show that neither legislators nor Sexton discussed reborrowing or the loan’s interest rate.

When Sexton took to the Tennessee House floor in April 2014, his colleagues showed him deference because of his banking experience, said former Rep. Craig Fitzhugh, a rural West Tennessee Democrat and the minority leader at the time, who sponsored the original payday lending legislation in 1997.

During the hearing, Fitzhugh asked Sexton if he thought the soon-to-be-created Flex Loan was “a step up for consumers” compared to payday and title loans. Sexton said that was a “fair statement.”

When a lawmaker asked about the interest rate, Sexton said it was 190% to 210%, which is lower than the actual rate. But Sexton once again assured lawmakers that the minimum payment would reduce the cost of the loan for consumers.

“When you reduce the principal each and every month, obviously you’re decreasing the amount of interest,” Sexton said from the House floor.

The Flex Loan legislation passed the Tennessee House 83-6, with Fitzhugh abstaining from the vote. Fitzhugh said the high-interest lending landscape in Tennessee has only “gotten worse” over the past decade because of Flex Loans.

Rep. Gloria Johnson, a Knoxville Democrat, said she regrets voting for the Flex Loan legislation and feels like proponents of the legislation misled her.

“I definitely would not vote that way today, and would like to work to fix that massive mistake that’s hurt so many Tennesseans,” Johnson said.

A spokesperson for Sexton did not respond to questions from Tennessee Lookout and ProPublica.

Since passing the Flex Loans bill in 2014, Sexton has received over $105,000 in contributions to his campaign and political action committee from Advance Financial and its affiliated PACs, making them one of his largest contributors.

No Money for Food

Over five years after the law passed, Jeanette Thomas walked into an Advance Financial store three weeks before Christmas 2019 and filled out an application.

Thomas said she listed her income, gave them her debit card number and permission to directly charge her bank account the required monthly minimum payment. A borrower isn’t required to put up any assets, like a car or future paycheck, to get a Flex Loan.

Thomas wound up in a debt trap, borrowing again and again to keep herself afloat. The Consumer Financial Protection Bureau had tried to restrict reborrowing to protect consumers from falling into this kind of hole. (Stacy Kranitz for ProPublica)

Unlike some other borrowers, Advance allowed Thomas to pay monthly, instead of biweekly, because that’s how she received her federal disability benefits. Thomas said she suffered physical abuse for decades that left her with a traumatic brain injury.

The company deposited $400 into her account the same day she walked into the store.

At the time of the loan, Thomas had been trying to build a better relationship with her two sons and three grandchildren. She used the money to purchase gift cards, art supplies and toys. She was happy to be able to give her family something for the holidays.

Thomas’ first minimum payment to Advance was due Dec. 31 and was a manageable $51.78. That December had been cold, and when Thomas’ heat bill came in $50 higher than normal, she started to worry.

Then, just two days after her loan payment, Thomas said an unsolicited email arrived from Advance telling her she was eligible to borrow $206 more. Thomas thought she could afford it. Why would Advance loan her money she couldn’t pay back, she said she thought.

What Thomas did not realize was her first bill had only been for a 13-day payment period, meaning she’d been charged less than two weeks of interest. By taking the additional loan for an entire month, her monthly payment would almost triple to $130 per month.

Over the next two months, the company offered her a lifeline, extending her credit limit enough that she could make her payments with the money she’d just borrowed.

Eventually, Advance stopped increasing her credit limit and her monthly payment had increased to $230 a month, almost a third of her disability check.

Thomas cut her spending to the bone, hoping that a few months of payments would get her out of debt. She turned to friends to help pay for food, and to a local church to cover her utility bill.

Thomas said Advance sent her mailers and emails multiple times a month, offering to let her borrow any of the principal she had paid off. She tried to resist, but inevitably, she would have an unexpected expense, like medical bills from a series of mini strokes.

Thomas found herself in the position the CFPB had warned about when it sought to restrict reborrowing. Former CFPB official Peterson, who’s now a law professor at the University of Utah, helped work on the agency’s 2017 payday regulations. At the time, the agency wrote that consumers who reborrowed would inevitably be forced to choose between making an unaffordable payment on the loan or paying for necessities like food or rent.

By May 2021, Thomas could no longer afford to pay. The company kept her loan open and unpaid for 90 days, allowing the interest and fees to accumulate, nearly doubling the amount due to $1,700. Advance then charged Thomas two times in one week, withdrawing $430, or half of her monthly budget.

“I can remember just lying in my bed, stomach hurting and doubled over in pain because I couldn’t get something to eat,” Thomas said.

Not knowing where to turn for help, Thomas filed a complaint with the Tennessee attorney general’s Division of Consumer Affairs. In her complaint, she wrote that Advance “needs to stop abusing their power.”

“Now I cannot pay my rent,” she said.

The state investigated the case and took no action. By October 2022, Advance noted on one of Thomas’s monthly bills that it had “written off” her loan and closed her account. Unlike the other 110,000 Tennesseans who fell behind in their payments, Advance hasn’t sued Thomas, whose federal benefits are protected from garnishment.

The company also agreed in a letter to the state to “cease all communications” with Thomas, but Advance continues to send bills requesting a minimum payment of $226.49.

Thomas continues to receive bills requesting a minimum payment of $226.49 years after closing her account with Advance Financial. (Obtained by Tennessee Lookout and ProPublica. Highlighted by ProPublica.)

Mollie Simon contributed research.

by Adam Friedman, Tennessee Lookout

This article was produced for ProPublica’s Local Reporting Network in partnership with Tennessee Lookout . Sign up for Dispatches to get stories like this one as soon as they are published.

ProPublica and the Tennessee Lookout are continuing to investigate online sportsbook Action 247 and Harpeth Financial, which owns Flex Loan operator Advance Financial. To tell us about the experience you had with either or both companies, call or text reporter Adam Friedman at 615-249-8509.

Jeanette Thomas had just made her first payment on a loan from payday lender Advance Financial when she said the company emailed her with “good news.” She could borrow $206 more.

The solicitation was a relief to Thomas, a 62-year-old grandmother who had already exhausted the $783 disability check she receives each month since her health conditions render her unable to work.

Over the next few months, Thomas made the required minimum payments on what started in 2019 as a $400 loan to buy Christmas presents. But each time she did so, the company invited her to borrow almost all of the payment back, she said, with emails or letters like “Access Your Cash Today” or “You’re Already Approved.”

“They kept trying to rope me in,” Thomas said.

In the months that followed, the company continued to expand her credit, allowing Thomas to borrow close to $1,600 in total. In the emails and letters that Thomas kept, Advance never stated how much it would cost if she continued to reborrow.

Thomas had read her original loan documents warning that the loan carried a high 279.5% interest rate and would be challenging to pay off. But as the loan balance grew, Thomas came to realize she was trapped. By the spring of 2021, Thomas had paid Advance almost $4,000, yet she still owed more than $1,000 and was paying more than $200 a month to cover the interest, depleting the disability checks that were her only source of income.

Until the Flex Loan, reborrowing or rolling over payday loans was against the law. Tennessee lawmakers first banned reborrowing when they passed the state’s payday lending law in 1997. They reaffirmed that protection in 2011 when they updated that law.

When Tennessee lawmakers passed a 2014 law allowing Flex Loans, they included no such provision.

Instead, the bill’s sponsor, current House Speaker Cameron Sexton, said the loans could be better for borrowers because it required them to make a monthly minimum payment that covered all fees, interest and 3% of the principal. This key provision would ensure that borrowers would always be paying down the principal on the loan.

Thomas and more than a dozen borrowers told the Tennessee Lookout and ProPublica that Advance has encouraged them through emails and notifications to borrow back the value of almost all of the payments they made, tearing a hole in the safety net the law tried to put in place.

All but one of the 14 borrowers who spoke to the newsrooms for this story reported having reborrowed at least once as part of their Advance loan. As with Thomas, Advance made them eligible to borrow more shortly after paying, even though they were often making the minimum payments and almost immediately borrowing the money back to cover the cost of the payment they just made. Advance went on to sue 12 of these borrowers once they stopped being able to afford the loan.

Advance Financial sent ads to several borrowers telling them they were eligible to borrow more. (Obtained by Tennessee Lookout and ProPublica. Highlighted and redacted by ProPublica.)

Andrea Heady, 45, was sued by Advance in Knoxville for over $7,300, despite having paid the company nearly double what she ultimately borrowed. She initially took out $750 through a Flex Loan after the hours at her university job were slashed in June 2020.

“I’ve always sent money home to my mom,” who was taking care of Heady’s sister, she said. “It was COVID. My aunt and uncle were very sick, then they passed away and I just needed money.”

Heady said Advance would send her notifications letting her know she could borrow more. One email appeared as a financial statement, but included in bold and large text was the amount she had available to borrow. The statement did not provide a payment schedule, a new loan amount, the total cost of the loan or how long it would take to pay off making minimum payments, information a lender would have been required to provide if she'd been borrowing on a credit card.

Andrea Heady reborrowed on her Flex Loan over a dozen times after receiving notifications from Advance saying that she could borrow more. (Stacy Kranitz for ProPublica)

Heady reborrowed on her Flex Loan over a dozen times over the next 18 months as Advance increased her credit limit seven times. She stopped paying when her monthly payments of $650 equaled a quarter of her paycheck.

Heady hoped the company would forget about her, but it didn’t. In 2024 Advance sued and won a wage garnishment against her. Ultimately, Heady will end up paying Advance over $14,000 on the $3,850 she borrowed.

David Hill, a 36-year-old from Nashville, started by borrowing $175 from Advance in February 2020. Each month he would repay the full borrowed amount, including interest and fees, and reborrow the principal, often on the same or next day. Over 18 months, he reborrowed almost 80 times.

“COVID happened and I was going through financial trouble,” Hill said. “I would get a check and pay it off. But then I would have to borrow it back to have money.”

David Hill received emails from Advance encouraging him to borrow more money, which he ultimately did almost 80 times. (Stacy Kranitz for ProPublica)

Via email, Advance kept increasing his credit limit and encouraging him to borrow more. “Dear David,” started two of the emails, which contained notes like “good news — you have $645 available.” Hill eventually reached a point where he couldn’t afford the minimum payment, totaling over $400 a month.

He stopped paying and the company sued him in 2023 for over $4,700.

The Lookout and ProPublica sent detailed questions to Cullen Earnest, the senior vice president of public policy at Advance Financial. Earnest repeated what he said in a previous statement, that the company has an A+ rating from the Better Business Bureau. He added that the Tennessee Department of Financial Institutions has received just 91 complaints about flexible credit lenders since 2020, representing less than 0.001% of all new flex loan agreements, and that this data reflects the satisfaction of the vast majority of Advance’s customers.

The Tennessee Lookout and ProPublica previously reported that the company has sued over 110,000 Tennesseeans since it began offering the Flex Loan in 2015, making it one of the largest single plaintiffs in the state. One of the subjects in that story reborrowed on her Flex Loan over a dozen times, turning $4,400 in borrowed cash into more than $12,500 in payments to Advance. The company sued her and won a judgment that led to the garnishment of her wages.

Christopher Peterson, a senior official with the federal Consumer Financial Protection Bureau from 2012 to 2016 and a contributor to multiple reports about payday loans, said the agency sought to limit reborrowing on payday and title loans because the desire to borrow again often indicated that borrowers couldn’t afford the loans and would be paying them off forever. That is especially true of the Flex Loan in Tennessee, he said.

“It’s a nasty loan,” he said.

A Better Loan?

The CFPB began targeting high-interest lenders in 2013, releasing a report on the dangers of payday loans and how reborrowing often led to debt traps.

With the threat of federal regulation looming, Advance Financial Chairman Michael Hodges started working with Tennessee lawmakers to create a new type of high-interest loan that would avoid federal oversight, he told the Nashville Business Journal.

In Tennessee’s state House, Advance and other high-interest lenders turned to Sexton to sponsor the legislation.

Sexton was then the majority whip, a position typically reserved for ambitious state House members hoping to travel up the party’s ranks. Sexton also knew banking. He worked at a local bank as a business development executive, a position he still holds today, along with having a seat on its board.

Cameron Sexton, now the speaker of the Tennessee House, sponsored the Flex Loan legislation in 2014. (John Partipilo/Tennessee Lookout)

Starting in the spring of 2014, Sexton began guiding Flex Loan legislation through Tennessee’s state House committees. On the surface, the bill appeared to be a new type of loan with a 24% interest rate, which would be significantly cheaper than the triple-digit interest on payday and title loans. But the actual cost could be found in the bill’s details, which gave lenders the right to charge a 0.7% daily customary fee, which over a year adds another 255.5%.

Official video recordings from legislative committee hearings show that neither legislators nor Sexton discussed reborrowing or the loan’s interest rate.

When Sexton took to the Tennessee House floor in April 2014, his colleagues showed him deference because of his banking experience, said former Rep. Craig Fitzhugh, a rural West Tennessee Democrat and the minority leader at the time, who sponsored the original payday lending legislation in 1997.

During the hearing, Fitzhugh asked Sexton if he thought the soon-to-be-created Flex Loan was “a step up for consumers” compared to payday and title loans. Sexton said that was a “fair statement.”

When a lawmaker asked about the interest rate, Sexton said it was 190% to 210%, which is lower than the actual rate. But Sexton once again assured lawmakers that the minimum payment would reduce the cost of the loan for consumers.

“When you reduce the principal each and every month, obviously you’re decreasing the amount of interest,” Sexton said from the House floor.

The Flex Loan legislation passed the Tennessee House 83-6, with Fitzhugh abstaining from the vote. Fitzhugh said the high-interest lending landscape in Tennessee has only “gotten worse” over the past decade because of Flex Loans.

Rep. Gloria Johnson, a Knoxville Democrat, said she regrets voting for the Flex Loan legislation and feels like proponents of the legislation misled her.

“I definitely would not vote that way today, and would like to work to fix that massive mistake that’s hurt so many Tennesseans,” Johnson said.

A spokesperson for Sexton did not respond to questions from Tennessee Lookout and ProPublica.

Since passing the Flex Loans bill in 2014, Sexton has received over $105,000 in contributions to his campaign and political action committee from Advance Financial and its affiliated PACs, making them one of his largest contributors.

No Money for Food

Over five years after the law passed, Jeanette Thomas walked into an Advance Financial store three weeks before Christmas 2019 and filled out an application.

Thomas said she listed her income, gave them her debit card number and permission to directly charge her bank account the required monthly minimum payment. A borrower isn’t required to put up any assets, like a car or future paycheck, to get a Flex Loan.

Thomas wound up in a debt trap, borrowing again and again to keep herself afloat. The Consumer Financial Protection Bureau had tried to restrict reborrowing to protect consumers from falling into this kind of hole. (Stacy Kranitz for ProPublica)

Unlike some other borrowers, Advance allowed Thomas to pay monthly, instead of biweekly, because that’s how she received her federal disability benefits. Thomas said she suffered physical abuse for decades that left her with a traumatic brain injury.

The company deposited $400 into her account the same day she walked into the store.

At the time of the loan, Thomas had been trying to build a better relationship with her two sons and three grandchildren. She used the money to purchase gift cards, art supplies and toys. She was happy to be able to give her family something for the holidays.

Thomas’ first minimum payment to Advance was due Dec. 31 and was a manageable $51.78. That December had been cold, and when Thomas’ heat bill came in $50 higher than normal, she started to worry.

Then, just two days after her loan payment, Thomas said an unsolicited email arrived from Advance telling her she was eligible to borrow $206 more. Thomas thought she could afford it. Why would Advance loan her money she couldn’t pay back, she said she thought.

What Thomas did not realize was her first bill had only been for a 13-day payment period, meaning she’d been charged less than two weeks of interest. By taking the additional loan for an entire month, her monthly payment would almost triple to $130 per month.

Over the next two months, the company offered her a lifeline, extending her credit limit enough that she could make her payments with the money she’d just borrowed.

Eventually, Advance stopped increasing her credit limit and her monthly payment had increased to $230 a month, almost a third of her disability check.

Thomas cut her spending to the bone, hoping that a few months of payments would get her out of debt. She turned to friends to help pay for food, and to a local church to cover her utility bill.

Thomas said Advance sent her mailers and emails multiple times a month, offering to let her borrow any of the principal she had paid off. She tried to resist, but inevitably, she would have an unexpected expense, like medical bills from a series of mini strokes.

Thomas found herself in the position the CFPB had warned about when it sought to restrict reborrowing. Former CFPB official Peterson, who’s now a law professor at the University of Utah, helped work on the agency’s 2017 payday regulations. At the time, the agency wrote that consumers who reborrowed would inevitably be forced to choose between making an unaffordable payment on the loan or paying for necessities like food or rent.

By May 2021, Thomas could no longer afford to pay. The company kept her loan open and unpaid for 90 days, allowing the interest and fees to accumulate, nearly doubling the amount due to $1,700. Advance then charged Thomas two times in one week, withdrawing $430, or half of her monthly budget.

“I can remember just lying in my bed, stomach hurting and doubled over in pain because I couldn’t get something to eat,” Thomas said.

Not knowing where to turn for help, Thomas filed a complaint with the Tennessee attorney general’s Division of Consumer Affairs. In her complaint, she wrote that Advance “needs to stop abusing their power.”

“Now I cannot pay my rent,” she said.

The state investigated the case and took no action. By October 2022, Advance noted on one of Thomas’s monthly bills that it had “written off” her loan and closed her account. Unlike the other 110,000 Tennesseans who fell behind in their payments, Advance hasn’t sued Thomas, whose federal benefits are protected from garnishment.

The company also agreed in a letter to the state to “cease all communications” with Thomas, but Advance continues to send bills requesting a minimum payment of $226.49.

Thomas continues to receive bills requesting a minimum payment of $226.49 years after closing her account with Advance Financial. (Obtained by Tennessee Lookout and ProPublica. Highlighted by ProPublica.)

Mollie Simon contributed research.

Correction

June 27, 2025: A call for tips at the top of this story originally misstated the extent of the connection between two companies. It is not clear if Harpeth Financial owns Action 247. The nature of the ownership of Action 247, which shares executives and addresses with Advance Financial, is not made public in Tennessee public documents, and leadership in all three entities refused to answer questions about who in fact owns the sportsbook.

by Tim Golden

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up to receive our biggest stories as soon as they’re published.

The Trump administration has launched a major reorganization of the U.S. fight against drug traffickers and other transnational criminal groups, setting out a strategy that would give new authority to the Department of Homeland Security and deepen the influence of the White House.

The administration’s plans, described in internal documents and by government officials, would reduce federal prosecutors’ control over investigations, shifting key decisions to a network of task forces jointly led by the FBI and Homeland Security Investigations, the primary investigative arm of DHS.

Officials said the plan to bring law enforcement agencies together in the new Homeland Security Task Forces has been driven primarily by President Donald Trump’s homeland security adviser, Stephen Miller, who is closely overseeing the project’s implementation.

Current and former officials said the proposed reorganization would make it easier for senior officials like Miller to disregard norms that have long walled off the White House from active criminal investigations.

“To the administration’s credit, they are trying to break down barriers that are hard to break down,” said Adam W. Cohen, a career Justice Department attorney who was fired in March as head of the office that coordinates organized crime investigations involving often-competing federal agencies. “But you won’t have neutral prosecutors weighing the facts and making decisions about who to investigate,” he added of the task force plan. “The White House will be able to decide.”

The proposed reorganization would elevate the stature and influence of Homeland Security Investigations and Immigration and Customs Enforcement among law enforcement agencies, while continuing to push other agencies to pursue immigration-related crimes.

The task forces would at least formally subordinate the Drug Enforcement Administration to HSI and the FBI after half a century in which the DEA has been the government’s lead agency for narcotics enforcement.

Trump’s directive to establish the new task forces was included in an Inauguration Day executive order, “Protecting the American People Against Invasion,” which focused on immigration.

The new task forces will seek “to end the presence of criminal cartels, foreign gangs and transnational criminal organizations throughout the United States,” the order states. They will also aim to “end the scourge of human smuggling and trafficking, with a particular focus on such offenses involving children.”

Since that order was issued, the administration has proceeded with considerable secrecy. Some Justice Department officials who work on organized crime have been excluded from planning meetings, as have leaders of the DEA, people familiar with the process said.

A White House spokesperson, Abigail Jackson, did not comment on Miller’s role in directing the task force project or the secrecy of the process. “While the Biden Administration opened the border and looked the other way while Americans were put at risk,” she said, “the Trump Administration is taking action to dismantle cross-border human smuggling and trafficking and ensure the use of all available law enforcement tools to faithfully execute immigration laws and to Make America Safe Again.”

The task force project was described in interviews with current and former officials who have been briefed on it. ProPublica also reviewed documents about the implementation of the task forces, including a briefing paper prepared for Cabinet-level officials on the president’s Homeland Security Council.

The Homeland Security Task Forces will take a “coordinated, whole-of-government approach” to combatting transnational criminal groups, the paper states. They will also draw support from state and local police forces and U.S. intelligence agencies.

Until now, the government has coordinated that same work through a Justice Department program established by President Ronald Reagan, the Organized Crime Drug Enforcement Task Forces — which the Trump administration is shutting down.

Known by the ungainly acronym OCDETF (pronounced “oh-suh-def”), the $550-million program is above all an incentive system: To receive funding, different agencies (including the DEA, the FBI and HSI) must come together to propose investigations, which are then vetted and approved by prosecutor-led OCDETF teams.

The agents are required to include a financial investigation of the criminal activity, typically with help from the Treasury Department, and they often recruit support from state and local police. The OCDETF intelligence center, located in the northern Virginia suburbs, manages the only federal database in which different law-enforcement agencies share their raw investigative files.

While officials describe OCDETF as an imperfect structure, they also say it has become a crucial means of law enforcement cooperation. Its mandate was expanded under the Biden and first Trump administrations to encompass all types of organized crime, not just drug trafficking.

As recently as a few months ago, the deputy attorney general, Todd Blanche, declared that OCDETF would play a central role in stopping illegal immigration, drug trafficking and street gangs. He even suggested that it investigate the governments of so-called sanctuary cities for obstructing immigration enforcement.

But just weeks after Blanche’s announcement, the administration informed OCDETF officials their operations would be shut down by the end of the fiscal year in September. In a letter to Democratic senators on June 23, the Justice Department confirmed that the Homeland Security Task Forces would absorb OCDETF’s “mission and resources” but did not explain how the new structure would take charge of the roughly 5,000 investigations OCDETF now oversees.

“These were not broken programs,” said a former Homeland Security official who, like others, would only discuss the administration’s plans on condition of anonymity. “If you wanted to build them out and make sure that the immigration side of things got more importance, you could have done that. You did not have to build a new wheel.”

Officials also cited other concerns about the administration’s plan, including whether the new task force system will incorporate some version of the elaborate safeguards OCDETF has used to persuade law enforcement agencies to share their case files in its intelligence database. Under those rules, OCDETF analysts must obtain permission from the agency that provided the records before sharing them with others.

Many officials said they worried that the new task forces seem to be abandoning OCDETF’s incentive structure. OCDETF funds are conditioned on multiple agencies working together on important cases; officials said the monies will now be distributed to law enforcement agencies directly and without the requirement that they collaborate.

“They are taking away a lot of the organization that the government uses to attack organized crime,” a Justice Department official said. “If you want to improve something, great, but they don’t even seem to have a vision for how this is going to work. There are no specifics.”

The Homeland Security Task Forces will try to enforce interagency cooperation by a “supremacy clause,” that gives task force leaders the right to pursue the cases they want and shut down others that might overlap.

An excerpt from a planning document drafted for the president’s Homeland Security Council describes how the new Homeland Security Task Forces would take charge of major organized crime investigations. (Text reproduced from a document obtained by ProPublica.)

The clause will require “that any new or existing investigative and/or intelligence initiatives” targeting transnational criminal organizations “must be presented to the HSTF with a right of first refusal,” according to the briefing paper reviewed by ProPublica.

“Further,” it adds, “the supremacy clause prohibits parallel or competitive activities by member agencies, effectively eliminating duplicative structures such as stand-alone task forces or specialized units, to include narcotics, financial, or others.”

Several senior law enforcement officials said that approach would curtail the independence that investigators need to follow good leads when they see them; newer and less-visible criminal organizations would be more likely to escape scrutiny.

In recent years, those officials noted, both Democratic and Republican administrations have tried at times to short-circuit competition for big cases among law enforcement agencies and judicial districts. But that has often led to as many problems as it has solved, they said.

One notable example, several officials said, was a move by the Biden administration’s DEA administrator, Anne Milgram, to limit her agency’s cooperation with FBI and HSI investigations into fentanyl smuggling by Los Chapitos, the mafia led by sons of the Mexican drug boss Joaquín Guzmán Loera, known as “El Chapo.”

Although the DEA eventually indicted the Chapitos’ leaders in New York, officials from other agencies complained that Milgram’s approach wasted months of work and delayed the indictments of some traffickers. Later, when the FBI secretly arranged the surrender of one of the sons, Joaquín Guzmán López, DEA officials were not told about the operation until it was underway, officials said. (Guzmán López initially pleaded not guilty but is believed to be negotiating with the government. Milgram did not respond to messages asking for comment.)

As to the benefits of competition, prosecutors and agents cite the case of El Chapo himself. Before he was extradited to the United States in January 2017, Guzmán Loera had been indicted by seven U.S. attorneys’ offices, reflecting yearslong investigations by the DEA, the FBI and HSI, among others. In the agreement that the Obama Justice Department brokered, three offices led the prosecution, which used the best evidence gathered by the others.

Under the new structure of the Homeland Security Task Forces, several officials said, federal prosecutors will still generally decide whether to bring charges against criminal groups, but they will have less of a role in determining which criminals to investigate.

Regional and national task forces will be overseen by “executive committees” that are expected to include political appointees, officials said. The committees will guide broader decisions about which criminal groups to target, they said.

“The HSTF model unleashes the full might of our federal law enforcement agencies and federal prosecutors to deliver justice for the American people, whose plight Biden and Garland ignored for four years,” a Justice Department spokesperson said, referring to former Attorney General Merrick Garland. “Any suggestion that the Department is abandoning its mission of cracking down on violent organized crime is unequivocally false.”

During Trump’s first term, veteran officials of the FBI, DEA and HSI all complained that the administration’s overarching focus on immigration diverted agents from more urgent national security threats, including the fentanyl epidemic. Now, as hundreds more agents have been dispatched to immigration enforcement, those officials worry that the new task forces will focus on rounding up undocumented immigrants who have any sort of criminal record at the cost of more significant organized crime investigations.

The first task forces to begin operating under the new model have not assuaged such concerns. In late May, Attorney General Pam Bondi and Virginia Gov. Glenn Youngkin announced that the Virginia Homeland Security Task Force had arrested more than 1,000 “criminal illegal aliens” in just two months, but the authorities have provided almost no details connecting those suspects to transnational criminal organizations.

Agents of Homeland Security Investigations and the FBI, part of the new Gulf of America Homeland Security Task Force, arrested dozens of undocumented immigrants in connection with a cockfighting ring in northern Alabama in mid-June. (Via HSI Atlanta’s X profile)

On June 16, the Gulf of America Homeland Security Task Force, a new unit based in Alabama and Georgia, announced the arrests of 60 people, nearly all of them undocumented immigrants, at a cockfighting event in northern Alabama. Although cockfighting is typically subject to a maximum fine of $50 in the state, a senior HSI official claimed the suspects were “tied to a broader network of serious crimes, including illegal gambling, drug trafficking and violent offenses.” Once again, however, no details were provided.

It is unclear how widely the new task force rules might be applied. While OCDETF funds the salaries of more than a thousand federal agents and hundreds of prosecutors, thousands more DEA, FBI and HSI agents work on other narcotics and organized crime cases.

In early June, five Democratic senators wrote to Bondi questioning the decision to dismantle OCDETF. That decision was first reported by Bloomberg News.

“As the Department’s website notes, OCDETF ‘is the centerpiece of the Attorney General’s strategy to combat transnational-organized crime and to reduce the availability of illicit narcotics in the nation,’” the senators wrote.

In a June 23 response, a Justice Department official, Daniel Boatright, wrote that OCDETF’s operations would be taken over by the new task forces and managed by the office of the Deputy Attorney General. But Boatright did not clarify what role federal prosecutors would play in the new system.

“A lot of good, smart people are trying to make this work,” said one former senior official. “But without having prosecutors drive the process, it is going to completely fracture how we do things.”

Veteran officials at the DEA — who appear to have had almost no say in the creation of the new task forces— are said to be even more concerned. Already the DEA has been fighting pressure to provide access to investigative files without assurances that the safeguards of the OCDETF intelligence center will remain in place, officials said.

“DEA has not even been invited to any of the task force meetings,” one former senior official said. “It is mind-boggling. They’re just getting orders saying, ‘This is what Stephen Miller wants and you’ve got to give it to us.’”

by Cezary Podkul

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Brian Maloney Jr. was flummoxed when he was served with a lawsuit against his family’s business, Middlesex Truck and Coach, in January. Maloney and his father, also named Brian, run the operation, located in Boston, which boasts that it can repair anything “from two axles to ten.” A burly man in his mid-50s who wears short-sleeved polo shirts emblazoned with the company name, Maloney Jr. has been around his dad’s shop since he was 8. The garage briefly surfaced in the media in 2012 when then-presidential candidate Mitt Romney made a campaign stop there and the Boston Herald featured Maloney Sr. talking about how he had built the business from nothing in a neighborhood he described as having been a “war zone.”

Now Middlesex was being sued by a New Jersey man who claimed he had been defrauded of $133,565 in a cryptocurrency scheme. The suit claimed Middlesex “controlled and maintained” a bank account at Chase that had been used to collect the fraudulent payment. The purported victim wanted his money back.

None of this made any sense to Maloney Jr. His company did not have an account at Chase, and he barely knew what crypto was. “For God’s sake, we fix trucks and still have AOL,” he would later say.

It was only after Maloney went to Chase to investigate that he was able to piece together at least part of the explanation. It turned out that Chase had allowed an unknown individual, who applied online with no identification, to open an account under Middlesex’s name, according to information Chase provided to Maloney. The account was then used to solicit hundreds of thousands of dollars from fraud victims, including the $133,565 from the man who was now trying to reclaim his funds.

Middlesex’s experience, as bizarre as it seems, is part of a global problem that plagues the banking industry. The account falsely opened in Middlesex’s name, and many others like it, are way stations in a sophisticated multistep money laundering process that transports cash from U.S. scam victims to crime syndicate bosses in Asia.

There’s been an explosion in international online fraud in recent years. Particularly widespread are “pig-butchering” schemes, as ProPublica reported in 2022. The macabre name derives from the process of methodically “fattening” victims by getting them to contribute more and more money to an investment scheme that seems to be succeeding, before eventually “butchering” them by taking all their deposits. Often operated by Chinese gangs out of prison-like compounds in Cambodia, Laos and Myanmar, pig-butchering in that region has reached a staggering $44 billion per year, according to a report by the United States Institute of Peace, and it likely involves millions of victims worldwide. The report called the Southeast Asian scam syndicates the “most powerful criminal network of the modern era.”

A huge portion of such fraud is transacted in cryptocurrency. But given that the typical consumer doesn’t own crypto, many scams unfold with a victim tapping a traditional bank account to wire dollars to swindlers, who receive the funds in their own accounts, then convert them into crypto to move across borders. Later in the process, the scammers will typically transfer their crypto back into standard currency.

Bank accounts are so crucial to this process that a thriving international black market has developed to rent accounts for fraud. That, it seems, is how a Chase account in the name of Middlesex ended up as a repository for the proceeds of pig-butchering.

The huge demand for accounts used for misbehavior gives banks a crucial, and not always welcome, role as gatekeepers — a responsibility required by U.S. law — to prevent criminals from opening accounts or engaging in money laundering. Yet from the U.S. to Singapore, Australia and Hong Kong, banks have consistently failed at that responsibility, according to experts who have investigated money laundering, as well as reviews of fraudulent account details shared by victims and court cases reviewed by ProPublica. The list of financial institutions whose accounts pig-butchering scammers have made use of includes global behemoths like Bank of America, Chase, Citibank, HSBC and Wells Fargo and many other U.S. and foreign lenders.

The banks said in statements to ProPublica that they make extensive efforts to fight fraud by investing in systems to detect suspicious activity and to report it to authorities (read the banks’ statements here). The American Bankers Association, which represents the industry, acknowledged that “with more than 140 million bank accounts opened every year bad actors can sometimes get through despite determined and ongoing efforts to stop them.” But the group said other industries like telecommunications providers and social media platforms need to do more to fight fraud because there’s only so much that financial institutions can do.

Pig-butchering scams present some unique challenges for banks. Among other things, a customer in thrall to a fraudster will sometimes foil their own bank’s attempts to prevent them from sending money to a criminal. And foreign-based scammers have become adept at finding middlemen in the U.S. to exploit the banking system. “Cyber-enabled fraud operations in Southeast Asia have taken on industrial proportions,” according to an October report by the United Nations Office on Drugs and Crime. John Wojcik, one of the authors of the report, told ProPublica, “Banks have never been targeted at this scale, in these ways.”

It doesn’t help that there are “no real standards as to what a bank has to do for detecting fraud or money laundering,” said Lester Joseph, a financial compliance consultant who used to oversee money laundering cases at the Department of Justice and later worked at Wells Fargo. The main law governing U.S. compliance regimes, the Bank Secrecy Act, requires financial institutions to maintain programs to know their customers and to detect and report suspicious activity to the government. That might mean noticing, say, that a newly opened account is suddenly receiving and sending hundreds of thousands of dollars of wire payments each month.

But it is up to banks to design those programs. The regulations don’t even require that the programs be effective. That gives banks wide flexibility on how much due diligence and monitoring to do — or not do. More scrutiny upfront means slowing down business and adding costs. Many banks don’t ask questions until it’s too late.

If you’re a criminal looking to obtain a bank account with no pesky formalities, it’ll take you only minutes to find one on the messaging app Telegram. Chinese forums there feature ads for “cars” or “fleets” — bank accounts or other online payment platforms that can be used to collect stolen funds. (The vehicle metaphor stems from the fact that in Chinese slang, money laundering operations are known as “motorcades.”) One Telegram ad offered accounts at PNC, Chase, Citi and Bank of America and boasted of “firsthand” control of the accounts: “People can go to the bank to transfer money,” the ad said.

An ad on Telegram, since taken down, offered bank accounts for “precision chat” — slang for pig-butchering — at Bank of America, Chase, Citibank and PNC. Under “advantages,” the ad listed “firsthand [control], people can go to the bank to transfer money … not a virtual account.” (Screenshot by Cezary Podkul)

Another Telegram channel listed various flavors of pig-butchering scams for which it provided bank accounts. The group, named KG Pay, boasted of accepting wire transfers, making withdrawals from U.S. banks and converting deposits into crypto to transfer them to scammers. KG offered to handle deposits of up to $1 million in accounts that imitate “normal business transactions.” To avoid suspicion, KG said, it sliced big amounts into smaller batches. If banks grew suspicious and froze one of its accounts, KG said, it had agents ready to call customer service to persuade them to lift the freeze. For smaller transfers, a video tutorial inside the channel showed how easy it was to send cash using the Chase app. (Telegram deleted the KG Pay channel after ProPublica asked about it. In a statement, Telegram said it “expressly forbids money laundering, scams and fraud and such content is immediately removed whenever discovered. Every month, over 10 million accounts, groups and channels are removed for breaching Telegram’s terms of service — including rules that prohibit money laundering and fraud.”)

Demand for money laundering is huge in Sihanoukville, a seedy gambling hub in Cambodia notorious for hosting massive scam operations. In some hotels above casinos there, blocks of guest rooms have been converted into offices where workers help fraudsters find motorcades to move illicit funds, according to a 2024 report by a doctoral anthropology student.

A walled complex in Sihanoukville, Cambodia, known to have housed scamming operations (Cindy Liu for ProPublica)

Inside those offices, the tap of keyboards and buzz of Telegram notifications suggested a trading floor at a stock exchange. But the work of the people interviewed by Yanyu Chen, the doctoral student, was very different. The workers, all Chinese and speaking on the condition of anonymity, were candid. They said they were tasked with matching cyberscam gangs with providers who could supply them with bank accounts to collect and move proceeds from fraud victims. In Telegram chat groups, the workers could see bank account suppliers and swindlers in need of accounts and would match the two and keep track of trades and commissions.

The business has become so mainstream that even one of Cambodia’s most prominent financial services firms, Huione Group, runs an online marketplace that allegedly facilitates such transactions. Its Telegram channels, including the one that included the aforementioned ad offering “firsthand” control of U.S. bank accounts, have helped launder funds for pig-butchering scams as well as heists linked to North Korea, according to the U.S. Treasury’s Financial Crimes Enforcement Network. (Huione said in a statement that it is working to prevent abuse of its services and is “fully committed to collaborating with the U.S. Treasury Department to address expeditiously any and all concerns.”)

The workers interviewed by Chen were unperturbed about enabling fraud. One described the work as boring, little more than copying and pasting bank account info between scammers and motorcades. Another worker told her that he viewed himself as “solving a very old problem of getting into the banking system people who have long been shut out of it.”

The fraud that ensnared Middlesex Truck and Coach as a tangential victim covered thousands of miles via electronic byways. By all appearances, it emanated from Cambodia, then reached New Jersey, where a mark was persuaded to wire a total of $716,000 to accounts tied to purported businesses in Boston, New York, California, Hong Kong and elsewhere. All but a few appeared to have been incorporated by Chinese individuals, sometimes just days before their accounts started accepting large sums.

The fleecing of Kevin, who ProPublica agreed to identify by first name only, was a textbook example of pig butchering. Kevin had reached the stage in life when he wanted to ease his workload after a varied career as a financial planner, small-business owner and fitness instructor. Just before Christmas 2022, someone purporting to be a San Diego woman named Viktoria Zara friended Kevin on Facebook. She soon introduced him to a sleek crypto trading website called 3A on which she claimed to have made $700,000 on bitcoin futures. (Facebook deactivated Zara’s profile after ProPublica inquired about it, and a spokesperson said the social media company has “detected and disrupted over seven million accounts associated with scam centers” in Asia and the Middle East since the start of 2024.)

Kevin acknowledges he was seduced by the thrall of easy money. “Something came over me,” he said. Kevin accepted Zara’s offer to teach him how to trade and, within a few weeks, he was routinely wiring tens of thousands of dollars to various bank accounts to fund his trading.

The accounts were not registered to 3A. They were listed under a variety of companies he’d never heard of, such as Guangda Logistics and Danco Global.

Kevin found this odd. But Zara, his supposed friend, told him that was just how 3A operated, and Kevin felt safe wiring funds to accounts at Chase because of its size and reputation. Every time he did so, the sum showed up in his online 3A portal, making him think the transactions were real. Better yet, his investments had apparently soared; his account balance now read $1.4 million.

An excerpt from Kevin’s chat log with the purported 3A trading site shows how the scammers, claiming to be customer service reps, directed him to wire funds to companies other than 3A with accounts at Chase. (Courtesy of Kevin. Redacted by ProPublica.)

Like many a pig-butchering victim, Kevin realized something was off only when he went to withdraw his profits and 3A demanded that he first pay a “tax” of almost $134,000. Kevin knew from his financial planning days that wasn’t how things worked. But he set aside his doubts and went to his bank late one afternoon in April 2023 to wire the tax payment. He’d been given a fresh Chase account to send funds to and pressured to wire money within two hours.

This time, his money was addressed to Middlesex Truck and Coach. Kevin was so under the sway of his scammers at that point that he did not question the money’s destination. Nor did the teller at the TD Bank branch he went to. (TD declined to comment on Kevin’s case but said it trains employees to challenge customers when transactions seem suspicious and to warn them never to wire funds to people they do not know.)

As soon as Kevin got home, panic set in: 3A told him the Chase account to which he’d just wired $134,000 was frozen and that his tax payment would not go through. He would need to send another $134,000 to a different account. Confused, Kevin went back to TD first thing the next day and asked the teller to reverse the wire. Over the next two weeks, Kevin said, his bankers at TD called Chase three times but never got a response. (Chase did not answer ProPublica’s questions about Kevin’s efforts to recall his wire but said the wire recall process is challenging and rarely succeeds.)

It is possible to reverse a wire transfer if customers inform their banks quickly, before the transaction has been completed, according to lawyers and experts. But banks have no obligation to reverse a transfer even when a customer reports potential fraud. “It’s really up to the receiving institution if they release the funds and how they go after the customer on their end,” said Saskia Parnell, a banking industry veteran who now volunteers for an anti-scam group called Operation Shamrock.

As Kevin agonized, the 3A customer service reps dangled a solution: Just wire the funds again and unlock your $1.4 million. He feared TD wouldn’t let him send the wire again, so he switched to PNC Bank and sent a fresh $134,000 wire to another recipient at Cathay Bank in California. That yielded yet another tale about a purported government roadblock and the demand for yet another payment.

Kevin wasn’t thinking clearly. His son, who had struggled with substance abuse, had suddenly died of a fentanyl overdose. Kevin was overwhelmed with grief. He agreed to make another payment.

By June 2023, even a call from PNC’s fraud department declining his outgoing wire could not dissuade him. It was the only instance, out of the 11 times he attempted to wire money to scammers, that a bank stopped the transaction, according to Kevin, who did not have a history of making wire payments before. (PNC said in a statement that “we believe we took appropriate action.”)

It made no difference. Kevin’s mind was so clouded that he instead opened a new account at Wells Fargo. The switch illustrated another challenge: Even if one bank succeeds in preventing fraud, criminals can still win if another bank isn’t as diligent. (Wells Fargo said it invests hundreds of millions of dollars a year to fight scams).

After wiring $150,000 from Wells Fargo to two Chinese entities listed at a Singaporean bank, Kevin waited to receive his trading proceeds. But when all that resulted was another request that he wire money — $40,000 this time — Kevin finally grasped reality. He was now without a son, and his finances lay in ruins. “The whole world was coming to an end,” he recalled.

Kevin had preserved enough savings to hire a private investigator, John Powers of Hudson Intelligence, to follow the financial trail. Powers found a litany of red flags among the entities that had gotten bank accounts and received Kevin’s funds. Some of the businesses gave phony addresses, such as a vacant home. Another was registered to a one-bedroom apartment in Los Angeles that was also listed as the headquarters of a dozen other businesses set up since 2022 by different Chinese individuals. Contact info was scarce; official emails for two companies included the temporary email domain “netsmail.us,” which doesn’t connect to a functioning website. All of these ersatz businesses had accounts at Chase, Cathay or Singapore’s DBS Bank.

Chase said that it has policies to identify and verify the identities of its customers, and that it continually evaluates and enhances them. Cathay said it also reviews its systems and policies to detect and prevent fraudulent activity. DBS did not respond to requests for comment.

Another clue indicated that the banks had been doing business with a larger criminal enterprise. Two of the companies Kevin sent funds to, Guangda Logistics (which lists no contact information) and Danco Global (which did not respond to ProPublica’s request for comment), showed up on a list of more than six dozen shell entities that had been used to defraud Americans of nearly $60 million. The information was uncovered in an investigation by the U.S. Secret Service into KG Pay, one of the money laundering groups that was on Telegram.

Kevin acknowledges he was seduced by the thrall of easy money. “Something came over me,” he said. Kevin ultimately wired a total of $716,000 to scammers’ accounts at Chase and other banks. (Christopher López for ProPublica)

The case of the man behind KG Pay sheds further light on how motorcades use U.S. banks. Daren Li, a Chinese national in his early 40s, went by the alias KG Perfect. Based in Cambodia, he directed the movement of large sums of pig-butchering proceeds from the U.S. to overseas. Li, who was arrested in April 2024 at the airport in Atlanta, pleaded guilty in November to conspiracy to commit money laundering. He admitted that at least $73.6 million of victim funds were deposited into bank accounts he and his co-conspirators controlled. Li, who is in federal detention awaiting sentencing, could not be reached for comment through his lawyer. Seven other people have pleaded guilty to conspiring with Li.

KG exploited a weakness in the U.S. banking system: Banks are reluctant to share account information, even after they’ve identified suspicious activity. A law enacted in the wake of the Sept. 11, 2001, attacks gave banks a reprieve from secrecy rules if they alert one another to potential terrorism or money laundering activities. But the information sharing is voluntary and “banks are not communicating with each other,” according to Matt O’Neill, who led many money laundering investigations for the U.S. Secret Service during his 25 years there. “Fraudsters know it and fraudsters are clearly making hundreds of millions or billions of dollars off of this glaring gap in the system,” said O’Neill, who now runs 5OH Consulting.

One of the most prolific cogs in Li’s motorcade, according to civil and criminal cases, was a Chinese national named Hailong Zhu. He entered the U.S. on a tourist visa around 2019 and then stayed, working odd jobs in construction and at a restaurant. In 2022, Zhu was recruited to help Li’s other operatives set up businesses and bank accounts near Los Angeles in exchange for $70,000.

Zhu turned the assignment into a full-time job, eventually juggling seven accounts at Bank of America, Chase, East West Bank and Wells Fargo tied to two entities set up in his name: Sea Dragon Trading and Sea Dragon Remodel. When Bank of America restricted Zhu’s Sea Dragon Trading account due to suspected fraud on Oct. 19, 2022, Zhu got another account at Bank of America the next day using Sea Dragon Remodel. By Nov. 1, 2022, he had secured four more accounts at Chase, Wells Fargo and East West Bank. Except for varying his address and email, investigators found that Zhu provided largely the same info when opening accounts for the two shell entities.

Zhu’s account opening spree happened just a few months after federal prosecutors blamed “the corruption of BofA bankers” for a scheme in which a handful of employees opened 754 accounts at Bank of America registered to 13 false addresses in the Los Angeles suburbs. In that case, shadowy middlemen dispensed bribes of $200 to $250 per account to Bank of America employees who overrode internal compliance systems to open accounts for overseas Chinese citizens who weren’t physically present at the branch to open the accounts, in violation of the bank’s rules. Even when the bankers registered 176 customers to one small home, the accounts were still opened. (Two of the bankers later pleaded guilty to making false entries in bank records; Bank of America said in a statement that it “uncovered illegal activity using its monitoring systems, terminated the employees, and cooperated with law enforcement, who successfully prosecuted those involved. This is how our anti-money laundering program is designed to work.”)

With banks always one step behind, Zhu’s accounts kept receiving hundreds of thousands of dollars from victims across the U.S. Zhu would bundle the proceeds and transfer them abroad. During one week in November 2022, for example, he received six wires totaling almost $52,000 into one of his accounts and wired out one lump sum of $53,000. The destination was a bank account in the Bahamas controlled by Li and others, who converted the funds into cryptocurrency for their journey to scam centers located overseas, including in Sihanoukville. Investigators discovered a crypto wallet address they believed Li controlled. Data from cryptocurrency analytics firm Crystal Intelligence shows the wallet address sent and received about $341 million of crypto across 16,800 transactions between April 2021 and April 2024.

Zhu was arrested in March 2023 and charged with bank fraud. His lawyers acknowledged at trial that their client opened bank accounts and moved funds but said that Zhu did not know his bosses were using them for criminal purposes. Zhu was acquitted after the attorneys persuaded the trial judge that using false information to obtain a bank account does not constitute a scheme to defraud a bank. Only months after the acquittal, Zhu was charged again, this time with money laundering offenses, in an indictment filed in December 2023. Zhu, who couldn’t be reached for comment, did not enter a plea and was listed as a fugitive as of March 2025.

In January 2024, Kevin, desperate to get his money back, sued the 10 companies to which he had wired money at the scammers’ behest, including Middlesex Truck and Coach. None replied to his lawsuit — most were shell entities, after all — until January 2025, when Kevin’s lawyer got an email from Brian Maloney Jr.

Maloney confessed that his staff had ignored the lawsuit when it was initially served because it looked like a scam. He said he’d never banked with Chase and had no idea about any account that had been used to defraud Kevin. Maloney agreed to go to the local Chase branch to investigate and try to help Kevin get his money back.

“I went to the bank and said, ‘What the hell is going on?’” Maloney told ProPublica. After spending nearly two hours with the local Chase branch manager, Maloney realized that he, too, was a victim of the bank’s lax procedures: He said the branch manager told him that Chase had allowed someone to obtain an account online in his company’s name in March 2023 with nothing more than a digital signature and an employer identification number, but no personal identification. That account had then accepted hundreds of thousands of dollars of wire transfers. And now Maloney’s family business — not Chase — was the defendant in a lawsuit. “How is this legal?” he wondered. (Colin Schmitt, a retired FBI agent, said Chase could have mitigated the fraud by at least pausing incoming wire transfers to the fake Middlesex account and asking its owner to justify the transactions. “If you’re just using an account just for wires, that’s a big red flag,” Schmitt said.)

Still, there was a silver lining: The funds remained in the account. Not only Kevin’s $134,000, but almost $100,000 more from several other victims sat frozen inside since spring 2023.

Kevin was glad the money was still there, but he wondered why it took a lawsuit to unearth the info. “It does not seem like the system is tailored to give any deference to the victim,” he said. “That’s what frustrates me.” His lawyers advised him to seek an order from a federal judge to get his funds back and filed such a petition in March. After ProPublica asked Chase about Kevin’s funds in April, the bank agreed to return the money to him without a court order.

The $134,000 landed back in Kevin’s bank account in mid-May. Finally, he felt a sense of relief. (He has now dropped the suit against Middlesex.) But Kevin also wondered what would happen to the other people whose money got siphoned up by the fake Middlesex account. Would Chase wait for them to file lawsuits too?

Banks are starting to face lawsuits by pig-butchering victims who allege laxness in opening accounts. In December, a California man who was defrauded of nearly $1 million sued DBS and two other banks for alleged failures to comply with know-your-customer and anti-money-laundering laws. A college professor from Iowa who lost $700,000 filed a lawsuit in January against Hang Seng Bank in Hong Kong for failing to do proper due diligence on the people who opened accounts used to defraud him. Hang Seng reached an agreement with the Iowa professor to dismiss the suit and declined to comment further. DBS did not reply to requests for comment on the California case, but the bank asserted that the lawsuit contains “fatal flaws,” according to a filing in the suit.

Such cases are long shots, according to Carla Sanchez-Adams, senior attorney at the National Consumer Law Center. The suits typically fail because it’s hard to show that financial institutions knew or should have known about potential fraud.

Still, banks are well aware that fraud is on the rise. Nearly 1 in 3 Americans say they have been the victim of online fraud or cybercrime, according to a 2023 poll commissioned by Wells Fargo. “The scale of fraud taking place every day is a massive burden for our country and for the millions of hard-working women and men whose lives are affected by it,” Rob Nichols, president of the American Bankers Association, said in an October speech.

Nichols contends that “consumers credit the banking industry with doing more than other industries to protect them from fraud and keep their information safe.” He cited an initiative by the ABA to create a database of fraud contacts to help banks figure out who to call when there’s a problem. And he urged the Trump administration to develop a national fraud prevention strategy.

Other countries are taking more aggressive steps. In October, the U.K. began requiring banks to reimburse scam victims up to £85,000, or about $116,000, per claim when they make a fraudulent payment on behalf of their customers, even if the customers authorized the transfer. Australia recently enacted a law that will require banks to share suspect account info with one another. Thailand has gone even further, creating a Central Fraud Register intended to compel banks to identify and close accounts used for money laundering.

The U.S. lacks such rules. O’Neill, the former Secret Service agent, thinks that updating the Patriot Act, the post-9/11 law meant to encourage banks to share intel, would be a good place to start. But Congress has not moved in that direction and the Trump administration has shown no sign that it plans to prioritize this issue. (Asked what steps the administration is taking, a spokesperson told ProPublica to Google the administration’s sanctions related to pig-butchering scams.)

For now, bank accounts remain easy for fraudsters to obtain. A sleek-looking brokerage akin to 3A has been online for months, soliciting deposits for what a researcher at the Global Anti-Scam Organization identified as a pig-butchering scheme. Anyone wishing to “invest,” the brokerage said, can wire money to a shifting array of banks, including Chase.

Doris Burke contributed research.

by Spencer Norris, New York Focus

This article was produced for ProPublica’s Local Reporting Network in partnership with New York Focus, an investigative news outlet reporting on New York. Sign up for Dispatches to get our stories in your inbox every week, and sign up for New York Focus’ newsletter here.

Jasmine Stradford sat on her porch near Binghamton, New York, with toys, furniture, garbage bags full of clothing and other possessions piled up around her. She and her partner were being evicted after falling behind on rent.

So last June, they and their children — then ages 3, 12 and 15 — turned to New York’s emergency shelter system for help. It was built to provide homeless residents not only beds, but also food, help finding permanent housing and sometimes child care so parents can find work, attend school or look for apartments.

Stradford and her family received almost none of that. Instead of placing them in a shelter, the Broome County Department of Social Services cycled them through four roadside hotels over three months, where they mostly had to fend for themselves.

“I remember staring at my kids, thinking that I’d failed them,” Stradford said. “Then I remember going to DSS and being completely dehumanized.”

Stradford’s family was part of a growing trend: In the past few years, hotels have quietly become the state’s predominant response to homelessness outside New York City. New York Focus and ProPublica found that the state’s social services agencies placed just under half the 34,000 individuals and families receiving emergency shelter outside the city in fiscal year 2024 in hotels — up from 29% in 2018. The change was most pronounced in Broome County, where hotel cases more than quintupled.

Statewide spending on hotels more than tripled over that period to $110 million, according to an analysis of state temporary housing data by the news organizations. In total, hotels outside New York City were paid about $420 million to shelter unhoused people from April 2017 to September 2024.

Statewide Spending on Hotels More Than Tripled From 2018 to 2024 Data source: Analysis of Office of Temporary and Disability Assistance data on emergency shelter payments. Years are fiscal years. (Lucas Waldron/ProPublica)

It’s a makeshift arrangement that provides people a roof over their head but little else. State regulations exempt hotels from providing the same services that families are supposed to receive in the shelter system.

The hotels are “less supportive, less conducive for good health outcomes, good education outcomes,” said Adam Bosch, CEO of Hudson Valley Pattern for Progress, a policy research nonprofit. “If our ultimate goal is to get people moving back toward independence, sticking them in a hotel on a hillside away from services, away from schools, away from transportation networks is not a great strategy.”

Homelessness in New York City received intense media coverage as the migrant crisis became fodder in the presidential election. But far less attention has been paid to the homeless population throughout the rest of New York, which far surpasses most other states on its own.

Few of the migrants were relocated to hotels outside the city. Instead, the spike in hotel housing stems from a combination of soaring rent, dozens of shelter closures and what housing advocates and industry representatives said was a botched response to the end of the state’s pandemic-related eviction moratorium in 2022. After the moratorium ended, landlords began evicting tenants at rates exceeding previous years. With fewer shelters and more people in need, the number of individuals and families placed in hotels shot up.

An unhoused family living at the Knights Inn in Endwell, New York. It was one of the hotels where the Broome County Department of Social Services placed the Stradford-Moses family. (Michelle Gabel for ProPublica)

Barbara Guinn, the commissioner of the state Office of Temporary and Disability Assistance, said in an interview that her agency hadn’t studied the growth in hotel use for emergency shelter. The trend has been scarcely mentioned at legislative hearings in Albany.

But OTDA, which supervises the county social services offices, has long known about the problems the hotels present. In early 2020, state auditors warned the agency that it wasn’t adequately overseeing shelters, including hotels used as temporary housing. OTDA acknowledged that hotels present challenges because they don’t have on-site support services or the same level of supervision as shelters.

Samir, Moses and Stradford’s 3-year-old son, tries to pass the time in one of the hotel rooms the family stayed in after its eviction. (Courtesy of Jasmine Stradford)

Watch video ➜

Rules clarifying the requirement that temporary housing recipients in hotels receive shelter-like services have been on OTDA’s regulatory agenda for at least four years. But the agency, and lawmakers who oversee it, stood by as hotel housing increased. Guinn said she couldn’t “provide insight” on why the agency never formally proposed the rules, but she committed to advancing them this year. The Broome County Department of Social Services did not make its commissioner, Nancy Williams, available for an interview and did not respond to a detailed list of questions.

Reporting across the state, the news organizations found people living for months and sometimes years in hotels, doing what they can to get by. Families share beds while their belongings fill the corners of their rooms. Without kitchens and barred from using most appliances, they trek down shoulderless highways to grocery stores or scour food pantries for anything they can cook in a microwave. They squish cockroaches skittering in dressers. And hotels often force them to move out every few weeks, keeping stability out of reach.

The four hotels that Stradford’s family was placed in last summer collectively made about $10,000 sheltering it over three months — more than what the family owed in back rent. That works out to more than twice the monthly fair market rent for a four-bedroom apartment in Binghamton at the time.

New York Social Services Agencies Frequently Paid Hotels Over Fair Market Rent for a Two-Bedroom Apartment

Nearly half of all payments to hotels were for more than twice the counties’ FMR.

Data Source: Analysis of Office of Temporary and Disability Assistance data on emergency shelter payments; U.S. Department of Housing and Urban Development fair market rent data for two-bedroom apartments in each county for federal fiscal year 2024. (Lucas Waldron/ProPublica)

This isn’t unusual. County social services offices regularly pay the hotels rates that are worth many times fair market rent for permanent housing in their areas, according to the analysis of OTDA’s housing payment data. One motel in Rome, outside Utica, that was the scene of a shooting last fall charged the county $250 a night for a room at times, according to invoices submitted to the county’s Department of Social Services.

Over three months, Stradford’s family struggled to maintain some semblance of its old life while bouncing from hotel to hotel. The family would lose countless possessions. The kids’ educations would be disrupted, as the school bus failed to keep up with their moves. Their experiences would show the importance of the services they weren’t receiving and what happens to New York’s homeless families when they can’t access them.

“It’s Like Malpractice”

Stradford and her partner, Tiberious Moses, had been evicted after she missed work at a children’s group home while recovering from surgery and Moses struggled to support the family with temporary jobs. At first, Stradford was relieved when the Department of Social Services informed her that it would place them in a hotel instead of a shelter.

“Going to the hotel, I originally thought, ‘OK, this gives a little bit more leeway, a little bit more comfort, hospitality, all of that,’ only to find out that it’s not that at all,” she said. “If you are a DSS recipient, you’re nothing. You are the bottom of the pit.”

Stradford’s family — two adults, three children and four dogs — was packed into a room with two beds at an Econo Lodge sandwiched between a gas station and another budget hotel. Stradford said she found cockroaches and had trouble getting the hotel to clean their room. She said she often saw drug use at the hotel and felt unsafe. Law enforcement and emergency services were called to the hotel 116 times in the first half of that year, dispatch logs show.

Despite those conditions, the Econo Lodge received more money to house temporary assistance recipients than any other known hotel outside New York City, according to the OTDA payments data for the 2024 fiscal year. The hotel, now called Hillside Inn & Suites, served more than 900 individuals and families placed by the Department of Social Services for at least 30,000 total nights, earning over $2.3 million.

The Hillside Inn & Suites, formerly an Econo Lodge, in Binghamton, New York. The Stradford-Moses family spent 26 nights here. (Michelle Gabel for ProPublica)

“We’re forced to rent hotel rooms across the state, and the operators of these places understand that,” said state Sen. Roxanne Persaud, chair of the chamber’s Social Services Committee. “The municipalities’ backs are against the wall. And so they must place the unhoused person or persons somewhere. And so that’s why you see the cost is skyrocketing, because people understand that it’s an easy way to make money off the government.”

OTDA’s regulations say hotels should be considered shelters and provide services if they are used “primarily” as temporary housing for homeless welfare recipients. At least 16 hotels appear to house mostly welfare recipients, the analysis showed.

OTDA spokesperson Anthony Farmer said the agency interprets “primarily” to mean hotels that “house recipients exclusively, or almost exclusively, throughout the year.” He said that hotels aren’t required to deliver services but that county social services agencies “are responsible for some level of service provision.” The state, however, doesn’t regularly collect information on how counties provide services. Guinn said OTDA plans to create a formal process for counties to submit it under new regulations.

(Illustration by ProPublica)

The Econo Lodge’s contract with Broome County doesn’t call for the services offered by shelters, like food and assistance finding housing. It requires the hotel to provide little more than a room with housekeeping, linens and toiletries. The hotel’s CEO, Paresh Patel, declined to comment.

In contrast, traditional shelters often put a significant amount of their funding toward social services. Shelter budgets obtained from OTDA show that they frequently retain at least part-time employees to prepare food and help people find jobs and housing. Local social services offices try to offset the lack of on-site services by hiring caseworkers but have struggled to retain them.

Instead, hotel residents like Stradford’s family are caught in a web of conflicts between the way those services are provided, the strings attached to benefits and the rules and limitations of living in hotels. Social services departments might provide them food stamps to buy groceries, but hotel residents usually don’t have kitchens and are often not allowed to have appliances like hot plates. To keep their lodging, they’re generally required to seek housing and to work or look for jobs, but they often don’t receive child care. They have to regularly meet with caseworkers at social services offices but must rely on spotty public transportation.

“To me, it’s like malpractice as a homeless services provider to place people without support services” in hotels, said Deborah Padgett, a professor of social work at New York University. “It’s good in the sense that they get more privacy, but for them to get a life and not be dependent on the government, they need to be close to services and not be punished for making mistakes.”

Guinn said that her agency would prefer counties use regulated shelters in housing emergencies but that there aren’t enough beds to accommodate everyone. Social services offices must rely on hotels when shelters don’t have space or don’t exist in a particular county, Farmer said in an email.

After 26 nights, Broome County relocated Stradford’s family to the Quality Inn & Suites in Vestal, a Binghamton suburb down the Susquehanna River that’s home to Binghamton University. Stradford’s car had been repossessed, so they stuffed a suitcase and the kids’ book bags with as many clothes as they could and hopped on the bus.

(Illustration by ProPublica)

At the Quality Inn, the family struggled to eat. They had applied for food stamps, but Stradford said she couldn’t get wage records from her former employer proving she was eligible. Instead, the county provided them a restaurant allowance worth about $15 a day to cover all five of them. To get by, they took the bus to food pantries like Catholic Charities, which had started creating “hotel bags” stuffed with canned food, oatmeal, crackers, macaroni and cheese and snacks for the kids — anything that could be eaten cold or prepared with a microwave.

While many shelters provide food on site, contracts between the hotels and Broome County forbid emergency housing recipients from eating the hotels’ food. Stradford said her family was threatened with removal from the Quality Inn after her 12-year-old daughter, Taylor, tried to eat the continental breakfast.

“When we first started taking families on, we did allow breakfast, and unfortunately there was too much being carried away, so we chose to change that,” the hotel’s general manager, Bernadine Morris, said. The Quality Inn has since closed and could not be reached for follow-up questions.

People can get kicked out of hotels and lose their housing assistance for repeatedly violating hotels’ policies, including by using their own cooking appliances. One woman who previously lived at the Motel 6 in Binghamton said she avoided sanctions by throwing an extension cord from the window of her second-story room to use a pressure cooker on the sidewalk.

Stradford’s nonstop juggling act left her on edge. She was grieving her mother’s death, feeding five people and four dogs, apartment-hunting and hustling to culinary classes and social services appointments. She said her children started feeling the stress too: Her 3-year-old, Samir, was wetting the bed frequently, and the older kids missed classes for their summer courses.

The family began butting heads with Quality Inn managers, who accused them of being disruptive and terminated their stay, according to Stradford’s social services case file.

“I’m not totally surprised that they run into problems with the hotel supervisors and the staff just because they’re trying to find some way to get their needs attended to, and it’s not really fair to expect the hotel to do what those people are not trained to do,” Padgett said.

During the three months her family lived in hotels, Stradford’s nonstop juggling act left her on edge. (Michelle Gabel for ProPublica)

Shelters are required to have enough qualified staff to meet residents’ needs. The staff members generally have at least some training in how to handle populations with complex needs, said Elizabeth Bowen, an associate professor at the University at Buffalo School of Social Work.

After Stradford and her family lost their room at the Quality Inn, the county sanctioned them and declined to find them a new place to stay. Moses, who had just gotten a job at Dave & Buster’s, paid out of his own pocket for a room at the Red Roof Inn in Johnson City. When they arrived, the woman at the front desk saw their belongings and dogs and told them the motel wouldn’t honor the reservation. They had used what little money was left on Ubers and the room deposit. The motel did not return requests for comment.

As it rained, Stradford got ahold of the Department of Social Services and pleaded their case. The county decided to continue housing her family until her sanction could be appealed. It booked them at the Knights Inn, another 10 minutes down the road in a town called Endwell.

“I Got Into Protection Mode”

Stradford’s family became skilled at sleeping on a single bed at the Knights Inn. Stradford, Moses, Samir and 15-year-old De’Vante would sleep side by side while Taylor slept horizontally at their feet.

The rest of the facility was in chaos, Stradford said. She saw hypodermic needles and other drug paraphernalia lying in the grass and underneath the stairwell and people slumped over while standing beside the dumpster. Over about six years that the county used it for temporary housing, law enforcement and emergency services were summoned to the motel for 789 incidents, including assaults, overdoses, robberies, domestic disputes and mental health crises.

Note: Knights Inn charged $109.09 per day for two rooms for at least part of their stay. (Illustration by ProPublica)

The Knights Inn had a litany of issues that prevented it from passing Broome County Social Services’ inspections from 2018 to 2021. According to inspection reports, the rooms were dimly lit due to missing light bulbs and broken lamps. The walls were stained and punched through, and the wallpaper peeled off. Some rooms’ doors didn’t lock. Windows didn’t either or were broken. Carpets were torn, and inspectors found cockroaches in dressers.

Health and safety issues plague hotels used as emergency shelters across the state. A 2020 state comptroller audit found that 60% of the hotels they reviewed outside New York City were in “unsatisfactory” condition — about the same as the percentage of shelters.

One woman, who was living with her children in a motel south of Albany, showed paint flaking off their walls and mattresses covered in black mold. Two other parents placed in the motel said they felt that if the Department of Social Services caught them in private housing that resembled their living conditions, their kid could be taken away by Child Protective Services.

OTDA requires social services agencies to inspect hotels housing families every six months. But an analysis of OTDA compliance data showed that social services districts often fail to keep up with hotel inspections: About 40% of the 351 hotels used to house homeless people outside New York City were out of date on their social services inspections as of mid-October or didn’t have an inspection date listed.

Farmer, the OTDA spokesperson, said that most hotels had been inspected within a year and that some others had stopped housing people.

Even when social services agencies do inspections, records show they sometimes fail to take action. Hotels have to correct problems within 30 days, unless it’s a safety problem. If they don’t, counties are supposed to stop placing people there, according to a directive from OTDA.

Records show that the Knights Inn fixed some of the issues as it went but continued to get written up in every inspection for two and a half years. Despite this, Broome County placed hundreds of social services cases there, earning the motel over $750,000.

A Knights Inn manager, Aizaz Siddiqui, said that the motel moved people out of rooms that needed the most work until they were renovated.

In January 2021, the county said it would stop placing people at the Knights Inn until the violations were corrected. The motel received a clean inspection in July 2022. But Stradford said the Knights Inn wouldn’t give them toilet paper or fresh sheets, which are required in shelters. A bedsheet was used as a curtain for their rear window.

Taylor and Samir watch TV in the Knights Inn room. (Courtesy of Jasmine Stradford)

The family stayed for three weeks, but tensions with management boiled over when the family failed to get rid of their dogs by the deadline set by the motel. Eventually, the Knights Inn told them to leave. After giving them a few extra days to find other accommodations, Siddiqui called the police to remove them.

Siddiqui said the families placed at the inn by the Department of Social Services deserve sympathy, but he still has to maintain order. “It’s a tough situation to be in, and we try to work with them as much as we can,” he said. “But again, we do have to fulfill our policies, and we have to stand by them.” The motel declined to respond to additional questions about the conditions.

Stradford’s family didn’t have anywhere else to go. As the State Police arrived, she planted herself on a red cooler in front of their room and refused to leave until the county found them somewhere to stay.

Some community activists she met through local charity work showed up to support her and livestreamed the incident on Facebook.

Note: Motel 6 charged $190 per day for two rooms. (Illustration by ProPublica)

After a three-hour standoff, management relented and allowed the family to stay two more nights. One of the activists arrived with a U-Haul and drove their stuff to the Motel 6, a 15-minute drive back up the river, past the Econo Lodge on the outskirts of Binghamton.

Things were initially calm at the Motel 6. But about three weeks into their stay, the Motel 6 complained to the county that Stradford had left the children alone, which they were told violated the motel’s guest policy. Stradford said she was doing charity work at the time but complained that she couldn’t attend school or meet the state’s requirements to look for housing if she had to constantly supervise her children.

The motel gave the family the weekend to leave. When they missed their checkout time, the Sheriff’s Office came to remove them.

Moses called Stradford, who was at school, to tell her what was happening. She headed to the Department of Social Services to plead their case.

“I got into protection mode,” Stradford said. “I wasn’t going to leave there and just put myself in a seriously homeless situation. So I told them I wasn’t leaving until I knew that we had a secure spot to go to.”

But her attempts failed. The agency said it would no longer help her family due to the complaints. The clerk used a special tool to unlock the room for the deputies.

Community members once again showed up to livestream the encounter and pressure the county. The Sheriff’s Office helped the family find a motel, where it stayed for two more nights.

In the end, it wasn’t New York’s social services system that found stable housing for Stradford’s family; it was a local landlord who heard about the case and offered an apartment at a rate the family could afford on Moses’ wages and temporary assistance from the county.

Moses holds Samir in the family’s new apartment. (Michelle Gabel for ProPublica)

Stradford’s family was placed in hotels for 89 days, about the average for a social services case. Many stay far longer. More than 1,500 individuals and families spent six months or more in hotels, according to payment data from the 2024 fiscal year.

“Some of us really get into a hard time and we really do need the help. We don’t just rely on the system,” Stradford said. “I pay my hard-earned tax dollars. I worked multiple jobs. I’m the one that tried to keep afloat and stuff like that. But things happen in life.”

Between their six moves, the family lost most of its possessions: furniture, Social Security cards, birth certificates, tax documents, family photos, laptops, coats, a painting from someone Jasmine was taking care of, Samir’s toy box, Taylor’s art projects and a blanket covered in motivational quotes that Stradford’s mom had given her before she passed. They had to give up two of their dogs.

When they arrived at their new home, they had only a couple of suitcases and garbage bags full of clothes.

(Illustration by ProPublica) How We Measured Hotel Stays

To track temporary housing recipients placed in hotels, New York Focus and ProPublica used data obtained from the New York Office of Temporary and Disability Assistance through an open records request. The data contains 1.1 million payments issued from April 2017 to September 2024 for emergency shelter stays outside New York City. OTDA repeatedly delayed releasing the data for 10 months but finally did so after ProPublica’s attorneys got involved in the appeals process.

The data classified payments by type of shelter, including family shelters, transitional housing and hotels. It also included an “emergency shelter” category for temporary housing assistance provided before a case is fully approved, which can flow to both hotels and shelters.

Our analysis includes only payments explicitly classified as hotel payments. We excluded some payments that were classified as hotel payments but where the recipients appeared to be nonprofits that operated homeless shelters.

The data also included unique IDs for each assistance case that received shelter, allowing us to determine how many people stayed in hotels and for about how long. Each case represents either an individual or a family.

To find hotels that housed mostly welfare recipients, New York Focus and ProPublica relied on each hotel’s total number of rooms reported to the New York State Department of Health and checked whether shelter payments covered at least half of the hotel’s total capacity from April 1, 2023, to March 31, 2024.

The data listed the start and end date for each payment, but it was not always clear whether the stay was inclusive or exclusive of the final date. As a result, we chose to exclude the final night whenever counting up dates to create the most conservative estimates possible, unless the payment covered a single night. When comparing the payments against fair market rent, we included the final night, which would decrease the daily rate.

Hotels used to house homeless families outside New York City must be inspected by counties once every six months. After that, the district has 30 days to submit the report to OTDA for review.

OTDA provided a database of inspections for hotels as of Oct. 15, 2024. To determine whether a hotel was past due on inspection, we checked whether the most recent inspection was completed and submitted to OTDA in the seven months leading up to that date. In some cases, the inspection may have been conducted but was not submitted to the state on time.

This story was supported by the journalism nonprofit the Economic Hardship Reporting Project.

If you have been placed in a hotel or have information about the use of hotels as emergency housing in New York, contact New York Focus reporter Spencer Norris at 570-690-3469 or spencer@nysfocus.com.

Joel Jacobs contributed data reporting.

by Spencer Norris, New York Focus

This article was produced for ProPublica’s Local Reporting Network in partnership with New York Focus, an investigative news outlet reporting on New York. Sign up for Dispatches to get our stories in your inbox every week, and sign up for New York Focus’ newsletter here.

Jasmine Stradford sat on her porch near Binghamton, New York, with toys, furniture, garbage bags full of clothing and other possessions piled up around her. She and her partner were being evicted after falling behind on rent.

So last June, they and their children — then ages 3, 12 and 15 — turned to New York’s emergency shelter system for help. It was built to provide homeless residents not only beds, but also food, help finding permanent housing and sometimes child care so parents can find work, attend school or look for apartments.

Stradford and her family received almost none of that. Instead of placing them in a shelter, the Broome County Department of Social Services cycled them through four roadside hotels over three months, where they mostly had to fend for themselves.

“I remember staring at my kids, thinking that I’d failed them,” Stradford said. “Then I remember going to DSS and being completely dehumanized.”

Stradford’s family was part of a growing trend: In the past few years, hotels have quietly become the state’s predominant response to homelessness outside New York City. New York Focus and ProPublica found that the state’s social services agencies placed just under half the 34,000 individuals and families receiving emergency shelter outside the city in fiscal year 2024 in hotels — up from 29% in 2018. The change was most pronounced in Broome County, where hotel cases more than quintupled.

Statewide spending on hotels more than tripled over that period to $110 million, according to an analysis of state temporary housing data by the news organizations. In total, hotels outside New York City were paid about $420 million to shelter unhoused people from April 2017 to September 2024.

Statewide Spending on Hotels More Than Tripled From 2018 to 2024 Data source: Analysis of Office of Temporary and Disability Assistance data on emergency shelter payments. Years are fiscal years. (Lucas Waldron/ProPublica)

It’s a makeshift arrangement that provides people a roof over their head but little else. State regulations exempt hotels from providing the same services that families are supposed to receive in the shelter system.

The hotels are “less supportive, less conducive for good health outcomes, good education outcomes,” said Adam Bosch, CEO of Hudson Valley Pattern for Progress, a policy research nonprofit. “If our ultimate goal is to get people moving back toward independence, sticking them in a hotel on a hillside away from services, away from schools, away from transportation networks is not a great strategy.”

Homelessness in New York City received intense media coverage as the migrant crisis became fodder in the presidential election. But far less attention has been paid to the homeless population throughout the rest of New York, which far surpasses most other states on its own.

Few of the migrants were relocated to hotels outside the city. Instead, the spike in hotel housing stems from a combination of soaring rent, dozens of shelter closures and what housing advocates and industry representatives said was a botched response to the end of the state’s pandemic-related eviction moratorium in 2022. After the moratorium ended, landlords began evicting tenants at rates exceeding previous years. With fewer shelters and more people in need, the number of individuals and families placed in hotels shot up.

An unhoused family living at the Knights Inn in Endwell, New York. It was one of the hotels where the Broome County Department of Social Services placed the Stradford-Moses family. (Michelle Gabel for ProPublica)

Barbara Guinn, the commissioner of the state Office of Temporary and Disability Assistance, said in an interview that her agency hadn’t studied the growth in hotel use for emergency shelter. The trend has been scarcely mentioned at legislative hearings in Albany.

But OTDA, which supervises the county social services offices, has long known about the problems the hotels present. In early 2020, state auditors warned the agency that it wasn’t adequately overseeing shelters, including hotels used as temporary housing. OTDA acknowledged that hotels present challenges because they don’t have on-site support services or the same level of supervision as shelters.

Samir, Moses and Stradford’s 3-year-old son, tries to pass the time in one of the hotel rooms the family stayed in after its eviction. (Courtesy of Jasmine Stradford)

Watch video ➜

Rules clarifying the requirement that temporary housing recipients in hotels receive shelter-like services have been on OTDA’s regulatory agenda for at least four years. But the agency, and lawmakers who oversee it, stood by as hotel housing increased. Guinn said she couldn’t “provide insight” on why the agency never formally proposed the rules, but she committed to advancing them this year. The Broome County Department of Social Services did not make its commissioner, Nancy Williams, available for an interview and did not respond to a detailed list of questions.

Reporting across the state, the news organizations found people living for months and sometimes years in hotels, doing what they can to get by. Families share beds while their belongings fill the corners of their rooms. Without kitchens and barred from using most appliances, they trek down shoulderless highways to grocery stores or scour food pantries for anything they can cook in a microwave. They squish cockroaches skittering in dressers. And hotels often force them to move out every few weeks, keeping stability out of reach.

The four hotels that Stradford’s family was placed in last summer collectively made about $10,000 sheltering it over three months — more than what the family owed in back rent. That works out to more than twice the monthly fair market rent for a four-bedroom apartment in Binghamton at the time.

New York Social Services Agencies Frequently Paid Hotels Over Fair Market Rent for a Two-Bedroom Apartment

Nearly half of all payments to hotels were for more than twice the counties’ FMR.

Data Source: Analysis of Office of Temporary and Disability Assistance data on emergency shelter payments; HUD Fair Market Rent data for two-bedroom apartments in each county for federal fiscal year 2024. (Lucas Waldron/ProPublica)

This isn’t unusual. County social services offices regularly pay the hotels rates that are worth many times fair market rent for permanent housing in their areas, according to the analysis of OTDA’s housing payment data. One motel in Rome, outside Utica, that was the scene of a shooting last fall charged the county $250 a night for a room at times, according to invoices submitted to the county’s Department of Social Services.

Over three months, Stradford’s family struggled to maintain some semblance of its old life while bouncing from hotel to hotel. The family would lose countless possessions. The kids’ educations would be disrupted, as the school bus failed to keep up with their moves. Their experiences would show the importance of the services they weren’t receiving and what happens to New York’s homeless families when they can’t access them.

“It’s Like Malpractice”

Stradford and her partner, Tiberious Moses, had been evicted after she missed work at a children’s group home while recovering from surgery and Moses struggled to support the family with temporary jobs. At first, Stradford was relieved when the Department of Social Services informed her that it would place them in a hotel instead of a shelter.

“Going to the hotel, I originally thought, ‘OK, this gives a little bit more leeway, a little bit more comfort, hospitality, all of that,’ only to find out that it’s not that at all,” she said. “If you are a DSS recipient, you’re nothing. You are the bottom of the pit.”

Stradford’s family — two adults, three children and four dogs — was packed into a room with two beds at an Econo Lodge sandwiched between a gas station and another budget hotel. Stradford said she found cockroaches and had trouble getting the hotel to clean their room. She said she often saw drug use at the hotel and felt unsafe. Law enforcement and emergency services were called to the hotel 116 times in the first half of that year, dispatch logs show.

Despite those conditions, the Econo Lodge received more money to house temporary assistance recipients than any other known hotel outside New York City, according to the OTDA payments data for the 2024 fiscal year. The hotel, now called Hillside Inn & Suites, served more than 900 individuals and families placed by the Department of Social Services for at least 30,000 total nights, earning over $2.3 million.

The Hillside Inn & Suites, formerly an Econo Lodge, in Binghamton, New York. The Stradford-Moses family spent 26 nights here. (Michelle Gabel for ProPublica)

“We’re forced to rent hotel rooms across the state, and the operators of these places understand that,” said state Sen. Roxanne Persaud, chair of the chamber’s Social Services Committee. “The municipalities’ backs are against the wall. And so they must place the unhoused person or persons somewhere. And so that’s why you see the cost is skyrocketing, because people understand that it’s an easy way to make money off the government.”

OTDA’s regulations say hotels should be considered shelters and provide services if they are used “primarily” as temporary housing for homeless welfare recipients. At least 16 hotels appear to house mostly welfare recipients, the analysis showed.

OTDA spokesperson Anthony Farmer said the agency interprets “primarily” to mean hotels that “house recipients exclusively, or almost exclusively, throughout the year.” He said that hotels aren’t required to deliver services but that county social services agencies “are responsible for some level of service provision.” The state, however, doesn’t regularly collect information on how counties provide services. Guinn said OTDA plans to create a formal process for counties to submit it under new regulations.

(Illustration by ProPublica)

The Econo Lodge’s contract with Broome County doesn’t call for the services offered by shelters, like food and assistance finding housing. It requires the hotel to provide little more than a room with housekeeping, linens and toiletries. The hotel’s CEO, Paresh Patel, declined to comment.

In contrast, traditional shelters often put a significant amount of their funding toward social services. Shelter budgets obtained from OTDA show that they frequently retain at least part-time employees to prepare food and help people find jobs and housing. Local social services offices try to offset the lack of on-site services by hiring caseworkers but have struggled to retain them.

Instead, hotel residents like Stradford’s family are caught in a web of conflicts between the way those services are provided, the strings attached to benefits and the rules and limitations of living in hotels. Social services departments might provide them food stamps to buy groceries, but hotel residents usually don’t have kitchens and are often not allowed to have appliances like hot plates. To keep their lodging, they’re generally required to seek housing and to work or look for jobs, but they often don’t receive child care. They have to regularly meet with caseworkers at social services offices but must rely on spotty public transportation.

“To me, it’s like malpractice as a homeless services provider to place people without support services” in hotels, said Deborah Padgett, a professor of social work at New York University. “It’s good in the sense that they get more privacy, but for them to get a life and not be dependent on the government, they need to be close to services and not be punished for making mistakes.”

Guinn said that her agency would prefer counties use regulated shelters in housing emergencies but that there aren’t enough beds to accommodate everyone. Social services offices must rely on hotels when shelters don’t have space or don’t exist in a particular county, Farmer said in an email.

After 26 nights, Broome County relocated Stradford’s family to the Quality Inn & Suites in Vestal, a Binghamton suburb down the Susquehanna River that’s home to Binghamton University. Stradford’s car had been repossessed, so they stuffed a suitcase and the kids’ book bags with as many clothes as they could and hopped on the bus.

(Illustration by ProPublica)

At the Quality Inn, the family struggled to eat. They had applied for food stamps, but Stradford said she couldn’t get wage records from her former employer proving she was eligible. Instead, the county provided them a restaurant allowance worth about $15 a day to cover all five of them. To get by, they took the bus to food pantries like Catholic Charities, which had started creating “hotel bags” stuffed with canned food, oatmeal, crackers, macaroni and cheese and snacks for the kids — anything that could be eaten cold or prepared with a microwave.

While many shelters provide food on site, contracts between the hotels and Broome County forbid emergency housing recipients from eating the hotels’ food. Stradford said her family was threatened with removal from the Quality Inn after her 12-year-old daughter, Taylor, tried to eat the continental breakfast.

“When we first started taking families on, we did allow breakfast, and unfortunately there was too much being carried away, so we chose to change that,” the hotel’s general manager, Bernadine Morris, said. The Quality Inn has since closed and could not be reached for follow-up questions.

People can get kicked out of hotels and lose their housing assistance for repeatedly violating hotels’ policies, including by using their own cooking appliances. One woman who previously lived at the Motel 6 in Binghamton said she avoided sanctions by throwing an extension cord from the window of her second-story room to use a pressure cooker on the sidewalk.

Stradford’s nonstop juggling act left her on edge. She was grieving her mother’s death, feeding five people and four dogs, apartment-hunting and hustling to culinary classes and social services appointments. She said her children started feeling the stress too: Her 3-year-old, Samir, was wetting the bed frequently, and the older kids missed classes for their summer courses.

The family began butting heads with Quality Inn managers, who accused them of being disruptive and terminated their stay, according to Stradford’s social services case file.

“I’m not totally surprised that they run into problems with the hotel supervisors and the staff just because they’re trying to find some way to get their needs attended to, and it’s not really fair to expect the hotel to do what those people are not trained to do,” Padgett said.

During the three months her family lived in hotels, Stradford’s nonstop juggling act left her on edge. (Michelle Gabel for ProPublica)

Shelters are required to have enough qualified staff to meet residents’ needs. The staff members generally have at least some training in how to handle populations with complex needs, said Elizabeth Bowen, an associate professor at the University at Buffalo School of Social Work.

After Stradford and her family lost their room at the Quality Inn, the county sanctioned them and declined to find them a new place to stay. Moses, who had just gotten a job at Dave & Buster’s, paid out of his own pocket for a room at the Red Roof Inn in Johnson City. When they arrived, the woman at the front desk saw their belongings and dogs and told them the motel wouldn’t honor the reservation. They had used what little money was left on Ubers and the room deposit. The motel did not return requests for comment.

As it rained, Stradford got ahold of the Department of Social Services and pleaded their case. The county decided to continue housing her family until her sanction could be appealed. It booked them at the Knights Inn, another 10 minutes down the road in a town called Endwell.

“I Got Into Protection Mode”

Stradford’s family became skilled at sleeping on a single bed at the Knights Inn. Stradford, Moses, Samir and 15-year-old De’Vante would sleep side by side while Taylor slept horizontally at their feet.

The rest of the facility was in chaos, Stradford said. She saw hypodermic needles and other drug paraphernalia lying in the grass and underneath the stairwell and people slumped over while standing beside the dumpster. Over about six years that the county used it for temporary housing, law enforcement and emergency services were summoned to the motel for 789 incidents, including assaults, overdoses, robberies, domestic disputes and mental health crises.

Note: Knights Inn charged $109.09 per day for two rooms for at least part of their stay. (Illustration by ProPublica)

The Knights Inn had a litany of issues that prevented it from passing Broome County Social Services’ inspections from 2018 to 2021. According to inspection reports, the rooms were dimly lit due to missing light bulbs and broken lamps. The walls were stained and punched through, and the wallpaper peeled off. Some rooms’ doors didn’t lock. Windows didn’t either or were broken. Carpets were torn, and inspectors found cockroaches in dressers.

Health and safety issues plague hotels used as emergency shelters across the state. A 2020 state comptroller audit found that 60% of the hotels they reviewed outside New York City were in “unsatisfactory” condition — about the same as the percentage of shelters.

One woman, who was living with her children in a motel south of Albany, showed paint flaking off their walls and mattresses covered in black mold. Two other parents placed in the motel said they felt that if the Department of Social Services caught them in private housing that resembled their living conditions, their kid could be taken away by Child Protective Services.

OTDA requires social services agencies to inspect hotels housing families every six months. But an analysis of OTDA compliance data showed that social services districts often fail to keep up with hotel inspections: About 40% of the 351 hotels used to house homeless people outside New York City were out of date on their social services inspections as of mid-October or didn’t have an inspection date listed.

Farmer, the OTDA spokesperson, said that most hotels had been inspected within a year and that some others had stopped housing people.

Even when social services agencies do inspections, records show they sometimes fail to take action. Hotels have to correct problems within 30 days, unless it’s a safety problem. If they don’t, counties are supposed to stop placing people there, according to a directive from OTDA.

Records show that the Knights Inn fixed some of the issues as it went but continued to get written up in every inspection for two and a half years. Despite this, Broome County placed hundreds of social services cases there, earning the motel over $750,000.

A Knights Inn manager, Aizaz Siddiqui, said that the motel moved people out of rooms that needed the most work until they were renovated.

In January 2021, the county said it would stop placing people at the Knights Inn until the violations were corrected. The motel received a clean inspection in July 2022. But Stradford said the Knights Inn wouldn’t give them toilet paper or fresh sheets, which are required in shelters. A bedsheet was used as a curtain for their rear window.

Taylor and Samir watch TV in the Knights Inn room. (Courtesy of Jasmine Stradford)

The family stayed for three weeks, but tensions with management boiled over when the family failed to get rid of their dogs by the deadline set by the motel. Eventually, the Knights Inn told them to leave. After giving them a few extra days to find other accommodations, Siddiqui called the police to remove them.

Siddiqui said the families placed at the inn by the Department of Social Services deserve sympathy, but he still has to maintain order. “It’s a tough situation to be in, and we try to work with them as much as we can,” he said. “But again, we do have to fulfill our policies, and we have to stand by them.” The motel declined to respond to additional questions about the conditions.

Stradford’s family didn’t have anywhere else to go. As the State Police arrived, she planted herself on a red cooler in front of their room and refused to leave until the county found them somewhere to stay.

Some community activists she met through local charity work showed up to support her and livestreamed the incident on Facebook.

Note: Motel 6 charged $190 per day for two rooms. (Illustration by ProPublica)

After a three-hour standoff, management relented and allowed the family to stay two more nights. One of the activists arrived with a U-Haul and drove their stuff to the Motel 6, a 15-minute drive back up the river, past the Econo Lodge on the outskirts of Binghamton.

Things were initially calm at the Motel 6. But about three weeks into their stay, the Motel 6 complained to the county that Stradford had left the children alone, which they were told violated the motel’s guest policy. Stradford said she was doing charity work at the time but complained that she couldn’t attend school or meet the state’s requirements to look for housing if she had to constantly supervise her children.

The motel gave the family the weekend to leave. When they missed their checkout time, the Sheriff’s Office came to remove them.

Moses called Stradford, who was at school, to tell her what was happening. She headed to the Department of Social Services to plead their case.

“I got into protection mode,” Stradford said. “I wasn’t going to leave there and just put myself in a seriously homeless situation. So I told them I wasn’t leaving until I knew that we had a secure spot to go to.”

But her attempts failed. The agency said it would no longer help her family due to the complaints. The clerk used a special tool to unlock the room for the deputies.

Community members once again showed up to livestream the encounter and pressure the county. The Sheriff’s Office helped the family find a motel, where it stayed for two more nights.

In the end, it wasn’t New York’s social services system that found stable housing for Stradford’s family; it was a local landlord who heard about the case and offered an apartment at a rate the family could afford on Moses’ wages and temporary assistance from the county.

Moses holds Samir in the family’s new apartment. (Michelle Gabel for ProPublica)

Stradford’s family was placed in hotels for 89 days, about the average for a social services case. Many stay far longer. More than 1,500 individuals and families spent six months or more in hotels, according to payment data from the 2024 fiscal year.

“Some of us really get into a hard time and we really do need the help. We don’t just rely on the system,” Stradford said. “I pay my hard-earned tax dollars. I worked multiple jobs. I’m the one that tried to keep afloat and stuff like that. But things happen in life.”

Between their six moves, the family lost most of its possessions: furniture, Social Security cards, birth certificates, tax documents, family photos, laptops, coats, a painting from someone Jasmine was taking care of, Samir’s toy box, Taylor’s art projects and a blanket covered in motivational quotes that Stradford’s mom had given her before she passed. They had to give up two of their dogs.

When they arrived at their new home, they had only a couple of suitcases and garbage bags full of clothes.

(Illustration by ProPublica) How We Measured Hotel Stays

To track temporary housing recipients placed in hotels, New York Focus and ProPublica used data obtained from the New York Office of Temporary and Disability Assistance through an open records request. The data contains 1.1 million payments issued from April 2017 to September 2024 for emergency shelter stays outside New York City. OTDA repeatedly delayed releasing the data for 10 months but finally did so after ProPublica’s attorneys got involved in the appeals process.

The data classified payments by type of shelter, including family shelters, transitional housing and hotels. It also included an “emergency shelter” category for temporary housing assistance provided before a case is fully approved, which can flow to both hotels and shelters.

Our analysis includes only payments explicitly classified as hotel payments. We excluded some payments that were classified as hotel payments but where the recipients appeared to be nonprofits that operated homeless shelters.

The data also included unique IDs for each assistance case that received shelter, allowing us to determine how many people stayed in hotels and for about how long. Each case represents either an individual or a family.

To find hotels that housed mostly welfare recipients, New York Focus and ProPublica relied on each hotel’s total number of rooms reported to the New York State Department of Health and checked whether shelter payments covered at least half of the hotel’s total capacity from April 1, 2023, to March 31, 2024.

The data listed the start and end date for each payment, but it was not always clear whether the stay was inclusive or exclusive of the final date. As a result, we chose to exclude the final night whenever counting up dates to create the most conservative estimates possible, unless the payment covered a single night. When comparing the payments against fair market rent, we included the final night, which would decrease the daily rate.

Hotels used to house homeless families outside New York City must be inspected by counties once every six months. After that, the district has 30 days to submit the report to OTDA for review.

OTDA provided a database of inspections for hotels as of Oct. 15, 2024. To determine whether a hotel was past due on inspection, we checked whether the most recent inspection was completed and submitted to OTDA in the seven months leading up to that date. In some cases, the inspection may have been conducted but was not submitted to the state on time.

This story was supported by the journalism nonprofit the Economic Hardship Reporting Project.

If you have been placed in a hotel or have information about the use of hotels as emergency housing in New York, contact New York Focus reporter Spencer Norris at 570-690-3469 or spencer@nysfocus.com.

Joel Jacobs contributed data reporting.

by Debbie Cenziper, Megan Rose, Brandon Roberts and Irena Hwang

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up to receive our biggest stories as soon as they’re published.

In 2022, three Food and Drug Administration inspectors headed to India to investigate a massive Sun Pharma plant that produces dozens of generic drugs for Americans. Over two weeks, they found dangerous breakdowns in the way critical medications were made, and the FDA ultimately placed the factory on an import ban — prohibiting the company from shipping drugs to the United States.

The agency, however, quietly gave the global manufacturer a special pass to continue sending more than a dozen drugs to Americans even though they were made at the same substandard factory that was officially banned from the U.S. market.

It wasn’t the first time. Here are the key takeaways from ProPublica’s 14-month investigation into the FDA’s oversight of foreign drugmakers:

• Over a dozen years, the agency entrusted to protect America’s drug supply gave similar exemptions to some of the most troubled foreign drugmakers in India, allowing factories banned from the U.S. market to continue shipping medications to an unsuspecting American public.

• A secretive group inside the FDA exempted the medications from import bans, ostensibly to prevent drug shortages. With each pass, the agency dismissed warnings from its own inspectors about dangerous breaches in drug quality on factory floors. All told, the FDA allowed into the United States at least 150 drugs or their ingredients from banned factories found to have mold, foul water, dirty labs or fraudulent testing protocols. Nearly all came from factories in India.

• The FDA did not regularly test the drugs exempted from import bans to see if they were safe or actively monitor reports about potential harm among patients. And as the drugs circulated in the United States, the agency kept the practice largely hidden from the public. The FDA said it put protective measures in place, such as requiring third-party oversight of factories to ensure the exempted drugs were safe.

• Some of the exempted drugs were recalled — just before or just after they were exempted — because of contaminants or other defects that could cause health problems. And a ProPublica analysis identified more than 600 complaints in the FDA’s files about the exempted drugs at three factories alone, each flagging concerns in the months or years after the medications were excluded from import bans. The reports cite about 70 hospitalizations and nine deaths.

• Janet Woodcock, who for more than two decades led the FDA’s Center for Drug Evaluation and Research, said she didn’t see a need to inform the public about the drugs from banned factories because the agency believed they were safe and that such information would create “some kind of frenzy” among consumers who might seek to change their prescriptions. “We had to kind of deal with the hand we were dealt,” she said, noting she supported the exemptions to deal with chronic drug shortages.

• Decisions made by the FDA decades ago gave rise to the use of exemptions. In the 2000s, as the cost of brand-name drugs soared, the FDA approved hundreds of generic drug applications for foreign manufacturers that had been in trouble before, companies well-known to the inspectors working to stamp out safety and quality breakdowns.

• The exempted drugs that have come to the United States include antibiotics, chemotherapy treatment, antidepressants, sedatives and epilepsy medication.

Sun Pharma did not respond to multiple requests for comment. When the FDA imposed the ban, the company said it would “undertake all necessary steps to resolve these issues and to ensure that the regulator is completely satisfied with the company’s remedial action. Sun Pharma remains committed to being … compliant and in supplying high-quality products to its customers and patients globally.”

Patricia Callahan and Vidya Krishnan contributed reporting. Alice Crites contributed research.