Anchorage couple pleads not guilty to all counts in fraud indictments related to fraudulent COVID-19 relief distributions

Operators of House of Transformations got $1.6 million federal grant through municipality
First fraud indictments related to Anchorage COVID-19 distributions charge couple for $1.6M in stolen funds
Published: Sep. 28, 2023 at 9:51 AM AKDT|Updated: Sep. 29, 2023 at 3:46 PM AKDT
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ANCHORAGE, Alaska (KTUU) - The couple charged in an alleged scheme to defraud the federal government and the municipality of Anchorage out of COVID-19 relief funds made their first court appearance Friday afternoon.

A federal grand jury had indicted 41-year-old Rosaline Natazha Mavaega and 44-year-old Esau Malele Fualema Jr. for allegedly misusing a COVID-related American Rescue Plan Act (ARPA) grant of $1,623,165 provided to the organization in 2021.

Court documents alleged the two deposited the grant money into the House of Transformations checking account, but then allegedly used the money for personal expenses.

On Friday afternoon, the two entered magistrate Judge Kyle Reardon’s courtroom at the Fitzgerald Courthouse in yellow prison clothes and were read the charges against them. Both pleaded not guilty to all counts of the indictment. The judge then ordered them released, contingent on meeting several conditions — including seeking employment and turning over their passports.

When House of Transformations applied for the COVID-19 relief money through the American Rescue Plan Act, they said the money would be used to aid chronically homeless people with “employment search, life skills classes, Peer support, mental/behavioral health assessments, apprenticeship/vocational programs, goal setting & individualized action plans.”

According to the indictment, instead of using the money for those purposes, Mavaega and Fualema Jr. had other ideas.

“[Instead] of using these funds for the purposes identified in the grant, the defendants moved the money into their personal bank accounts and accounts associated with other corporations under their control. They allegedly used the money to finance their for-profit business operations, pay tax debt on another business, secure a personal cash loan and buy cryptocurrency,” a press release issued by the United States Attorney’s office in Alaska stated.

According to the Department of Justice, the couple then applied for an additional $2 million in COVID-related grants in 2022.

The Department of Justice says Mavaega was arrested Wednesday at the Captain Cook Hotel and Fualema Jr. was arrested at his home.

They have both been charged with five federal counts including major fraud.

The indictment alleges a week after receiving the grant from the city in August 2021, nearly $200,000 was moved from the House of Transformations account to a personal checking account. The money was then allegedly used to pay the IRS a portion of back taxes owed by a for-profit company Mavaega and Fualema owned.

Two months later, the indictment alleges the defendants transferred another $200,000 to a Coinbase account to buy cryptocurrency.

Mavaega has served on two Anchorage city commissions: the Anchorage Equal Rights Commission, and the Housing, Homeless and Neighborhood Development Commission. She is still serving on both commissions as of Thursday. In a statement, a spokeswoman for Mayor Dave Bronson said the mayor has asked for Mavaega’s resignation, but she has refused.

“The Mayor cannot unilaterally remove a member of boards and commissions per municipal code. However, Ms. Mavaega’s service is under official review by the Board of Ethics,” read the statement.

ARPA grants were approved by the Anchorage Assembly and administered by the city administration.

Anchorage Assembly Chairman Christopher Constant provided an email statement saying he was glad the Department of Justice filed the charges.

“While both named individuals have the presumption of innocence, the facts presented by the case raise substantial concerns about the misuse of federal relief funds appropriated to ensure our community weathered the storm of the COVID-19 pandemic as best as possible. I look forward to the timely and effective administration of justice,” Constant said in the email.

Veronica Hoxie, the Bronson administration’s communications director, released the following statement on Thursday afternoon:

“Ms. Mavaega is still serving on the Anchorage Equal Rights Commission and the Housing, Homeless, and Neighborhood Development Commission. When she was investigated in May, the Mayor asked for her resignation, which she declined. The Mayor cannot unilaterally remove a member of boards and commissions per municipal code. However, Ms. Mavaega’s service is under official review by the Board of Ethics. The Board is addressing the issue and took initial public testimony in an executive session during its meeting on September 22. The matter is still under consideration by the Board.”

Hoxie later sent a statement from the mayor reacting to the indictment. That statement made note of earlier unrelated state action against the couple that banned them from serving as Medicaid providers.

“Someone with a history of fraud should have never received these funds. The grant applicants should have been vetted before the Assembly appropriated the funds. They decided who got money and how much,” Bronson said in the written statement.

Constant responded by admitting some responsibility but lobbing criticism back at the mayor.

“We appropriated the funding. It’s so interesting to see the mayor pointing fingers at the Assembly and shouting ‘separation of powers.’ The Assembly doesn’t have the authority to draft agreements and ensure compliance. That’s squarely in the hands of the mayor. That said, I do accept responsibility for voting yes to a fraudulent proposal made by friends of Mayor Bronson. I promise to be more careful vetting any proposal supported by the Mayor and his friends,” Constant wrote in an email.

Then, late Thursday afternoon, Constant and Vice Chair Meg Zaletal issued a press release saying it was “very disheartening” that the grant money was allegedly misused.

“Finally, it is our hope that the actions of a few bad actors do not detract from the incredible work an overwhelming majority of recipients achieved through federal recovery investments,” read the statement.