DEMA’s sudden collapse followed resignations of unpaid employees, then layoffs

Employees of the for-profit homeless services provider DEMA Consulting and Management went unpaid for a month before a wave of resignations and layoffs completed the embattled contractor’s sudden collapse on Wednesday, The Press Democrat has learned.

Nearly a dozen key employees, including the company’s director of operations, resigned Wednesday, and by Thursday, the Sonoma County Health Services Department was left managing two housing sites for homeless people, with the assistance of another contractor, FS Global.

DEMA had been expected to staff the sites until May 31, after the county supervisors ordered the health department to transition away from the troubled contractor. Supervisors ordered the changeover after a Press Democrat investigation triggered a county financial inquiry that was unable to account for millions of dollars that DEMA billed the county.

On Thursday afternoon, a distraught Michelle Patino, DEMA’s CEO and founder, called and apologized to Sonoma County Health Services Director Tina Rivera for being unable to staff the two sites — Mickey Zane Place, a hotel converted to housing for medically vulnerable elderly people, and the Emergency Shelter Site on the county’s administrative campus.

Patino did not initially respond to requests for comment from The Press Democrat Thursday. Late Friday afternoon, however, she texted that “The business is closed.” She added only a few terse answers to a handful of questions.

The company also contracts with Harris County government in Houston. Its status there was not immediately clear, and Patino did not respond to questions about it.

The company’s collapse marked a sudden and emotional end for site residents and the staff.

A front-line DEMA employee who was suddenly told not to come to work last week said it was a bitter blow for people who had tried to focus on serving local vulnerable residents despite months of scrutiny by the public and county officials.

“I’m furious (that) boots-on-the ground staff looked like sh-t when we’re not, and I’m furious for how it worked out,” said the employee, who worked at the tent site until she was laid off Wednesday. “All I know is that me and my co-workers have busted our asses and we care about every single person that comes into that camp.”

Witnessing the collapse

Employees in Sonoma County who witnessed the collapse and ultimately left the company themselves faulted Patino for the abrupt ending and were left worrying about when and whether they’d receive their final paychecks.

Asked if she was working to get her employees paid, Patino texted “yes.” Otherwise, Patino wrote, she was “devastated” and did not wish to comment or speak to a reporter.

Unpaid DEMA staff stayed at work for weeks despite their frustrations, out of loyalty to the site residents, they said.

“Staff did not just walk out, it was a struggle,” one employee told The Press Democrat. “They wanted to be there for the residents.”

Though Patino has in the past accused the county, which has paid the company more than $26 million over the last three years, of holding up her payments, both DEMA employees and county officials said the county had recently made deposits to the company.

The county deposited $280,000 into a DEMA account on Friday, April 26, bringing the total payments made to the company last month to $460,000, Rivera told The Press Democrat through a spokesperson Friday. DEMA had not yet submitted its invoices for March or April, Rivera said.

The April 26 payment was enough to cover staff salaries, but early in the week, employees learned that Patino had told her management staff that the company would not make payroll for the second pay period in a row, according to three employees who were on hand for the events.

The employees agreed to speak only on condition of anonymity, saying they feared retaliation from Patino.

Wave of resignations

Tensions inside the company came to a head on Wednesday, when DEMA’s director of operations, Adelia Godoy, resigned, sources told The Press Democrat. That was followed by a wave of around 10 more resignations, mostly of administrative staff, including the managers of both homeless sites, according to the three former employees.

The same day, Patino informed staff through an email she was going to “turn over the business to a new owner,” who would be able to turn the company around, according to a screenshot of the message obtained by The Press Democrat.

Sonoma County Department of Health Services spokesperson Sheri Cardo said the agency had no knowledge of any transfer of ownership. In response to voice mails from The Press Democrat seeking comment on Friday, the woman Patino named as a new owner sent a text message saying, “I did not purchase the company.”

She declined to comment on why Patino would have named her as the new owner.

In her email to the staff, Patino said she intended to remain engaged “as a consultant until there is a smooth transition.”

But beginning Wednesday night, DEMA human resources director Helen Ghosheh called the remaining staff at the sites and told them Patino had ordered her to conduct layoffs, according to the three employees. More than a dozen employees appear to have been laid off.

On Thursday, Patino fired Ghosheh, according to the two former employees. It was unclear whether any Sonoma County employees of DEMA remain.

DEMA’s payroll in the past was handled by DEMA’s co-founder and Patino’s wife, Mica Pangborn. The two are now estranged, and Patino fired Pangborn in March, according to court documents filed in a legal dispute between the two.

Pangborn told The Press Democrat she was unable to comment.

Some DEMA employees reported receiving direct deposits on Friday, but others have not been paid or were only paid for the current pay period and not the preceding one. Employees are also owed for hours worked before Thursday, as well as unused paid-time off and sick time, according to the three former employees, and some are worried about their ability to collect unemployment without official letters of termination.

DEMA is coming under scrutiny in Texas as well. On April 23, the Harris County Commissioners Court ‒ the local governing equivalent of the county supervisors ‒ paused an expansion of DEMA’s contract in that county to run a crisis response team for homeless people.

County officials during that meeting said the company was under a local investigation by the Harris County Auditor’s Office, sparked by an inquiry from Sonoma County’s auditor. The scope and nature of the Texas investigation wasn’t discussed in the public meeting, and the auditor did not respond to several Press Democrat inquiries in the weeks since.

The company was hired by the Harris County Department of Public Health after that agency came under the helm of former Sonoma County health director Barbie Robinson.

The commissioners’ agenda for their May 7 meeting includes a proposal to contract an outside firm for an independent audit of the company.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. Follow him on X (Twitter) @AndrewGraham88