What's at stake?
The city has been championing modular construction as a way to build more affordable housing faster and cheaper.
The city is coming after the Poverello House after they failed to fulfill a contract to build two dozen modular tiny homes. But the Poverello House is pointing fingers at a local contractor who specializes in modular homes but failed to deliver, and who may be on the watchful eyes of state and federal prosecutors.
A failed effort to build about two dozen tiny homes has caused clashes between the City of Fresno and the Poverello House. Now City Hall appears poised to ratchet up the legal pressure, triggering confusion and frustration from the nonprofit.
The Fresno City Council voted on Thursday to initiate litigation against the Poverello House, one of the city’s premier nonprofit service providers for local homeless residents, following an unfulfilled service agreement, according to multiple sources who agreed to speak about the issue on the condition of anonymity.
In 2023, the City of Fresno entered into a contract with the Poverello House, with the understanding that the nonprofit would partner with a developer to build about two dozen tiny homes in the city.
In total, the City of Fresno committed about $2 million toward the project. The money came from two sources — about $965,000 from ARPA, the pandemic-era relief dollars handed out by the federal government, and $1 million through the state’s Encampment Resolution Funding grant.
The nonprofit has not delivered on this promise, leading the city to sue to recoup their funding. It is not immediately clear how much of the near $2 million the city is looking to claw back.
The council unanimously voted to pursue a lawsuit on Thursday while in closed session through a 6-0 vote. Fresno City Councilmember Mike Karbassi was absent from the day’s meeting.
Representatives for the Poverello House say that the issue stems from a nonresponsive contractor. They also said that members of the nonprofit have been interviewed by the FBI about their experiences with the contractor in question.
However, while the city prepares to mount a case against the local nonprofit, multiple sources from across the Central Valley identified the Poverello House as one of several victims of a years-long string of alleged fraud at the hands of a local contractor who they say is the subject of a federal and state inquiry over their business practices.
Zachary Darrah, CEO of the Poverello House, told Fresnoland that they could not answer questions about a potential city lawsuit as they had not yet been served legal papers and, thus, did not know what specific claims to respond to.
Darrah, in a call to Fresnoland on Thursday afternoon alongside Cary Catalano, a spokesperson for the nonprofit, acknowledged that there have been longstanding issues with the tiny homes project.
The Poverello House conducted a bidding process to identify and partner with a developer for the tiny homes, according to city documents. The winner was ultimately PreFab Innovations Inc., a Fresno-based modular housing manufacturer owned by contractor Dave Clevenger.
The City of Fresno had successfully partnered with Clevenger and PreFab Innovations before. The developer delivered on a separate agreement for modular homes for a housing project for at-risk youth in northwest Fresno in 2023.
But in this case, the Poverello House is insisting that Clevenger and his business are not delivering on their end of the bargain or engaging with them in good faith.
Attorney General Rob Bonta’s office filed a complaint in February of this year to strip Clevenger of his contractor’s license following similar claims from past business partners of PreFab Innovations.
Clevenger did not respond to requests for comment for this story.
Darrah and Catalano confirmed that the FBI had approached the Poverello House in connection with Clevenger and PreFab Innovations.
However, the two also insisted that the City of Fresno and the Poverello House had been in constant communication over issues with the tiny home project for years.
Darrah and Catalano said they’ve repeatedly offered to refund the city their $1 million in state funds, with one instance happening as recently as “a few weeks ago,” while continuing to work with the FBI to recoup the ARPA funding given to Clevenger.
“That’s why we’re caught off guard by this,” Catalano said.
Darrah added, “the city is well aware of this. Our counsel has been in contact with the (Fresno) City Attorney. This is not new information to them, so again I’m a little confused about everything that’s going on here.”
The two also said that the city has refused the $1 million refund offer.
Fresno City Attorney Andrew Janz disputed this characterization, in a text to Fresnoland on Friday.
“They are well aware the City has requested the full amount to be returned, totaling nearly two million in tax payer dollars. Poverello has asked us to forgive the remaining balance which we have communicated is unacceptable especially when the FBI and Attorney General are involved.”
He had initially declined to comment to Fresnoland about the lawsuit on Thursday, citing confidentiality surrounding matters discussed during the council’s closed session.
If the City of Fresno wins their lawsuit, it is not immediately clear if they would be able to redirect the $965,000 in ARPA money toward a different cause.
Local governments that were awarded money through ARPA had a deadline, which has long since passed, to allocate and spend that money.
Any unspent funding is required to be delivered back to the federal government.
That means that if the City of Fresno were to win their case and recoup their costs, they may have to immediately deliver that money back to the federal treasury.
The FBI declined to respond to Fresnoland’s request for comment on this story on Friday, citing their long-standing practice of neither confirming or denying on potential investigations or allegations of criminal misconduct.
Just a ruse?
Fresnoland approached multiple past business partners of Clevenger and PreFab Innovations for this story. They all described the Poverello House as a victim in the city’s impending legal battle, before going on to describe similar stories, alleging Clevenger and his company defrauded them of money or engaging in bad faith business practices.
For about three years, PreFab Innovations used to be located in a warehouse in downtown Fresno on 1801 Santa Clara Ave. The warehouse was a property owned by the Fresno Rescue Mission, a local faith-based nonprofit that provides services for the local homeless population.
Matt Dildine, the Mission’s CEO and effectively Clevenger’s landlord, told Fresnoland that they housed PreFab Innovation’s on a “sweetheart deal,” hoping to help a developer that he believed had “an altruistic vision of building affordable housing” in the city.
Dildine said Clevenger failed to pay the Mission rent on the downtown Fresno warehouse for months. He added that he was initially apprehensive to escalate the issue given his belief that PreFab Innovations was on its way to becoming a force for good in the local affordable housing development space.
He also said he was coaxed into backing off after Clevenger asked Dildine to entertain the possibility of selling him the downtown warehouse location.
“Looking back,” Dildine said, “it was all just a ruse to try and get more time.”
Dildine said news of his new working relationship with Clevenger saw him get approached by individuals and organizations warning him of past bad behavior.
“It just so happened that everywhere I went around town, I would hear about another person who felt like they had been defrauded by Dave Clevenger.”
In 2025, Dildine eventually went to court to evict Clevenger and his business. Dildine won the case, and was paid about $80,000 in past-due rent and damages to the property.
The two parties did not end on good terms.
“I mean, he left a bunch of trash and environmental waste and all this stuff,” Dildine said.
Dildine is part of several past business partners of Clevenger scattered across the Central Valley who have similar stories of bad behavior on behalf of the contractor.
Some of those past business partners managed to get the attention of California Attorney General Rob Bonta, the state’s highest ranking prosecutor and law enforcement official.
One of the listed individuals in Bonta’s filing, who agreed to speak with Fresnoland on the condition of anonymity, said they were sad but not surprised to hear news about the city’s plans for a lawsuit against the Poverello House.
“We’ve been trying to sound the alarm on this guy for years,” the source said. “This man is taking public and private funds and he’s wasting them. He’s defrauding people and cities.”
This story has been updated to include a response from Fresno City Attorney Andrew Janz.
