Olympia ‘Diaper Guy’ named in $940K rent aid fraud investigation

The Thurston County Auditor’s Office initially requested an investigation into Lance Benson and his Lacey-based property management company in 2022. County audit documents identify at least $940,000 in rent aid payments to Benson’s company on behalf of properties whose owners told auditors they do not rent to tenants, do not work with Benson or disputed application details. 

But three years later, Thurston County’s leadership has not demanded Benson repay the money or taken public action to hold him accountable for the alleged scheme.

Leaders in neighboring Lewis County filed a lawsuit in July against Benson and his company, accusing him of using a fake lease to defraud the county of $17,600. Benson repaid Lewis County under an agreement announced on Tuesday, Sept. 23.

“This outcome sends a clear message that fraud against the county will not be tolerated,” Lewis County Commissioner Scott Brummer wrote in a press release.

Benson is well known in Olympia for his nonprofit Dry Tikes and Wet Wipes. Local news profiles refer to the hometown businessman as “the Diaper Guy.”

In the wake of the audit, Thurston County officials focused their scrutiny on the nonprofit distributing the rental funds — the Lacey-based Community Action Council — rather than Benson. Local law enforcement called the case a “trainwreck” that may have been referred to federal investigators at one point, but had otherwise “died a quiet death” in administrative back-and-forth between agencies. 

The U.S. Treasury last year demanded that Thurston County repay more than $668,000 tied to fraud, though county leaders say they have since negotiated that number down. Thurston County numbered among a small group of jurisdictions forced to repay federal rental relief dollars.

Reached by phone, Benson disputed the audit findings. He too blamed the improper payments on the Action Council, which he accused of aggressively pursuing his low-income tenants and encouraging them to apply for aid even if they were not behind on rent. He said he paid back over $50,000 after the Action Council contacted him with questions.

“I think Community Action had a lot to do with the wasteful spending and how they were pushing the money,” Benson said. “They would call my tenants all day, all night, late at night even. They would say, ‘Even if you don’t need the money, take the money.’” 

‘Chasing our tail’

Amid the economic upheaval of COVID-19, officials at all levels of government set up pandemic rent aid programs to prioritize speed in an effort to keep tenants housed and landlords whole. Those eased rules made fraud prevention difficult, Thurston County’s manager argued in a letter to Treasury officials last summer pleading for leniency.

Thurston County abruptly pulled the plug on its pandemic rent aid program in 2022 after a routine review flagged improper payments. 

Community Action Council initially denied that fraud had occurred and asked for policy changes to be written into its contract. County commissioners terminated the nonprofit’s contract during a closed-door meeting and auditors began digging through their books.

Auditor records obtained by Cascade PBS indicate Benson’s company submitted forms falsely claiming rent owed at 35 properties he did not manage or where listed tenants did not live.

“In most situations, property owners live in their home and have never rented out their home,” the 2022 letter stated. “[S]ome property owners stated that they do rent out their properties, but they were not under contract with the rental management company that received these rental assistance payments. In a few instances the property owners had previously used this property management company but were not using this company during the time that rental assistance was paid.”

Email records show that county auditors notified federal and county law enforcement, as well as the City of Lacey’s Police Department. Lacey Police declined to pursue the case, citing Community Action Council’s unwillingness to participate in a fraud investigation. 

Lacey Deputy Police Chief Robert Hollis recalled that the vagueness of the county’s program procedures made it hard to prove a crime had occurred. Hollis said the case “died a quiet death.”

Thurston County Sheriff Derek Sanders said one of his detectives looked into fraud allegations, but concluded that the sheer volume of suspicious claims, limited manpower and lack of cooperation from the Action Council as a potential victim made a case difficult to bring.

“This whole thing was a trainwreck,” Sanders said, singling out the Action Council for what he called negligence and improper vetting.

“You’re allowed to give your money away if you want to,” he added.

A spokesperson for the Thurston County Prosecutor’s Office said they never received any criminal or civil referrals from the sheriff for Benson.

Thurston County Commissioner Carolina Mejia told Cascade PBS that the previous sheriff, John Snaza, told her he had referred the fraud case to the FBI in 2022, but she has not heard any update since. An FBI spokesperson declined to confirm or deny an investigation, but records show an FBI special agent met with a Thurston County auditor. 

“I think,” Mejia said, “this is where we kind of get into a chasing our tail situation.”

The investigation

After fraud concerns derailed Thurston County’s rent relief program in 2022, auditors pored through the payment logs of Community Action Council, the nonprofit tasked with distributing the assistance. They also checked the books of another nonprofit subcontractor that has not been accused of wrongdoing.

An investigator in the Thurston County Auditor’s Office contacted landowners listed on 80 applications verified by Benson, documents obtained by Cascade PBS indicate. Of the landowners who responded, just 16 said they actually worked with Benson. And more than half of those payments still drew questions from auditors.

About one-third of respondents said they lived in their home and did not rent to anyone. Some rented, but not with Benson Management. One of the respondents who said he lived in his home was Benson’s brother, according to the county auditor’s office. 

“The preponderance of the evidence is that these people were not tenants at these properties,” said Chief Deputy Auditor Brandon Weber, who performed the investigation. 

But the Action Council failed to take basic steps that could have flagged the phony claims sooner, the investigation found, such as confirming that tenants actually lived at the properties or that the landlords listed on the applications actually owned or were authorized to rent the properties out.

The Action Council’s former leadership initially denied that any fraud occurred. The audit found more than $700,000 of suspected fraudulent payments issued by the organization to Benson’s company alone.

Reached by phone on Tuesday, Sept. 23, executive director Justin DeFour, who joined the organization in 2024, said he has not seen the audit. 

DeFour acknowledged that fraud likely occurred, but pushed back on the notion that the Action Council was at fault. He argued that the contract with the county did not require them to vet claims, and that the Action Council was directed to allow applicants to “self-attest” that they needed the money.

“In retrospect, yes, we were defrauded out of that money,” he said, “because these people self-attested to things that weren’t true.” 

In a written statement, DeFour added that new leadership has “overhauled” internal practices, instituting self-audits and verification checks using county land records.

Settling out of court

Benson’s public reputation appears largely untarnished. His company, Benson Management Services LLC, continues to do business with Thurston County’s Housing Authority, which has paid his company and him personally more than $500,000 in the past five years, according to county records. 

About two weeks ago, Thurston County Commissioner Wayne Fournier posted a photo of himself on Facebook aboard Benson’s “Diaper Bus.”

Fournier’s office did not respond to a phone call on Wednesday, Sept. 24.

In August, Thurston County reached a $275,000 settlement with the Action Council’s insurer, according to Commissioner Mejia. She noted the county never considered pursuing Benson.

Things went differently in nearby Lewis County. Like Thurston, Lewis County was forced to repay rent relief funds obtained fraudulently. Centralia police investigated the claim in 2023 and traced it to Benson, records show. They backed off after learning the FBI was involved, but the county later brought a civil suit. 

That it was one single claim rather than hundreds of claims did not matter to Lewis County Commissioner Scott Brummer. It was important to recover public funds, he said, no matter the amount, intended for struggling renters and landlords during a national crisis.

“This company took advantage of that and essentially stole those dollars from the taxpayers,” Brummer said. “We take it very seriously.”

Asked about the Lewis County lawsuit on Monday, Sept. 22, Benson called it an error and blamed former employees he has since terminated.

“When I was out of the office,” he said, “I had some employees that maybe went the wrong direction.”

Brandon Block is an investigative reporter at Cascade PBS, focused on federal funding, renewable energy, and Washington state government. You can reach him at brandon.block@cascadepbs.org.