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With its multitudes of addicts, prostitutes, drifters and homeless people, Vancouver's Downtown Eastside is Canada's epicentre of human dysfunction – a magnet for the down-and-out. It is also the epicentre of the poverty industry, which seems to flourish no matter what else changes. There are social agencies on every block – more than a hundred of them, which compete and overlap to offer every imaginable kind of service. The giant of them all is the Portland Hotel Society, which receives $27-million a year in public funding. It manages housing for a thousand people at a dozen sites, as well as numerous other services. It is also largely responsible for Insite, the controversial supervised-injection site that has attracted world attention for its progressive approach to drug addiction.

The public face of the Portland Hotel Society is Mark Townsend, one of the most powerful and aggressive poverty advocates in Canada. But today he's in disgrace, forced out along with the other top executives after two devastating audits alleged that they had been enjoying lavish junkets and extra compensation on the taxpayers' dime. The details make the Senate expenses scandal (or Alison Redford's plane trips) look rather modest. They include trips to Paris and Vienna, stays at the Plaza in New York, a cruise down the Danube, tens of thousands spent on restaurant bills and limousine service, even a trip to Disneyland. The top executives – including Liz Evans, who is married to Mr. Townsend – also collected vacation payouts, child-care expenses, and rent for a home office.

If true, how could poverty entrepreneurs live like kings? Simple. Like senators, they may have felt they were entitled. After all, nobody worked harder than they did. Mr. Townsend and Ms. Evans built their enterprise from scratch and ran it for more than 20 years. Although entirely dependent on government money, according to the audit they behaved as if they owned it. They saw themselves as warriors, fighting for social justice against a callous and often hostile world. Mr. Townsend's main operating mode was righteous indignation and confrontation – so much so that last year Vancouver Coastal Health, one of his major funding agencies, threatened to cut him off.

But PHS also had many powerful friends. Their board (which resigned last week) was stacked with supporters. Their media coverage was almost universally enthusiastic. Progressive politicians, such as Larry Campbell and Philip Owen, were strong and loyal supporters. One of their executives, Dan Small, was married to Jenny Kwan, who, as the NDP MLA for the Downtown Eastside, has built her career on advocating for the plight of the downtrodden. This became embarrassing when it emerged that the Portland Hotel Society had paid for the family's trip to Disneyland, and other fancy travel. Ms. Kwan, who has since split up with her husband, says she had no idea that taxpayers had footed the bills, and she has paid back $35,000.

All this may go to show that no one is immune from cronyism – not even advocates for the homeless. Cronyism may explain why Mr. Townsend's empire was so untouchable for so long. The PHS does much more than operate housing for the homeless. It owns $58-million worth of real estate, and has an opaque tangle of other interests, including cleaning and maintenance services, laundries, a grocery store, a clinic, an art gallery and a credit union. The dealings among these entities are ripe for closer scrutiny.

The people who run the PHS are nothing if not entrepreneurial. They run a chocolate-and-coffee bar, where hard-to-employ women learn to make chocolate from ethically sourced, organic cacao beans. They've installed vending machines to sell 25-cent crack pipes to addicts. They've even launched a harm-reduction program that teaches alcoholics how to brew their own booze. Whether these initiatives really help hard-to-help people is difficult to say. But they definitely help the poverty industry.

And the fact that Mr. Townsend's poverty empire was able to operate unchecked for so long raises larger issues. What has the poverty industry accomplished, anyway? What have all those millions that we've poured into the Downtown Eastside – and the millions more to come – really bought us, other than a vague feeling that we must be doing good? Maybe we should start to ask.