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Attorney General Ellison reaches settlement with charter school over misuse of funds by three former leaders

Minnesota Attorney General Keith Ellison announced today that a Burnsville charter school will enact reforms to address issues involving its former leaders, including insufficient board oversight of the former executive director. 

An investigation by the Charities Division of the Attorney General’s Office found that Abdiaziz Shafii Farah, founder and executive director of Gateway STEM Academy, violated his fiduciary duties to Gateway by steering nearly $300,000 to companies owned or controlled by three of the school’s directors or officers, including a company that Farah co-owned. 

The investigation also found that previous directors or officers violated their fiduciary duties to Gateway by failing to sufficiently oversee Farah and failing to have policies and procedures that would have detected and prevented the conflicts of interests. 

“Nonprofit charter schools must use their resources to further their educational mission, not to benefit insiders,” Attorney General Ellison said.  “The clear self-dealing by Gateway’s former executive director and some members of its board is extremely disappointing, as are the governance failures that allowed the misuse of funds to happen. I am encouraged that Gateway’s new leadership cooperated with our Office’s investigation, put controls in place to protect the school and its charitable mission going forward, and agreed to additional measures proposed by my office to help ensure a strong fresh start for the school.”

Farah, a founder and longtime executive director of Gateway, was indicted last year by a federal grand jury on several charges related to improper acquisition and use of child-nutrition funds, including wire fraud, money laundering, and conspiracy to commit those offenses. After news went public in January 2022 of Farah’s alleged role in the food-fraud scandal, Gateway accepted his request for a leave of absence and then replaced him as executive director. 

The AGO’s investigation, launched under Minnesota’s civil nonprofit corporation, charitable solicitation, and charitable trust laws, found that Gateway funds were paid to companies headed by Mahad Ibrahim ($173,602.65) and Mukhtar Mohamed Shariff ($117,255) while they served as Gateway board members in 2021 and 2022.  Ibrahim and Shariff were charged in the same federal child nutrition fund-fraud indictment as Farah. 

Under the terms of an Assurance of Discontinuance (“Assurance”) filed in Dakota County, Gateway agrees to, among other actions, work with its charter-school authorizer to perform an internal investigation of how the improper transactions occurred; ensure sufficient training for directors and officers regarding their duties under state and federal law; and not work again with the former directors and officers named in the Assurance. 

The AGO’s Charities Division has civil enforcement authority over the state’s nonprofit corporation, charitable-solicitation, and charitable-trust laws. The Charities Division does not enforce criminal laws.  Under Minnesota law, nonprofit board members and executives owe fiduciary duties to act in the best interests of the charities that they serve, including putting the interests of the nonprofit above any personal financial interests. Information about these fiduciary duties, and other resources to help nonprofit leaders properly serve their organizations, is on the AGO’s website at www.ag.state.mn.us/Charity/InfoNonProfits.asp.

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Watch out for puppy scams!

Michigan Attorney General Dana Nessel and the Humane Society of the United States are urging consumers to be wary of puppy scams as many people seek to purchase or adopt dogs during the holiday season. 

Many people enjoy gifting kittens, puppies and other pets to loved ones during the holidays, which creates an atmosphere ripe for scammers to exploit. Michigan residents in recent years have been tricked into paying for pets that do not exist or have adopted pets with undisclosed health or behavioral complications. And because these thieves are often outside the country or selling independently, the prospects of getting money back are extremely low.   

“Scammers are looking for any way to take advantage of consumers during the holidays and puppies are unfortunately not exempt,” Nessel said. “While many people may be eager to gift a furry friend during this time, I urge residents to be vigilant in their search to avoid being scammed. My office continues to prioritize protecting residents from predatory and deceptive business practices, and these puppy scams will ultimately result in heartbreak and financial loss. Always do your homework before making any purchase online to avoid being taken advantage of.”  

In addition to the deceptive practices of advertising puppies that do not exist or charging exorbitant fees, scammers are taking advantage of the holiday season as they use it as a reason to avoid in-person visits and demand additional fees.   

“Taking advantage of the holiday season by exploiting Michiganders’ love of animals is as cruel to people as it is to the dogs. For families looking to confidently adopt a happy, healthy pet, we encourage folks to skip pet stores and online sellers and visit one of our state’s many shelters or rescues, which are full of animals looking for their forever homes,” said Blake Goodman, Michigan State Director for the Humane Society of the United States. “HSUS is happy to partner with Attorney General Nessel to warn residents about pet scams to keep families and pets safe.” 

Attorney General Nessel released a Public Service Announcement in 2020 with tips to help consumers spot and avoid puppy scams. Consumers should remain hyper-vigilant and use these best practices:

  • Make sure the person you’re gifting the pet to wants the pet and is ready for ownership.
  • Research the breed and breeder.
  • If the breeder claims to have registered the puppy, research the pet.
  • Do not purchase a puppy sight-unseen.
  • Arrange for safe transport of the pet.
  • Use a credit card to make the purchase.
  • Retain all documents and communications from the breeder.
  • Consider contacting your local shelter for adoption.

Each year, consumers in the U.S. spend more than $1 billion buying puppies without realizing they may be doing business with scammers, puppy mill operators, or both. Puppy mills are inhumane dog breeding operations that keep dogs in overcrowded and unhealthy conditions and, depending on location, many are not regulated or inspected. Breeders hide their poor conditions by meeting buyers at offsite locations or selling through pet stores or online. 

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NASCO comments on 1023 EZ

Please find below NASCO’s Board letter to the IRS in response to the IRS’s solicitation for comments on its forms.  In the letter, we underscore NASCO’s longstanding position that the 1023-EZ should be revisited and reiterate the need for timely availability of Forms 990.  We highlight how the use of the Form 1023-EZ combined with the IRS’s retroactive reinstatement procedures under section 4 of Rev. Proc. 2014-11 can harm the public interest and enable scam charities to fly under the radar with serious consequences for donors, public funds, and confidence in the charitable sector. 

November 27, 2023, NASCO 1023 EZ Letter

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Couple Pleads Guilty to Stealing $30,000+from Winton Woods School Booster Club

A married couple accused of stealing more than $30,000 from a Winton Woods booster organization have both pleaded guilty in the case, Ohio Attorney General Dave Yost announced today.

C. Michael Trubl and Nancy Trubl faced charges stemming from misuse of the accounts of the Winton Woods Performing Arts Boosters within the Winton Woods City School District.

“They acted in concert to loot club coffers for their own financial gain,” said Yost, whose office is responsible for protecting and regulating the charitable sector. “Bravo to my Charitable Law team for exposing their shameful deceit.”

An investigation by Yost’s Charitable Law Section found that between January 2017 and March 2022, while Nancy Trubl was serving as the organization’s unpaid elected treasurer, the couple withdrew excess cash from the booster’s bank account to pay personal bills and personal living expenses, and made unauthorized personal purchases with a club credit card.

C. Michael Trubl pleaded guilty Monday in Hamilton County Common Pleas Court to one count of theft and one count of unauthorized use of property, both fourth-degree felonies, and Nancy Trubl pleaded guilty to one misdemeanor count of theft.

A restitution amount has yet to be determined, and sentencing is scheduled for Jan. 4, 2024.

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AG Yost Announces Settlement with Creator of Crowd-funding Campaign Who Didn’t Fulfill Promises

Ohio Attorney General Dave Yost has reached a settlement with the organizer of a Kickstarter campaign who collected $31,753 from 101 supporters but didn’t deliver the goods he promised in return for pledges. He also failed to turn over donations to the charities identified as the campaign beneficiaries until he received pressure from the Attorney General’s Office and local police.

Under the settlement, former Westerville resident Samuel Darling — who created the crowd-funding initiative “Turtle Conservation Diver” using the business name of Flamingo Collective — has agreed to provide restitution to supporters, to pay civil penalties and to not engage in additional crowd-funding campaigns in Ohio for at least five years.  

“When it comes to allocating funds for a charitable cause and it doesn’t materialize, it truly gets my blood boiling,” Yost said. “Consumers should have confidence that their investments in crowd-funding campaigns are protected by the law.”

The Kickstarter website allows individuals to create campaign pages to solicit monetary pledges from supporters. Once a campaign reaches its goal, the pledges are paid and the project creator is contractually obligated to deliver on the promises outlined in the campaign, including any specified rewards for contributions.

Darling committed to supplying wristwatches to donors, using the slogan “Buy a watch, save a turtle” and to giving a portion of the proceeds to turtle-conservation charities.

After collecting pledges in July and August of 2020, easily surpassing his fundraising goal of $18,000, Darling wrote on the campaign page that there were production challenges with the watches but assured supporters that the watches would be delivered.

After another “production delay,” Darling acknowledged in a June 21, 2021, posting on the campaign page that he couldn’t deliver the watches and promised to refund donors. He also wrote that all of the money contributed by donors had been used to buy the watches.

When refunds were slow to come, many donors filed complaints with the Federal Trade Commission and shared their dissatisfaction in the comments section of the Kickstarter campaign page.

The Attorney General’s Office initiated an investigation, discovering that Darling had deposited the donations into his personal bank account and had purchased cryptocurrency, among other things, but made no purchases toward fulfilling the campaign promises. The investigation also uncovered that Darling had no evidence that he ever attempted to produce the watches.

In November 2021, the Attorney General sued Darling, alleging violations of both the Ohio Consumer Sales Practices Act and the Ohio Charitable Organizations Act.

Under the settlement announced today by Yost, Darling, among other things, must:

  • Pay full restitution to any campaign supporters whose donations haven’t been refunded.
  • Pay a civil penalty of $2,000 for the consumer law violations and an additional $2,000 civil penalty for the charitable law violations.
  • Not conduct any “charitable sales promotions” or act as a “commercial co-venturer” in Ohio for five years and, after that period, only if he meets certain conditions.
  • Pay court costs.

Crowd-funding scams have been on the rise, leaving consumers vulnerable to deceptive campaign operators. This case underscores AG Yost’s dedication to protecting consumers and ensuring that campaign operators satisfy their obligations.

Contributors to the Turtle Conservation Diver campaign who haven’t received a refund are eligible for restitution. If you were promised goods you did not receive from this or another crowd-funding campaign, you can file a complaint by calling 1-800-282-0515 or by filing one online at OhioProtects.org.