Tag: Minnesota

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Attorney General Ellison sues nonprofit and its leaders for misusing funds and extensive governance violations; seeks to shut down nonprofit

State files lawsuit against ThinkTechAct Foundation and three of its leaders for running a sham nonprofit, misusing nonprofit funds obtained from the federal child nutrition program, and other charities violations

Minnesota Attorney General Keith Ellison has filed a lawsuit against Minnesota nonprofit ThinkTechAct Foundation and founder and President Mahad Ibrahim, board member Abdiaziz Farah, and executive director Bianca Scott, alleging they ran a sham nonprofit, misused nonprofit funds, and violated numerous other governance requirements under Minnesota charities laws. AG Ellison’s lawsuit asks the court to dissolve ThinkTechAct, impose civil penalties on the individual defendants, and prevent the individual defendants from serving as officers or directors of any nonprofit or charitable corporation in Minnesota in the future.

The complaint, filed in Hennepin County, accuses the defendants of pocketing sizable nonprofit assets obtained through the federal child-nutrition program. The complaint also alleges that ThinkTechAct failed to comply with numerous governance requirements for nonprofits, failed to register with the Attorney General’s Office as a soliciting public charity or charitable trust, failed to file required annual reports on its activities, and failed to cooperate with the Office’s investigation as required by law.

“It is wrong that ThinkTechAct’s leaders took advantage of funds meant to help children.” Attorney General Ellison said. “My office launched this investigation and filed this lawsuit because we cannot allow nonprofits to be hijacked to line the pockets of their directors and officers. The overwhelming majority of Minnesota’s nonprofit organizations do vital work supporting our communities, but sham nonprofits and their leaders who abuse the public trust must be held accountable.”

The Charities Division of the Minnesota Attorney General’s Office launched this investigation under Minnesota’s civil nonprofit corporation, charitable solicitation, and charitable trust laws. The Office’s independent investigation revealed that Ibrahim received at least $21.8 million of nonprofit assets, of which he steered more than $14.8 million to entities owned or co-owned by Farah.  Meanwhile, one of Farah’s entities made payments to Ibrahim of nearly $850,000 for “consulting.”  Ibrahim and Farah were criminally indicted in September 2022 by a federal grand jury on several charges related to the federal child-nutrition funds, including wire fraud, money laundering, and conspiracy to commit those offenses.

In Minnesota, the Attorney General through the Charities Division has civil enforcement authority over the state’s nonprofit corporation and charitable-solicitation, and charitable-trust laws. The Charities Division does not enforce criminal laws.  Under state law, nonprofit 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. The Attorney General’s Office provides additional information about these fiduciary duties, as well as other resources to help nonprofit leaders properly serve their organizations, on its website at www.ag.state.mn.us/Charity/InfoNonProfits.asp.

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Attorney General Ellison shuts down mismanaged school-supply charity, secures permanent ban against president

Minnesota Attorney General Keith Ellison announced today that his Office has shut down Welch Charities, a Minnesota nonprofit, and has permanently banned its president, Arturo Eguia, from operating a charity, having access to charitable assets, or soliciting charitable contributions in Minnesota. The charity, whose stated mission is to help children start the school year right, operates the annual Indian Bike Week motorcycle festival and fundraising event. The civil enforcement action, filed today in Ramsey County District Court, arises from failures in oversight by the organization’s board of directors that Eguia led, that resulted in the misuse of tens of thousands of dollars in charitable assets.   

Under the terms of the enforcement action, the charity must liquidate its assets, distribute them to another nonprofit organization with similar charitable purposes, and dissolve. In addition to a permanent charitable ban, Eguia is also subject to a penalty of $50,000 if he violates the terms of his settlement.   

“As Minnesota’s chief regulator of charities and protector of consumers, it’s my job to ensure nonprofits that raise money for charitable purposes use it as they promised their donors they would use it. Arturo Eguia took advantage of Minnesotans’ and motorcycle riders’ trust and generosity. Instead of using donations well-intentioned people made to Welch Charities to help low-income school children, Eguia instead used the money intended for children to enrich himself, travel on the charity’s dime, and prop up his for-profit business,” said Attorney General Ellison. “This settlement ensures the money the charity raised will actually be used to help low-income children — and that Eguia can never do anything like this again.” 

Attorney General’s investigation 

The Attorney General’s Office’s Charities Division launched this investigation under Minnesota’s civil nonprofit corporation and charitable trust laws, which require nonprofit directors and those who hold charitable assets to adhere to strict governance standards and fiduciary duties. The Attorney General’s Office’s investigation revealed that the charity’s board of directors never met, discussed, voted, or kept minutes on any operational decisions, allowing Eguia to run the organization without any input, supervision, or regard to Minnesota laws. The settlement agreement also alleges that the charity failed to properly manage and oversee its charitable assets: since at least August 2017, the charity failed to track its revenue, expenditures, or deposits; retain receipts of transactions; maintain a ledger; prepare financial statements; or otherwise keep accurate financial records.  

These failures to properly manage and oversee Eguia and the charity’s assets enabled tens of thousands of dollars of those assets to be misused. Despite the charity raising more than $142,000 over a four-year period, it only distributed $12,203 of these funds for charitable purposes. At the same time, Eguia’s personal spending and unchecked cash withdrawals tallied at least $36,856, including expenditures for restaurants and bars, hotels, auto parts, car washes, pest control, and custom motorcycle products.  

During its investigation, the Attorney General’s Office discovered that the charity’s inadequate record-keeping and internal controls made the amount of misuse difficult, if not impossible, to fully quantify. 

In Minnesota, the Attorney General has civil enforcement authority over the state’s nonprofit corporation and charitable trust laws. As in all cases involving potential misuse of charitable assets, the Attorney General’s Office will evaluate if there is sufficient evidence to make a referral to the appropriate authorities for criminal law enforcement. 

Under state law, nonprofit 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. The Attorney General’s Office provides additional information about these fiduciary duties, as well as other resources to help nonprofit leaders properly serve their organizations, on its website at www.ag.state.mn.us/Charity/InfoNonProfits.asp. 

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Attorney General Ellison wins $954,966 judgment and permanent ban against company Contributing 2 Combatants and its owner for bilking charitable donations intended for the military

State’s lawsuit alleged that Jacob Choinski used his for-profit company, Contributing 2 Combatants, to solicit donations from Minnesotans door to door while posing as a charity and kept the donations to line his own pockets.

Minnesota Attorney General Keith Ellison today announced that his Office has obtained a judgment of $954,966 against a Minnesota company that calls itself Contributing 2 Combatants and Coast 2 Coast Marketing, and its owner, Jacob Choinski, for violating charitable solicitation and consumer protection laws by defrauding Minnesota donors. Formally named PNW C2C Marketing, LLC (“C2C”), the company went door to door in Minnesota neighborhoods and misrepresented that C2C was a nonprofit soliciting donations to send care packages to servicemembers overseas. Choinski then spent the funds collected for his personal use and did not spend a single dollar on care packages since C2C’s inception in July 2018. The default judgment obtained by the State also permanently bans C2C from doing business in Minnesota and Choinski from any involvement in Minnesota’s nonprofit sector.

“Choinski’s conduct in this case was reprehensible. He used C2C to take advantage of Minnesotans who wanted to help our military servicemembers who are actively defending our country,” Attorney General Ellison said. “Our servicemembers overseas are making sacrifices for us every day and we will not stand by and allow their sacrifices to be exploited. This judgment ensures that Choinski and C2C can never engage in this conduct again.” 

C2C is a for-profit Minnesota limited liability company that advertised the cost of shipping a care package to service members overseas through door-to-door solicitation. While soliciting, however, C2C deceptively represented itself as a nonprofit by asking Minnesotans for donations and telling Minnesotans that their donations were tax deductible. C2C also claimed to partner with a charity to which it provided funds from its sales, but the State discovered that it never provided any funds to that nonprofit. Instead, Choinski diverted all the funds solicited for his personal use. The AGO’s judgment of $954,966 includes $70,966 in restitution for Minnesotans who were successfully solicited by C2C since its inception in 2018. The remaining $884,000 are civil penalties that must be paid to the State.

C2C solicited throughout the Twin Cities metro area, greater Minnesota, and other states. The lawsuit was filed in Ramsey County District Court and asserted that C2C and Choinski violated Minnesota’s Charitable Solicitation Act, the Uniform Deceptive Trade Practices Act, and the Consumer Fraud Act.

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Attorney General Ellison restructures charity and replaces its leadership following more than $2 million in self-dealing transactions

Minnesota Attorney General Keith Ellison announced today that his Office has replaced the leadership and overhauled the governance of the Minnesota nonprofit BFW Institute of Education & Research (“BFW”), also known as Pain Free Patriots, in a settlement agreement filed in Ramsey County District Court. BFW allegedly violated Minnesota law when its leadership directed that its charitable grantees seek pain relief only at insider-owned businesses, made grants of more than $2 million to those insider-owned entities over a period of four years, and turned a blind eye to hundreds of thousands of dollars in debt that BFW’s founder, Douglas V. Huseby, directed BFW to take from and make payable to him and his affiliated entities. 

“Nonprofits that serve our military servicemembers are entrusted with not only charitable dollars but the public’s trust and commitment to do the right thing.  Any nonprofit’s money should be used exclusively to further its charitable mission, and not to line the pockets of its insiders while doing so,” Attorney General Ellison said.  “Under its prior leadership, BFW breached its duties and that public trust by letting conflicts of interest run rampant, and its board of directors failed to recognize and prevent these abuses from occurring.  I am optimistic about BFW’s future under its new leadership, however, and thank them for working with our Office to put controls in place to protect the organization and its charitable mission going forward.” 

BFW issues grants for pain-relief care to veterans, first responders, law enforcement personnel, and their family members. The court order that the Attorney General’s Office filed today alleges that, under prior leadership, BFW approved only its related pain-relief provider, Ultimate Wellness Center (“UWC”) for grantees to seek care.  BFW’s relationship with UWC — which is wholly owned by BFW’s founder — had never been competitively evaluated, appropriately documented, or negotiated at arm’s length.  

BFW’s structural issues also contributed to unchecked conflicted decision-making. These conflicts took several forms, including:  

  • Four of BFW’s five directors had a financial interest in or were otherwise affiliated with UWC or in the two entities subcontracted to provide patient care at the clinic. 
  • None of BFW’s “approved provider” relationships, financial transactions, or other conflicted director arrangements were disclosed to or discussed by the Board of Directors when it entered into transactions, renewed agreements, or elected directors to the Board. 
  • Save for one, none of BFW’s board members signed required annual statements disclosing potential conflicts. 
  • BFW gave its founder and its Treasurer the authority to borrow money on behalf of the corporation and did not require the Board to approve loans—even those taken from BFW’s founder. 

As a result, BFW became heavily indebted to its founder and his related entities. BFW started borrowing money from its founder and his businesses as far back as FYE 2012, when it owed $88k. As of FYE 2020, BFW owed $712k to its founder individually and $1k to one of his businesses. The loans were not board-approved, had no written agreement, and some were not disclosed on BFW’s tax returns as insider loans. The loans were ostensibly taken out to fund veteran care, but grantee checks were to be redeemed only at insiders’ for-profit care providers. From 2016 through 2019, BFW made $2,020,607 in grants for care that were to be redeemed at those insider-owned providers. 

In this court order filed today, BFW agrees to secure the wholesale replacement of its board of directors and officers, including permanent separation from the organization of BFW’s founder, Douglas V. Huseby. The new BFW board will undertake formal reviews of the debts owed to its founder and determine all claims and remedies BFW may have arising out of the Attorney General’s allegations. BFW will also implement a series of governance reviews and changes, including adopting a written policy requiring competitive arm’s-length bidding for services, and take other steps to prevent these same types of abuses from happening again. 

A copy of the settlement is available on the Attorney General’s website. 

In Minnesota, boards of directors 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. The Attorney General’s Office has additional information about these fiduciary duties, as well as other resources to help nonprofit leaders properly serve their organizations, on its web site at www.ag.state.mn.us/Charity/InfoNonProfits.asp. To review this information — or to file a complaint about a nonprofit — contact the Attorney General’s Office by calling 800-657-3787 (Greater Minnesota) or (651) 296-3353 (Metro area) or submitting an online complaint through the Attorney General’s website at www.ag.state.mn.us/Office/Complaint.asp.

Tips before donating to charities claiming to help veterans: 

  • Do your homework first.  Investigate how a charity actually uses donations that it receives. People can research this information using the “Search for Charities” tab of Attorney General’s website, www.ag.state.mn.us, or by calling the Attorney General’s Office at (651) 296-3353 or (800) 657-3787. 
  • Be wary of high-pressure tactics. Don’t feel pressured to donate on the spot just because a charity claims to have an urgent need. This should be especially true if the person asking for money contacts you through unrequested telemarketing calls or mail solicitations. Reputable charities will happily accept your donation when you are ready to give. 
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Attorney General Ellison sues company for posing as charity helping service members, funneling donations to owner

Minnesota Attorney General Keith Ellison today announced that his Office is suing a company calling itself Contributing 2 Combatants and Coast 2 Coast Marketing, and its owner, Jacob Choinski, for violating charitable-solicitation and consumer-protection laws by defrauding Minnesota donors. The lawsuit alleges that the company, formally named PNW C2C Marketing, LLC (“C2C”), went door to door in Minnesota neighborhoods and misrepresented that C2C was a nonprofit soliciting donations to send care packages to servicemembers overseas. The lawsuit further alleges that Choinski spent the funds collected for his personal use — and did not spend a single dollar on care packages since C2C’s inception in July 2018.  

“Choinski enriched himself by using C2C to exploit Minnesotans’ generosity in the name of benefiting military service members who are serving all of us overseas,” Attorney General Ellison said. “This conduct is truly despicable. Our military members serving overseas undertake a tremendous sacrifice from which we all benefit. I will continue to aggressively pursue every company and person that exploits our service members’ sacrifice and preys on Minnesotans’ generosity.” 

C2C is a for-profit Minnesota limited liability company that claims to sell the cost of shipping a care package to service members overseas through door-to-door solicitation. C2C claims to partner with a charity to which it provides funds from its sales. C2C claims that its partner charity then sends the care packages using the money it gives the charity.  

The AGO’s lawsuit alleges that C2C has not given any money to the nonprofit with which it supposedly partners, despite soliciting over $70,000 for Minnesotans since July 2018. Choinski, as C2C’s sole owner, instead used C2C to solicit door to door in Minnesota and keep all the money received for his own purposes.  

The lawsuit also alleges that C2C deceptively represents itself as a nonprofit while soliciting and asks Minnesotans for donations, tells Minnesotans that their donations are tax deductible, and misleads Minnesotans to believe that they can choose the gender of the service member who will receive a care package and the branch of military they wish to support. The lawsuit further alleges that Choinski has been affiliated with other companies that have been accused of the same conduct as C2C in Minnesota, Iowa, and the Dakotas.

C2C has solicited throughout the Minneapolis–Saint Paul metro area, Greater Minnesota, and other states. The lawsuit, filed in Ramsey County District Court, asserts that C2C and Choinski have violated Minnesota’s Charitable Solicitation Act, the Uniform Deceptive Trade Practices Act, and the Consumer Fraud Act.