Attorney General Ellison shuts down charity after investigation finds self-dealing transactions and governance violations

December 3, 2024 (SAINT PAUL) — Minnesota Attorney General Keith Ellison announced today that he has reached a settlement with Minneapolis nonprofit Youth Leadership Academy d/b/a Gar Gaar Family Services (“Gar Gaar”), that requires the organization to dissolve in the wake of its violations of state laws concerning self-dealing and governance.  The settlement does not preclude any future claims against individuals.

In the settlement, filed in Hennepin County District Court, the Attorney General alleges that Gar Gaar paid more than $100,000 to a for-profit company owned by two of Gar Gaar’s officers and that an audit found several significant deficiencies in Gar Gaar’s internal controls, among other issues. Gar Gaar, created in 2020 at the height of the COVID-19 pandemic, agreed to dissolve.

“Charitable nonprofits hold assets in trust for the public, not their directors, and nonprofit board members are obligated to act in the organization’s best interests, not their own,” Attorney General Ellison stated. “Gar Gaar’s leaders seemed not to understand either of these crucial facets of Minnesota nonprofit law, so I am shutting them down.”

Gar Gaar participated in the federal child nutrition program in the summer of 2021. When it applied to participate in the year-round program during the school year, however, the Minnesota Department of Education, which administers the program, declined Gar Gaar’s application after identifying “numerous instances of mismanagement” in Gar Gaar’s operation of the summer program, including an inability to account for the use of over $2 million in federal funds. Gar Gaar appealed the Department of Education’s decision, but in February 2023, the Minnesota Court of Appeals upheld it, finding that “Gar Gaar lacked financial viability and financial management.” The Charities Division of the Attorney General’s Office subsequently initiated an independent civil investigation under the state’s nonprofit-corporation, charitable-solicitation, and charitable-trust laws. The Charities Division does not have authority to 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.

The public may submit complaints to the Attorney General about nonprofit directors and officers putting their own interests before the charity’s interests using this online form. The Office may also be reached by calling (651) 296-3353 (Metro area), (800) 657-3787 (Greater Minnesota), or (800) 627-3529 (Minnesota Relay).