For two years, Attorney General Ellison’s office has held Feeding Our Future accountable

Minnesota Attorney General Keith Ellison and his office have been deeply involved for two years in holding Feeding Our Future accountable. The Attorney General’s Office worked closely with the Minnesota Department of Education as they provided suspicions of fraud and other evidence and information to the FBI, which directly led to the federal investigation and indictments of Feeding Our Future and its founder Aimee Bock. Without the Attorney General’s involvement alongside MDE in flagging that fraud and turning it over to the criminal investigative power of the federal government, there would likely have been no federal investigation or indictments. The FBI has praised this cooperation.

“For two solid years, Attorney General Ellison’s office has been holding Feeding Our Future accountable,” said John Stiles, deputy chief of staff and spokesperson for Attorney General Ellison’s office. “Early on, the Attorney General’s Office worked side by side with MDE to flag evidence of fraud, demand correction from Feeding Our Future, defend MDE from Feeding Our Future’s scurrilous lawsuit — and most importantly, bring evidence of criminal fraud to the FBI, which led directly to the federal criminal investigation and criminal indictments of Feeding Our Future for fraud. Attorney General Ellison’s office has also used its civil charities-enforcement authority to investigate for violating state charities law and make sure a court is supervising its dissolution so it can’t misuse any of its remaining assets.

“A long, complex criminal investigation such as this involves many law-enforcement partners and different levels of jurisdiction. MDE and Attorney General Ellison’s office brought their suspicions of fraud to the FBI and fully cooperated with the investigation that they jump-started because the federal government has criminal jurisdiction over fraud involving federal programs, which neither MDE nor the Attorney General’s office have, and because the penalties for this kind of fraud in federal law are hefty. In addition to having criminal jurisdiction, the federal government also has massive investigative power and resources that dwarf those of State government: indeed, four federal law-enforcement agencies have said that hundreds of agents were involved for many months in collecting evidence of fraud across multiple continents, and that their work is not yet done. The 48 indictments that the U.S. Attorney announced last week are a direct result of the choice the Attorney General’s office and MDE made chose to turn their concerns over to the federal government and to cooperate fully with them. The FBI praised this cooperation in the press conference where the Department of Justice announced these indictments.

“This is what true law-enforcement cooperation looks like. It is the opposite of grandstanding. At no time was Attorney General Ellison willing to compromise the integrity of the investigation by grandstanding either to reveal it or get in the way of it, which would have tipped off the perpetrators and stopped the investigation in its tracks. Instead, he sacrificed scoring political points to make sure these perpetrators of fraud were held accountable to the greatest extent.

“The facts that Attorney General Ellison has used the power of his office to hold Feeding Our Future accountable are overwhelming,” Stiles concluded.

For more than two years, the Attorney General Ellison’s office has played three important and distinct roles in holding Feeding Our Future accountable.

1) Being at the origin of federal criminal investigation and indictments; no federal indictments without MDE and AGO

The Minnesota Department of Education and the Attorney General’s Office are at the origin of the federal criminal investigation and 48 indictments. Without their efforts, there would have been no criminal investigation or indictments.

The Attorney General’s Office represents more than 100 State of Minnesota agencies, boards, and commissions — like the Minnesota Department of Education — in all litigation. This is a core function of the Attorney General’s Office.

In the fall of 2020, when MDE first confronted Feeding Our Future about its suspicious growth, Feeding Our Future responded by threatening a lawsuit. This is when the Attorney General’s Office stepped in. From that point forward, the Attorney General’s Office was by MDE’s side through all stages of the litigation and investigation. In November 2020, Feeding Our Future sued MDE. This timeline is laid out in the affidavit in support of the FBI’s January 2022 search warrants against Feeding Our Future (see paragraphs 73-75).

In the spring of 2021, MDE contacted the FBI with its concern that Feeding Our Future was committing criminal fraud, and the FBI began to investigate. This timeline is laid out in the FBI’s January 2022 affidavit (see paragraphs 51-53). Subsequently, representatives of Attorney General Ellison’s office met confidentially with the FBI on a regular basis to cooperate fully with the investigation. The FBI repeatedly made it clear to the Attorney General’s Office and MDE that it should not disclose the existence of the investigation in Feeding Our Future’s state court lawsuit so that it could proceed without tipping off Feeding Our Future and the target of the investigation.

In April 2021, MDE issued Feeding Our Future a serious deficiency and issued a stop-pay to allow MDE to validate the legitimacy of Feeding Our Future’s claims for reimbursement before paying them. Feeding Our Future immediately sought court intervention to force MDE to lift the stop pay. At the hearing on Feeding Our Future’s motion, the court told MDE it had “a big problem” with its decision to stop payments to Feeding Our Future. That hearing did not result in any written order from the court, so there was nothing to appeal. MDE and the Attorney General’s Office did not pursue the stop-pay through other legal channels because to do so would have risked having to disclose to Feeding Our Future MDE’s report of suspected fraud to the FBI and the subsequent federal criminal investigation.

In June 2021, the same court found MDE in contempt of court for not processing Feeding Our Future’s applications to open more food sites, many of which we now know were fraudulent, quick enough. The court imposed a total $47,500 in fines and fees on MDE, including requiring it to pay the fees of Feeding Our Future’s attorneys.

The suspicions of fraud that MDE and the Attorney General’s Office presented to the FBI was the trigger for the FBI’s criminal investigation, which eventually involved hundreds of agents, investigators, and attorneys from the FBI, the U.S. Department of Justice, the IRS, and the U.S. Postal Service. This investigation led to the January 20, 2022 execution of search warrants against Feeding Our Future, and the September 20, 2022 federal criminal indictments of 48 people, notably including Feeding Our Future founder Aimee Bock, for alleged fraud in the amount of $250 million.

Feeding Our Future asked to dismiss its lawsuit against MDE on the day the federal search warrants were executed. MDE is now seeking to recover the fees and costs it incurred defending itself against Feeding Our Future’s baseless legal attacks.

At the September 20, 2022 press conference announcing the indictments of 48 people connected with Feeding Our Future, including Aimee Bock, for alleged fraud in the amount of $250 million, FBI Special Agent in Charge Michael Paul offered this praise (at 29:14-29:22): “I want to thank the Minnesota Department of Education for their cooperation and their continued transparency throughout the investigation.” Attorney General Ellison’s office was by MDE’s side supporting and representing the agency throughout the federal investigation.

2) Investigating Feeding Our Future for violations of State charity and nonprofit law

In addition to holding Feeding Our Future accountable through its representation of the Minnesota Department of Education, the Attorney General’s Office has been holding feeding our future accountable through its authority to regulate charities and nonprofits. Under State law, the Attorney General is the chief civil regulator and registrar of charities in Minnesota.

In January 2019, the Attorney General’s office issued a letter to Feeding Our Future stating that it needed to register as a charity as required by Minnesota law. Feeding Our Future did not respond, so in February 2019, the Attorney General’s Office sent another letter. Feeding Our Future finally registered as a charity in Minnesota in March 2019. However, for the next two years, Feeding Our Future failed to file any of the documents required to keep its registration active. On October 25, 2021, the Attorney General’s Office withdrew Feeding Our Future’s registration to solicit funds after it failed for two years to file annual reports and financial records. Feeding Our Future also failed to file its financial records with the IRS. (See paragraphs 18-21 of this petition.) Feeding Our Future only rectified its failure to file in late January 2022, after the FBI executed search warrants against it.

In the same role, the Attorney General’s Office has been conducting a civil investigation into potential violations of Minnesota’s nonprofit and charities laws by Feeding Our Future.

In February 2022, Attorney General Ellison’s office sent a civil investigative demand to Feeding Our Future in which the Office alleged that it “has reasonable grounds to believe that Feeding Our Future and its officers and directors have, among other things, failed to properly administer and use assets held for charitable purposes; breached fiduciary duties; failed to comply with statutory requirements for nonprofit corporations; made false and/or deceptive representations in connection with the solicitation of donations; and engaged in charitable solicitation without registration.” (See paragraph 42 of this petition.)

The investigation is ongoing.

3) Overseeing Feeding Our Future’s dissolution in court

Using the same civil authority to regulate charities, when Feeding Our Future announced its intent to dissolve in the wake of the federal search warrants, Attorney General Ellison’s office petitioned a Dakota County court in March 2022 to supervise Feeding Our Future’s dissolution. If the Attorney General’s office had not used its authority in this way, Feeding Our Future’s founder Aimee Bock — the ringleader of the alleged fraud — would have had been in control of disposing of Feeding Our Future’s assets.

In April 2022, the court granted Attorney General Ellison’s request to supervise the dissolution. As a result of this successful request, Feeding Our Future is now restricted from being able to do anything with their remaining assets other than what the court approves, with input from Attorney General Ellison’s office. The supervised dissolution proceedings are ongoing.

Former Head of Homeless Shelter Pleads Guilty, Sentenced to Jail for Stealing From the Non-profit Organization

The former executive director of Casa Nueva Vida (CNV), a now-closed publicly funded non-profit homeless shelter that had locations in Boston and Lawrence, has pleaded guilty and been sentenced to jail in connection with stealing nearly $1.5 million from the organization and lying under oath to conceal his self-dealing, Attorney General Maura Healey announced today. 

Manuel Duran, age 70, of West Roxbury, the former executive director and board president of CNV, pleaded guilty today in Suffolk Superior Court to the charges of Perjury (4 counts), Larceny over $1,200 (3 counts), and Making False Entries in Corporate Books (2 counts). Following the plea, Judge Michael Doolin sentenced Duran to one year in the House of Correction followed by four years of probation, with the conditions that he complete 250 hours of community service and can no longer work as a fiduciary or in transitional housing. The AG’s Office previously recommended a sentence of four to six years in state prison, with six years of concurrent probation. 

Duran was also ordered to pay restitution with the amount to be determined at a hearing at a later date in December.  

“Manuel Duran’s schemes and blatant abuse of power led to the destruction of a valuable charitable organization and basic services for our state’s most vulnerable residents,” said AG Healey. “We are pleased to deliver accountability in this case.” 

The criminal charges are the result of a joint investigation by the AG’s Office and the Office of the Inspector General, with assistance from Massachusetts State Police assigned to the AG’s Office. The Inspector General’s Office initiated an investigation following an anonymous tip. Duran was indicted on the charges in September 2021. 

 “A short, anonymous email to our fraud hotline sparked our investigation, which uncovered Duran’s theft of $1.5 million – funds intended to help some of the most vulnerable people in our community,” said Acting Inspector General Natalie Monroe. “Our office, working with the Attorney General’s Office, has ensured that Duran is held accountable for his actions.” 

CNV, headquartered in Jamaica Plain, housed over 150 primarily Spanish-speaking families at 14 locations in Boston and Lawrence. As CNV’s Executive Director, Duran essentially had complete control of CNV’s $7 million budget, directed procurement and site selections, and managed facility maintenance and staffing across all locations. As of July 1, 2022, CNV’s shelter service programs have become a division of Heading Home, one of the largest emergency housing and shelter providers in the Boston area.  

The joint investigation revealed that Duran used his power to lease four of his privately owned properties and one owned by a relative to CNV as shelter locations, hiding his interests in the transactions through use of limited liability companies. On behalf of CNV, Duran signed four annual disclosure forms under oath, attesting falsely that the organization, among other things, was not a party to any transaction in which any of its officers, directors, or trustees had a material financial interest. The forms were submitted to the AG’s Non-Profit Organizations and Public Charities Division.  

The investigation further revealed three different fraudulent financial schemes that Duran used to steal funds from CNV.  

From 2014 to 2021, Duran skimmed rent money paid by CNV for a shelter site in Lawrence by using a shell company he set up as a middleman. Duran made inflated rent payments from CNV to the shell company, and had it pay less than half of that amount to the owners of the property, who were unaware of the scheme. In this way, Duran siphoned off more than $1.1 million for his personal use.  

The joint investigation also revealed that between 2012 and 2020, Duran created fraudulent invoices and contracts to obtain checks made out to three different vendors for work they never performed. The named vendors would cash the checks with Duran present, and provide the cash directly to him. Duran stole $242,012 from CNV in these fraudulent vendor payments for purported services including renovations, lead abatement, and asbestos abatement. 

The joint investigation also found that between 2014 and 2019, Duran stole approximately $140,831 from CNV by depositing directly into his own business bank account paychecks issued to a seasonal maintenance employee for CNV who was in Puerto Rico when the paychecks were issued.  

In a separate civil matter, the AG’s Office sued Duran in September 2021 for abusing his position to improperly funnel state money to himself, all while falsely certifying compliance with state regulations designed to detect such improper self-dealing. The lawsuit alleged Duran established shell companies to purchase properties he then leased to CNV at above-market rates, allowed him to funnel more than $2 million in state funds to himself. In January, the AG’s Office reached a civil settlement with Duran requiring him to pay $6 million and permanently banning him from accepting a position as a fiduciary at a public charity; working on or with any business connected to the state or a state entity or any business that receives money from the state; and from forming a separate entity operating under a different name in order to violate the settlement. 

 The criminal case against Duran was prosecuted by Assistant Attorney General Mindy Klenoff, of AG Healey’s White Collar and Public Integrity Division, and Victim Witness Advocate Lia Panetta, with assistance from Massachusetts State Police assigned to the AG’s Office, and Senior Investigators Jack Meyers and Will Bradford from OIG. 

Attorney General Bonta Conditionally Approves Sale of California Nevada Methodist Homes to Pacifica Companies LLC

 California Attorney General Rob Bonta today conditionally approved the sale of California Nevada Methodist Homes (CNMH), a nonprofit that owns and operates two continuing care retirement communities in California. The conditional approval would allow the retirement communities in Oakland, Alameda County, and Pacific Grove, Monterey County, to come under the ownership of Pacifica Companies LLC (Pacifica). Under California law, any transaction involving the sale or transfer of control of a healthcare facility owned by a nonprofit must secure the approval of the state Attorney General. The conditions Attorney General Bonta approved today ensure access to quality healthcare and will allow current residents to continue receiving care at the facilities while protecting their outstanding entrance fee obligations.

“Our primary responsibility when reviewing healthcare transactions is to protect the people. With our conditional approval today, we ensured that the residents of these retirement communities continue to receive the best possible care and quality of life,” said Attorney General Bonta. “Due to the strong conditions we’ve imposed on the sale of these continuing care retirement communities, the individuals and families living in Oakland and Pacific Grove can remain in the communities they called home and receive uninterrupted health care.”

The two continuing care retirement communities (CCRCs) are Lake Park, which is located in Oakland and includes a 35 licensed-bed skilled nursing facility (SNF), and Forest Hill, which is located in Pacific Grove in Monterey County and includes a 26 licensed-bed SNF. Both facilities also include a Residential Care Facility for the Elderly (RCFE). The proposed $34 million sale is part of CNMH’s chapter 11 bankruptcy proceeding filed March 16, 2021. The Bankruptcy Court has already approved the proposed sale to Pacifica pursuant to an order entered on February 8, 2022. 

The expert report identified safety issues at other Pacifica facilities. Between 2017 and 2022, Pacifica’s rate of citations was significantly higher than the average rate for all RCFEs in California. The most troubled Pacifica facilities were in Oakland, Oxnard, and Modesto.

Therefore, as part of his conditional approval, Attorney General Bonta has imposed specific conditions for the sale which would require Pacifica to, among other things:

  • Appoint a monitor to ensure resident safety;
  • Report semi-annually on safety; 
  • Preserve access to skilled nursing facility services for the community;
  • Consult with a Community Advisory Board on a quarterly basis; 
  • Pay off debt, including existing bond debt and existing lines of credit;
  • Honor residents’ contracts; and 
  • Ensure that outstanding entrance fee obligations to current residents are paid.

The California Department of Justice’s Healthcare Rights and Access Section (HRA) works proactively to increase and protect the affordability, accessibility, and quality of healthcare in California. HRA’s attorneys monitor and contribute to various areas of the Attorney General’s healthcare work, including nonprofit healthcare transactions; consumer rights; anticompetitive consolidation in the healthcare market; anticompetitive drug pricing; privacy issues; civil rights, such as reproductive rights and LGBTQ healthcare-related rights; and public health work on tobacco, e-cigarettes, and other products.

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Cosponsored by National Association of State Charity Officials October 12-14, 2022 History Colorado Center Denver, CO  Virtual Option Also Available REGISTER TODAY The 2022 NAAG/NASCO Charities Conference will take place in Denver, Colorado from October 12-14, 2022. The conference is the only annual event at which charity regulators and nonprofit organizations and their attorneys, accountants, fundraisers, and advisers can meet, learn about, and discuss issues of interest to the charitable sector. The conference will provide an opportunity to hear from regulators and others in the nonprofit sector on current issues, including sessions on Establishing an Effective and Healthy Board Culture in a Stress-Filled World and Challenges and Changes in Charitable Fundraising. Internationally-noted scholar Professor Una Osili, of the Indiana University Lilly Family School of Philanthropy, will provide the keynote address on Trends in the Philanthropic and Charitable Sectors and their Implications – What the Numbers Tell Us. Attendees will also hear from top state officials on regulatory priorities. The sessions on Wednesday, October 12 are open to the public, starting at approximately 8 a.m. and ending with a networking reception that evening. Sessions on October 13-14 are open to government staff only with the government portion of the conference ending at 11 a.m. on Friday, October 14.   Click here to view the public agenda. We plan to keep the conference webpage updated with the most current version. Registration Prices (in-person attendance):  Attorneys General of NAAG Member Offices: Complimentary Government Staff: $500 General Admission: $500  The registration deadline is Friday, September 30, 2022. A $100 late fee will be assessed to late registrants. Additional information regarding pricing can be found here.  This conference will also be offered virtually for government staff from October 12-14, and for general admission on October 12. Below is the registration cost for the virtual option.   Registration Prices (virtual attendance): Attorneys General of NAAG Member Offices: complimentary  Staff of Attorney General NAAG Member Offices and Staff of Non-AGO NASCO Members: complimentary  Other Government and General Admission: $200 NAAG will apply for CLE for eligible attendees per CLE accrediting body guidelines. ROOM BLOCK NAAG has secured a room block at The Art Hotel. The group rate is $259.00 per night plus tax. This rate will be available until Tuesday, September 20, 2022, or until the block is full, whichever comes first. There are several other hotels close to the History Colorado Center that you may wish to consider, including but not limited to: The Slate DenverHampton Inn & Suites – Convention Center, Hyatt Place Denver, Downtown, and Homewood Suites – Convention Center. These, and other hotels in the area, may offer government rates. Please email Amy Jackson at ajackson@naag.org with any questions. REGISTER TODAY If you have created your NAAG account and do not see the correct pricing listed, please make sure you have entered your organization under your profile. Attorney general staff will need to wait until after your account is verified by your office before being able to register for this event. The 2022 NAAG/NASCO Annual Charities Conference is coordinated by the National Association of State Charity Officials and the NAGTRI Center for Consumer Protection, whose mission is to assist and enable state and territory attorneys general in protecting the public in the areas of consumer protection and charitable asset and entity oversight by providing information, technical assistance, and support; facilitating cooperation among attorney general staff through open dialogue and advanced communication systems; planning, organizing, and conducting training and seminars for the exchange of ideas and information on relevant matters; and promoting the development of effective programs and education for the protection of the public. Please check out the Center’s consumer-facing website at ConsumerResources.org.
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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