Minnesota Attorney General's Office
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
M - F 8 am - 5 pm
Thursday, March 13, 2014
ATTORNEY GENERAL SWANSON FILES LAWSUIT AGAINST
CHARITY FOR MISUSE OF CHARITABLE ASSETS
Eden Prairie Charity To Help At-Risk Kids Misspent Charitable Assets
For Personal Benefit Of Executive Director
Attorney General Lori Swanson today filed a lawsuit against Eden Prairie A Brighter Day Foundation (“ABDF”), an Eden Prairie charity to help at-risk youth, and its executive director, alleging that they misspent charitable assets for the personal benefit of the executive director.
“Minnesotans are generous with their charitable giving, and a charity should spend funds to further its charitable mission, not for personal gain,” said Attorney General Swanson.
ABDF was formed in 1995 with the nonprofit mission of offering students from at-risk backgrounds the opportunity to attend Eden Prairie public schools and to provide a “stable and supportive home environment in Eden Prairie.” Mr. Gardner Gay of Eden Prairie is its executive director and a board member. The lawsuit names both ABDF and Mr. Gay as defendants.
The lawsuit alleges that ABDF has not housed any students since June, 2013 and, since that time, has provided only limited “mentoring” of three to four hours per week to former students. Yet, the organization has spent significant assets since October, 2013, including expenditures that ABDF or Mr. Gay admit were for his personal benefit, such as $1,163 to Lifetime Fitness, $247 to SXM Sirius, $214 to Pinook Massage, $904 at the Mall of America, $1,000 in ATM withdrawals, and various air travel, car repair expenses, and restaurant purchases. The lawsuit also alleges that ABDF failed to provide written substantiation that many thousands of dollars spent since October—when the organization was largely defunct—were in furtherance of the organization’s charitable mission.
The lawsuit also alleges that Mr. Gay used ABDF funds to attempt to secure his wife’s option to purchase property in Eden Prairie in which the Gays reside and which once belonged to the charity. In 1997 ABDF purchased two adjoining Eden Prairie properties. The Gays moved into one of the homes, and both homes were used at that time to house at-risk youth. After a bank foreclosed on the two properties in 2011, a donor agreed to arrange for the purchase of one of the properties if the bank would donate the other property back to ABDF. Mr. Gay’s wife, Bridget Gay (who is not a board member or employee of ABDF) entered into a lease that allowed the Gays to live in the property for one year and gave Bridget Gay the option to buy the property for $200,000. Mr. Gay then facilitated the sale of the ABDF property with the intention of using the proceeds to facilitate the exercise of Bridget Gay’s option to purchase the other property. When the donor refused to allow Ms. Gay to exercise the purchase option—on the basis that it was for her benefit, not the charity’s—Mr. Gay used $66,000 in ABDF funds to pay for his wife’s litigation costs, when she sued the donor to secure her purchase option. Mr. Gay recently admitted in sworn testimony to the Attorney General’s Office that his wife may choose not to transfer the property to ABDF.
The State’s lawsuit was filed in Hennepin County District Court. It alleges eight counts of violations of the state’s charitable and nonprofit organization laws, including breach of fiduciary duty, breach of trust, failure to administer charitable assets for charitable purposes, failure to maintain adequate books and records, and failure to notify the Attorney General’s Office of its transfer of assets. The State seeks a temporary restraining order to stop Mr. Gay and ABDF from making further payments from the charity’s bank accounts until an accounting is done and safeguards are in place to ensure the proper administration of ABDF’s charitable assets. Among other things, the lawsuit also seeks recoupment of charitable funds spent for Mr. Gay’s personal benefit.