Some Minnesota Charites Fail Duty of Care

The Minneapolis Star Tribune reported on Monday, October 27, that several Minnesota charities were bilked out of money .  The article further suggests that the nonprofits failed to exercise the charities’ duty to be prudent with donated money when investing with Tom Petters, a businessman with major holdings in Sun Country Airline and who is now jailed on federal fraud and money laundering charges.

See the excerpt below:

Minnesota charities scrambling to recover millions of dollars invested with businessman Tom Petters violated a basic duty to be prudent with donated money, according to experts in nonprofit finance.

For at least five years, religious nonprofits, led by Fidelis Foundation, based in Plymouth, made large, unconventional loans to businessman Tom Petters’ company — supposedly secured by merchandise — in return for interest payouts of 19 to 22 percent.

Six charities had more than $27 million invested with Petters when federal authorities alleged last month that he and others had run a massive Ponzi scheme that bilked investors out of more than $3 billion.

Petters, an entrepreneur with major holdings in Sun Country Airlines, Polaroid and other companies, is now jailed on federal fraud and money-laundering charges. He maintains he is innocent, though four others implicated in the alleged scheme have pleaded guilty to related charges.

As the criminal case developed, several of Petters’ companies were put into receivership and 10 filed for Chapter 11 bankruptcy protection.

Private investors lent far more to Petters’ companies than did charities. But experts in nonprofit management say that charity boards of directors have special responsibilities to be financially prudent with donated, tax-exempt money.

And they say the charities dropped the ball for years by making the Petters’ investments.

For the full story, please click here –Tribune.

AMT