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

Charity was victim of insider misuse and governance violations; tens of thousands of dollars misused

 

August 25, 2022



August 24, 2022 (SAINT PAUL) -- 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 http://www.ag.state.mn.us/Charity/InfoNonProfits.asp.

The public may submit complaints about nonprofit directors putting their own interests before the charity’s interests using a complaint form on the Attorney General’s website, or by calling (651) 296-3353 (Metro area), (800) 657-3787 (Greater Minnesota), or (800) 627-3529 (Minnesota Relay).

 

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