HERMANTOWN, Minn. — The Minnesota Attorney General's Office filed a petition in early September ordering a nonprofit, which started in Duluth, to overhaul its policies and leadership after an investigation found it misused around $800,000 to help fund a former Hermantown coffee shop.
The office alleges that Praying Pelican Missions, which plans and leads international mission trips, misused funds by supporting Pelican Coffee. PPM’s president and CEO, Matthew Pfingsten, was the coffee shop’s majority owner when funds were routed to the shop, the attorney general's office alleges.
After a three-year investigation, the office filed documents in Ramsey County on Sept. 9 that state the nonprofit’s board of directors misused and improperly transferred around $800,000 in funds to an entity that the board’s president owned.
In a statement, PPM said "there is no evidence of ill intent" and that the coffee shop served as a way to connect the global community.
“Ultimately a failed (endeavor), it is believed that the initial concept was conceived with good intentions. Although there is no evidence of ill intent, proper protocols and guidelines were not followed for a nonprofit institution,” the statement reads.
Pfingsten started the nonprofit in Duluth in 2003 to lead mission trips around the world that promoted Christianity. Around 10 years later, PPM’s board of directors voted to open Pelican Coffee as an investment.
Accountants and lawyers advised the directors to operate the shop as a limited liability corporation and have PPM serve as the sole owner, ensuring the nonprofit would receive the shop's profits. But the directors voted to let Pfingsten hold a majority of the coffee shop's share with 51%, according to documents filed by the attorney general's office.
Throughout the coffee shop’s approximately five-year run, Pfingsten and other board leaders allegedly directed nearly $800,000 in funding for the shop and paybacks to its creditors. PPM employees were also paid to work for Pelican Coffee, an amount which is not included in the $800,000 figure. This resulted in “significant financial harm to PPM,” the documents reads.
The office states these transactions violated numerous Minnesota laws, including breach of director fiduciary duties, director conflicts of interests and others.
“Minnesotans donate to charity because they want to help people. Any nonprofit that receives their donations should use them to further its charitable mission — not subsidize its president’s for-profit businesses, to the tune of almost $1 million,” Attorney General Keith Ellison said in a statement. “The fact that this sum is so high is a consequence not only of the former president putting his personal financial interests ahead of PPM’s charitable mission, but of its former board being asleep at the switch and doing nothing to stop it.”
In a 2015 interview with the News Tribune, Pfingsten said the nautical-themed coffee shop would give away half of its profits to coffee-growing regions and youth efforts in Hermantown.
“I’m very excited,” said Pfingsten. “This has been a long time coming. I always wanted to own a coffee shop. But it’s more than that. It’s a mission.”
The office started its investigation in late 2016. Several months later, the board directed Pfingsten to transfer ownership to PPM. Instead, he told the board to “cut their losses” and sell the coffee shop, the documents read.
The board agreed and Pfingsten sold the coffee shop for $16,000. Before this, the board learned from an informal assessment that the shop was worth hundreds of thousands of dollars.
Pfingsten said he moved to sell it quickly because his family was moving to Florida, according to the documents.
Additionally, the documents allege that PPM referred mission trip participants to Mango Creek Travel for travel arrangements. Pfingsten owned Mango Creek.
PPM also wrote checks to Mango Creek for around $136,000. Pfingsten denied that PPM gave money to Mango Creek, and later said he denied this because the checks were a repayment to the travel company. This, he said, didn’t financially benefit Mango Creek, the document reads.
In March, PPM’s entire board of directors resigned because of the attorney general's investigation. PPM said it then terminated Pfingsten’s employment after a new board of directors conducted its own investigation.
“Praying Pelican Missions walked through a challenging season, but we are grateful to see God continue to use our organization for His Kingdom. Under new board governance and leadership, the organization is committed to the vision that Praying Pelican Missions was founded upon,” PPM’s statement reads.
“The good news is I'm hopeful about PPM’s future under its new leadership. I thank them for working with our office to put controls in place to protect the organization, its charitable assets, and Minnesota donors going forward,” Ellison wrote.