62-CV-19-6438

Filed in District Court

State of Minnesota
9/9/2019 9:15 AM

STATE OF MINNESOTA DISTRICT COURT

COUNTY OF RAMSEY SECOND JUDICIAL DISTRICT

Case Type: Other Civil

(Charitable/Nonprofit Violations)

Court File No. _______________

In the Matter of Praying Pelican Missions PETITION FOR ORDER

APPROVING ASSURANCE
OF DISCONTINUANCE

The State of Minnesota, by its Attorney General, Keith Ellison, hereby petitions the

Court, pursuant to Minn. Stat. §§ 8.31, subd. 2b, for an Order approving the attached,

fully-executed Assurance of Discontinuance between the State of Minnesota, through its

Attorney General, Keith Ellison, and Praying Pelican Missions.

Dated: September 9, 2019 Respectfully submitted,

KEITH ELLISON
Attorney General
State of Minnesota

/s/Carol R. Washington
CAROL R. WASHINGTON
Assistant Attorney General
Atty. Reg. No. 0390976

445 Minnesota Street, Suite 1200

St. Paul, Minnesota 55101-2130
(651) 757-1298 (Voice)
(651) 296-1410 (TTY)
carol.washington@ag.state.mn.us

ATTORNEYS FOR STATE OF MINNESOTA

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Filed in District Court
State of Minnesota
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STATE OF MINNESOTA DISTRICT COURT

COUNTY OF RAMSEY SECOND JUDICIAL DISTRICT

Case Type: Other Civil

(Charitable/Nonprofit Violations)

Court File No. _______________

In the Matter of Praying Pelican Missions ASSURANCE OF

DISCONTINUANCE

WHEREAS, this Assurance of Discontinuance (“Assurance”) is entered into pursuant to

Minnesota Statutes section 8.31, subdivision 2b, between the State of Minnesota, through its

Attorney General, Keith Ellison (“State” or “AGO”) and Praying Pelican Missions (“PPM”);

WHEREAS, the AGO has authority to enforce Minnesota’s laws relating to charitable

organizations, charitable trusts, and nonprofit corporations under state statutes and common law,

including as parens patriae. See, e.g., Minn. Stat. §§ 8.31, 309.57, 317A.813, and 501B.34;

WHEREAS, PPM is a Minnesota nonprofit corporation organized under Minnesota

Statutes chapter 317A, and its registered office address is located at 8011 34th Avenue South,

Suite 33, Minneapolis, Minnesota, 55425. PPM is exempt from federal income taxation pursuant

to section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3). PPM first registered

with the AGO as a soliciting charitable organization pursuant to Minnesota Statutes section

309.52 on or around November 30, 2005, and is currently registered to solicit charitable

contributions in Minnesota;
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WHEREAS, until March 21, 2019, when they resigned due to the AGO’s investigation,

PPM’s board members included Matthew Pfingsten, Kevin Meyer, Donald Schmidt, Timothy

Schnoor, and Jason Swartz (collectively “Former Directors”);

WHEREAS, Matthew Pfingtsen was PPM’s Board Chair, President, and Chief Executive

Officer (“CEO”). Pfingsten was a PPM board member, officer, and employee during all time

periods relevant to this Assurance prior to March 21, 2019;

WHEREAS, Timothy Schnoor was a PPM board member and Treasurer. Schnoor was a

PPM board member and officer during all time periods relevant to this Assurance prior to March

21, 2019;

WHEREAS, Jason Swartz was a PPM board member and its Vice President of Strategic

Relations. Swartz was a PPM board member and employee during all time periods relevant to

this Assurance prior to March 21, 2019;

WHEREAS, Kevin Meyer was a PPM board member during all time periods relevant to

this Assurance prior to March 21, 2019; and

WHEREAS, Donald Schmidt was a PPM board member during all time periods relevant

to this Assurance prior to March 21, 2019;

NOW THEREFORE, the AGO and PPM hereby agree to entry of an Assurance of

Discontinuance with the following terms and conditions:

ALLEGATIONS

1. The AGO states and alleges as follows:

2. PPM is a Minnesota nonprofit corporation based in Minneapolis that was

formerly located in Duluth. Its charitable mission is to plan and lead international and domestic

missions trips promoting Christianity in various manners.

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3. In 2017, PPM raised more than $8.2 million in revenue. About $763,000

consisted of contributions solicited from the public, including about $37,000 from Minnesota

donors, and about $7.5 million consisted of program service revenue resulting from PPM

charging fees to mission trip participants and selling products from an online store.

I. PPM’S FORMER DIRECTORS BREACHED THEIR FIDUCIARY DUTIES, BREACHED

TRUST, AND VIOLATED THE NONPROFIT ACT BY MISUSING PPM ASSETS FOR THE
BENEFIT OF A FOR-PROFIT CORPORATION WHOLLY OWNED BY PPM’S FORMER
BOARD CHAIR, PRESIDENT, AND CEO.

4. From 2013 through 2018, PPM, through its Former Directors Matthew Pfingsten,

Kevin Meyer, Donald Schmidt, Timothy Schnoor, and Jason Swartz engaged in a series of

transactions for the benefit of a for-profit coffee shop named Pelican Coffee Inc. (“Pelican

Coffee”), which was solely owned by Pfingsten, PPM’s former Board Chair, President, and

CEO.

5. Such transactions were made for the benefit and under the direction of Pfingsten,

despite his material conflicts of interest. PPM’s other Former Directors—Meyer, Schmidt,

Schnoor, and Swartz—repeatedly failed to act independently of Pfingsten and in the best

interests of PPM in approving these transactions.

6. These transactions were not only unlawful under the Minnesota Nonprofit

Corporation Act (“Nonprofit Act”), Minn. Stat. ch. 317A, and the Minnesota Supervision of

Trusts and Trustees Act, Minn. Stat. §§ 501B.33-.45 (“Charitable Trust Act”), but as discussed

further below, they caused significant financial harm to PPM.

A. PPM’s Former Directors Improperly Transferred Hundreds of Thousands of

Dollars to a For-Profit Coffee Shop Solely Owned by Pfingsten.

7. In 2013, Former Directors voted to open Pelican Coffee as an “investment.”

Former Directors discussed in board meetings that Pelican Coffee’s presumed profits could be

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used to fund PPM’s charitable activities. The venture was not in the usual and regular course of

PPM’s activities.

8. Former Directors obtained advice from accountants and lawyers to incorporate

Pelican Coffee as a limited liability corporation, with PPM as the sole member/owner. This

structure would ensure that PPM would control Pelican Coffee’s operations and receive its

profits. Contrary to this advice, Former Directors voted that PPM would own a 49% minority

share of the coffee shop, and Pfingsten would be the majority owner at 51%. When deposed by

the AGO, PPM’s Former Directors testified that they wanted Pfingsten to have a more

significant ownership stake in Pelican Coffee so he would have more control over it without

requiring PPM oversight.

9. Former Directors also voted that both PPM and Pfingsten were to initially invest

substantial sums in the proposed joint venture. PPM and another Pfingsten-owned business

named Mango Creek Travel initially invested in Pelican Coffee, but Pfingsten made no personal

investment in the venture.

10. Former Directors never memorialized the terms of its proposed joint venture with

Pfingsten in a contract, including each parties’ respective ownership shares, investment

obligations, repayment terms, or consequences if one party did not live up to their agreed-upon

obligations as part of the joint venture.

11. Former Directors further pledged PPM’s assets as security for a loan received

from the U.S. Small Business Administration (“SBA”) to capitalize Pelican Coffee, without any

analysis that such a guarantee could be reasonably be expected, in the judgment of Former

Directors, to benefit PPM.

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12. Despite his material financial interest in the transaction, Former Directors allowed

Pfingsten to lead, participate in, and vote on most, if not all, material decisions related to the

transfer of money and other PPM assets from PPM to Pelican Coffee.

13. Contrary to both professional advice and PPM’s vote, Pfingsten incorporated

Pelican Coffee as a for-profit corporation, and designated himself as the sole shareholder.

Pfingsten never gave PPM any ownership interest in Pelican Coffee. Pfingsten testified that he

viewed the ownership of Pelican Coffee as a “technicality.”

14. Neither PPM, nor any individual Former Director other than Pfingsten, served as

a Pelican Coffee board member or officer. PPM never received any kind of ownership interest

in, legal control over, or benefit from Pelican Coffee. Indeed, Pfingsten, who was a former

consumer lending analyst at Wells Fargo, represented on Pelican Coffee’s SBA loan application,

under threat of criminal penalty, that PPM would “not guide the for-profit coffee shop” in any

way.

15. Despite having no ownership interest in or legal control over Pelican Coffee, PPM

expended at least $771,624 between 2014 and 2018 to capitalize Pelican Coffee, fund its ongoing

operations, and pay off its creditors. Some PPM employees also worked at Pelican Coffee, and

PPM subsidized these employees’ wages for work performed on behalf of Pelican Coffee, which

is not reflected in this figure. Former Directors further expended significant time and effort

discussing Pelican Coffee instead of PPM’s business and affairs.

16. Pelican Coffee was not profitable, so Former Directors approved an additional,

unsecured “line of credit” in 2016, allowing it to obtain tens of thousands of dollars a month

from PPM. Former Directors allowed Pfingsten and Pelican Coffee staff to obtain these funds

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directly from PPM’s finance department without PPM board or management pre-approval or

oversight. These payments hurt PPM’s bottom line.

17. These actions and inactions violated, among other statutes, Minn. Stat. §§

317A.251, subd. 1 (breach of director fiduciary duties), 317A.361 (breach of officer fiduciary

duties), 317A.255, subd. 1 (director conflicts of interest), 317A.501 (limits on loans to and

guarantees of obligations of directors), and 501B.41 (breach of trust), and provide grounds for

equitable relief under Minn. Stat. § 317A.751, subd. 5.

B. Former Directors Voted to Discipline a Whistleblower for Raising Concerns

About Pelican Coffee Expenses, and Failed to Appropriately Address the
Problem.

18. In August 2016, PPM’s Finance and Operations Director (“Finance Director”)

sent Former Directors detailed correspondence alerting them that the Pelican Coffee

expenditures presented financial and legal problems for PPM.

19. The Finance Director specifically alerted Former Directors that PPM did not own

Pelican Coffee, Pelican Coffee was not fulfilling its obligation to pay PPM back, and PPM

should not be expending money and devoting PPM staff time to further the interests of a for-

profit company it did not own.

20. Former Directors purported to conduct an investigation into this report, which

consisted only of speaking to Pfingsten and lower-level employees with no role in PPM’s

finances or governance. Former Directors did not interview the Finance Director or other

finance staff as part of its investigation, or share his complaint with PPM’s CPA, auditor, or

lawyers.

21. Other than purportedly reviewing PPM’s regularly scheduled annual audit, which

Pfingsten presented to the board, Former Directors took no steps to investigate the claims

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concerning misuse of PPM’s charitable assets. Rather, Former Directors, under the direction of

Pfingsten, voted to discipline the Finance Director.

22. Former Directors voted to do so notwithstanding PPM’s handbook, which is

applicable to all PPM “employees, volunteers, and Board of Directors,” and which states: “No

employee will be disciplined or otherwise penalized for raising a concern in good faith.”

23. These actions and inactions violated, among other statutes, Minn. Stat. §§

317A.251, subd. 1 (breach of director fiduciary duties), 317A.361 (breach of officer fiduciary

duties), and 501B.41 (breach of trust), and provide grounds for equitable relief under Minn. Stat.

§ 317A.751, subd. 5.

C. In the Midst of the AGO’s Investigation, PPM “Approved” Pfingsten’s Sale

of Pelican Coffee’s Assets at a Substantial Loss.

24. The AGO initiated an investigation into PPM in late 2016. In April 2017, Former

Directors discussed in a board meeting how Pfingsten was still the sole owner of Pelican Coffee.

Former Directors instructed Pfingsten to transfer ownership of Pelican Coffee to PPM. Pfingsten

never transferred ownership of Pelican Coffee to PPM, however, and Former Directors never

took any steps to ensure the transfer was made.

25. Rather, while the AGO’s investigation was still ongoing, Pfingsten convinced the

other Former Directors to “cut their losses” and sell Pelican Coffee. Such a sale prior to the

transfer of ownership limited PPM’s ability to recoup its Pelican Coffee-related expenditures or

control the terms of the sale.

26. Despite PPM never having received an ownership interest in Pelican Coffee,

Former Directors purported to agree to allow Pfingsten to sell Pelican Coffee’s assets to “any

buyer” who expressed interest.

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27. Despite his material financial interest in the transaction, Former Directors allowed

Pfingsten to lead, participate in, and vote on all PPM decisions related to the transfer of assets

from Pelican Coffee to a third-party buyer.

28. Prior to the sale, Former Directors obtained an informal assessment from its

independent auditor valuing Pelican Coffee’s assets at hundreds of thousands of dollars. With

Former Directors’ knowledge and approval, and with assistance of counsel, Pfingsten sold

Pelican Coffee’s assets to a buyer for $16,000. Pfingsten testified that he had a desire to quickly

get rid of Pelican Coffee because “our family is moving to Florida.”

29. Pfingsten used the entire proceeds of the sale to pay Pelican Coffee creditors other

than PPM, without objection from Former Directors.

30. Despite their knowledge of the AGO’s ongoing investigation into PPM’s prior

dealings and monetary support of Pelican Coffee, Former Directors did not notify the AGO of

Pfingsten’s intent to sell Pelican Coffee’s assets. The AGO only learned of the sale after the fact

when PPM filed its annual report with the AGO in November 2017.

31. These actions and inactions violated, among other statutes, Minn. Stat. §§

317A.251, subd. 1 (breach of director fiduciary duties), 317A.361 (breach of officer fiduciary

duties), 317A.255, subd. 1 (director conflicts of interest), and 501B.41 (breach of trust), and

provide grounds for equitable relief under Minn. Stat. § 317A.751, subd. 5.

D. Former Directors Purported to Discharge Any Obligation by Pelican Coffee

or Pfingsten to Repay PPM.

32. In the fall of 2017, PPM filed its 2016 audit with the AGO. The audit stated that

PPM management had determined that Pfingsten-owned Pelican Coffee’s obligation to PPM was

“entirely uncollectable.” The audit further stated that, as a result, PPM had discharged the entire

amount of Pelican Coffee’s—and by extension, Pfingsten’s—obligation to pay PPM back.

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33. PPM’s auditor identified Pfingsten and PPM’s finance staff as providing

information for the audit. Former Directors allowed Pfingsten to lead, participate in, and vote on

all PPM decisions and communications with its auditor related to the purported discharge of

Pelican Coffee’s obligations to PPM.

34. Former Directors had conducted no analysis on whether PPM should attempt to

collect the obligation from Pelican Coffee or Pfingsten, as its sole owner, or whether the

discharge of this obligation could be reasonably be expected, in the judgment of Former

Directors, to benefit PPM.

35. Despite their knowledge of the AGO’s investigation into PPM’s dealings with

Pelican Coffee, Former Directors did not notify the AGO of PPM’s intent to discharge Pelican

Coffee’s or Pfingsten’s obligations to PPM. The AGO only learned of this occurrence after the

fact when PPM filed its annual report with the AGO in November 2017.

36. After learning of the sale of Pelican Coffee assets and discharge of its obligations

to PPM, the AGO deposed each Director in the spring of 2018. Multiple Former Directors

testified that, despite PPM’s audit stating otherwise, they had not made a final decision on

whether or not to discharge Pelican Coffee’s or Pfingsten’s obligations to PPM, and were still

considering the appropriate course of action.

37. In November 2018, however, PPM filed its audited financial statements with the

AGO for 2017. In a note concerning related-party transactions, PPM’s audit stated that PPM

allowed a “complete write off of the note receivable balance of $678,252.”

38. Despite the AGO’s ongoing investigation, Former Directors did not notify the

AGO of PPM’s intent to discharge Pelican Coffee’s obligations to PPM, thereby terminating a

potential avenue for PPM to recover the money expended on Pelican Coffee.

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39. PPM’s auditor also disclosed that PPM gave an “additional $93,372” to Pelican

Coffee during 2018 “in order to payoff [Pelican Coffee’s] outstanding debts.” Yet again, PPM

made these additional transfers to Pelican Coffee during the AGO’s investigation of its previous

Pelican Coffee transactions, without notifying the AGO. In total, PPM transferred nearly

$800,000 to Pelican Coffee or its creditors.

40. These actions and inactions violated, among other statutes, Minn. Stat. §§

317A.251, subd. 1 (breach of director fiduciary duties), 317A.361 (breach of officer fiduciary

duties), 317A.255, subd. 1 (director conflicts of interest); 317A.501 (limits on financial

assistance to directors), and 501B.41 (breach of trust), and provide grounds for equitable relief

under Minn. Stat. § 317A.751, subd. 5.

II. PPM FILED FALSE DOCUMENTS WITH THE AGO.

41. PPM also filed documents with the AGO containing misrepresentations that

obscured its self-dealing transactions.

42. In its Form 990 for the year 2014 filed with the AGO on or around December 30,

2015, PPM checked “no” to the question of whether PPM was “a party to a business transaction

with . . . [a]n entity of which a current or former officer, director, or key employee . . . was an

officer, director, trustee, or director or indirect owner.”

43. This was false. As described above, PPM transferred significant sums of money

to Pelican Coffee, including approximately $50,000 in 2014. Pelican Coffee’s sole shareholder

was and always had been Pfingsten, a PPM officer and director.

44. PPM further failed to complete the corresponding schedules requiring it to

describe these Pelican Coffee transactions, which would have allowed the AGO and other

regulators to analyze the appropriateness of the transactions in detail.

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45. These actions violated Minn. Stat. § 309.53 (requirements for documents

submitted to the AGO).

III. PPM FALSELY TOLD THE AGO THAT IT TRANSFERRED NO MONEY TO MANGO CREEK
TRAVEL, ANOTHER PFINGSTEN-OWNED BUSINESS.

46. Pfingsten also solely owned a travel agency called Mango Creek Travel (“Mango

Creek”), a for-profit corporation. PPM referred all of its mission trip participants to Mango

Creek to book their travel arrangements. These referrals to Mango Creek from PPM made up

93% of Mango Creek’s revenue between 2012 and 2017.

47. Neither PPM, nor any of its individual former board members other than

Pfingsten, served as a Mango Creek board member or officer. PPM never had any kind of

ownership interest in, legal control over, obligation to, or liability for, Mango Creek.

48. As part of its investigation, the AGO served PPM interrogatories in a Civil

Investigative Demand pursuant to Minnesota Statutes section 8.31. In response to an

interrogatory requiring PPM to identify the amount of money it provided to Mango Creek, PPM

stated that it had provided “zero (0)” dollars to Mango Creek.

49. The AGO also examined Pfingsten under oath on March 16, 2018. The AGO

asked Pfingsten if PPM had ever given money to Mango Creek, as follows:

Q. Has PPM ever given Mango Creek money?

A. No.

50. The AGO also specifically asked Pfingsten about PPM’s Interrogatory answer on

this subject in his deposition, as follows:

Q. Then it says, “Monies invested or provided by PPM zero (0).” So

you see that?
A. Uh-huh.
Q. So this is saying that PPM did not invest or provide any money to
Mango Creek Travel, is that right?
A. Correct.

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Q. And then is that correct that PPM provided no money to Mango

Creek Travel?
A. Correct. Mango Creek Travel transferred a bunch of business over
to PPM. And so we, like I said, it was quite the opposite.

51. In the deposition, the AGO produced checks that PPM had written to Mango

Creek in 2017 totaling approximately $136,000. Pfingsten testified that such payments served

to reimburse Mango Creek for credit card expenditures that Mango Creek had incurred on PPM’s

behalf. Pfingsten further testified that he did not disclose such transfers in PPM’s interrogatory

answers because they only served to repay Mango Creek for a supposed past obligation incurred

on behalf of PPM, and conferred no financial benefit on Mango Creek other than the repayment

of this supposed debt.

52. In November 2018, approximately eight months after Pfingsten’s deposition,

PPM filed its audited financial statements for 2017. The audit disclosed that “Praying Pelican

Missions advanced $136,497 to Mango Creek Travel, Inc. (a related party for profit

organization) during the year ending December 31, 2017.” Directly contrary to Pfingsten’s

testimony, PPM’s independent auditor characterized the transfer as a “note receivable” owed to

PPM—not an obligation PPM owed to Mango Creek—and stated that Mango Creek’s obligation

to repay PPM for the note receivable remains outstanding.

53. Such transfers were not in the best interest of PPM. They also occurred prior to

Pfingsten’s March 6, 2018, testimony, and were known to Pfingsten at the time as the sole owner

of Mango Creek and as the Board Chair, President, and CEO of PPM.

54. The audit further stated that PPM had transferred additional sums to Mango Creek

during 2018 without the AGO’s knowledge. Once again, despite the AGO’s ongoing

investigation, Former Directors did not notify the AGO of PPM’s intent to transfer such funds to

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another Pfingsten-owned, for-profit business. In total, PPM transferred at least $149,306 to

Mango Creek since January 1, 2017.

55. These actions and inactions violated, among other statutes, Minn. Stat. §§

317A.251, subd. 1 (breach of director fiduciary duties), 317A.361 (breach of officer fiduciary

duties), 317A.255, subd. 1 (director conflicts of interest); 317A.501 (limits on financial

assistance to directors), and 501B.41 (breach of trust), and provide grounds for equitable relief

under Minn. Stat. § 317A.751, subd. 5.

IV. THE ABOVE UNLAWFUL CONDUCT IS EVIDENCE OF, AND WAS CAUSED BY,
VIOLATIONS OF NONPROFIT ACT PROVISIONS DESIGNED TO ENSURE PROPER
GOVERNANCE.

56. Many of the above-referenced violations were the result of, and evidence of,

Former Directors’ overall failure to act in the best interests of PPM and their relinquishment of

control over PPM to Pfingsten alone.

57. Additional evidence of Former Directors’ governance failures under the Nonprofit

Act include, but are not limited to, the following:

58. Former Directors were not aware of the basic obligations of nonprofit directors.

Some Former Directors testified that they were not aware of the fiduciary duties owed by

nonprofit directors, or other requirements for nonprofit directors under Minnesota law, including

conflict-of-interest procedures and limitations on financial transactions with directors.

59. Former Directors failed to familiarize themselves with PPM’s internal policies,

procedures, or bylaws. Multiple Former Directors were not even aware of the existence of such

documents. Former Directors failed, in turn, to abide by the standards set forth in these

documents.

60. Former Directors failed to familiarize themselves with PPM’s key financial

documents, including its annual Internal Revenue Service filings, its audited financial statements,
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and its filings with the AGO. Multiple Former Directors were not even aware of the existence of

such documents.

61. Former Directors completely ceded their authority over PPM to Pfingsten.

Multiple Former Directors testified that they believed that their role was to personally support

Pfingsten, rather than to serve as an overseer of Pfingsten and his actions on behalf of PPM. All

Former Directors testified that they had never voted against a proposal raised by Pfingsten. On

multiple occasions where Pfingsten acted in contravention to a board vote, Former Directors

failed to address this conduct.

62. The above allegations constitute violations of Minn. Stat. §§ 317A.201 (board

direction and control over nonprofit), 317A.251, subd. 1 (breach of director fiduciary duties),

317A.361 (breach of officer fiduciary duties), and 501B.41 (breach of trust), and provide

grounds for equitable relief under Minn. Stat. § 317A.751, subd. 5.

63. Despite their potential liability to PPM for the above violations, Former Directors

continued to serve on PPM’s board until March 21, 2019, when they resigned as a result of the

AGO’s investigation. Until March 21, 2019, Pfingsten continued to serve as PPM’s Board

Chair, President, and CEO. Each Former Director had a personal interest in avoiding liability to

PPM that was a direct conflict of interest with PPM’s interest in recovering the significant

amounts of PPM’s charitable assets misused or wasted by Former Directors.

64. As such, the AGO recommended that PPM voluntarily appoint a leadership

structure independent of Former Directors if it wished to negotiate a resolution to this matter

with the AGO and ensure PPM’s interests were adequately represented. On or around March 21,

2019, PPM, with the assistance of counsel, removed Former Directors and appointed new board

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members March 21, 2019 (“Current Directors”), which PPM has represented to the AGO are

independent of Former Directors and the transactions at issue.

65. Former Directors’ and PPM’s repeated, flagrant violations of Minnesota Statutes

chapter 317A and 501B, continuing misconduct during the course of the AGO’s investigation,

and material self-interests adverse to PPM, made it critical to appoint replacements for Former

Directors so PPM’s best interests could be adequately represented in all respects.

66. PPM neither admits nor denies the allegations contained in this Assurance.

INJUNCTIVE RELIEF

67. PPM represents and warrants that Current Directors have been since their

election, presently are, and will continue to be independent of, and free from undue influence by,

any Former Director. The AGO’s agreement to the terms of this Assurance, including the below

injunctive relief, is expressly contingent on the completeness and accuracy of this representation

and warranty by PPM. If this representation and warranty by PPM are materially inaccurate or

materially incomplete, this shall be deemed a violation of this Assurance.

I. TERMINATION OF FORMER DIRECTORS’ EMPLOYMENT.

68. Within 14 days of the Court’s approval of this Assurance, Current Directors shall:

(a) Terminate the employment of Pfingsten, effective on or before August 2, 2019,

and Swartz, effective on or before August 30, 2019, and take appropriate steps to
secure PPM’s assets therefrom; and

(b) Notify all PPM employees, contractors, and other agents of the termination of
Pfingsten and Swartz’s employment.

69. The employee officer position(s) previously occupied by Pfingsten shall remain

vacant until a suitable replacement Executive Director is found by the Current Directors pursuant

to Paragraph 72. A manager shall oversee and ensure the day-to-day continuity of the program

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aspects of PPM’s operations until such successor Executive Director is hired. Such manager

shall be subordinate and answerable to the Board in all respects.

70. PPM shall not, whether directly, indirectly, or in combination with or through any

other person or entity:

(a) Allow any Former Director to serve or act as a director, officer, employee,
independent contractor, consultant, or other representative of PPM, or to
otherwise have any control over managing, overseeing, or administering the
finances, operations, or other affairs of PPM;

(b) Pay any compensation or otherwise confer any financial benefit on any Former
Director, other than paying employees Schwartz and Pfingsten their pro-rated
salaries and other compensation as set forth in their employment agreements
earned through their last days of employment

(c) Transfer any PPM money or assets to, guarantee or pledge PPM assets as security
for an obligation of, become a surety for, or otherwise financially assist any
Former Director;

(d) Allow any Former Director to have access to or otherwise exercise any control
over any PPM assets, including any PPM bank or other financial account; or

(e) Allow any person associated with any Former Director to engage in any of the
conduct prohibited by this paragraph.

71. The term “officer” shall have the meaning given this term by Minn. Stat. §

317A.011, subd. 15, and the term “director” shall have the meaning given this term by Minn.

Stat. § 317.011, subd. 7. The term “associated with” shall mean the persons and entities

referenced in Minn. Stat. § 317A.255, as well as any other person who is connected with the

persons in question by friendship or a similar or equivalent relationship.

III. DUTIES OF BOARD.

72. In addition to all other duties, powers, responsibilities, and obligations set forth

under the Nonprofit Act and Charitable Trust Act, PPM’s Board of Directors shall:

(a) Search for and hire a qualified and appropriate Executive Director;

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(b) Ensure that PPM is represented by legal counsel with nonprofit governance
expertise, and certified public accountants with nonprofit accounting expertise,
and who are independent of Former Directors and the allegations set forth in this
Assurance, to assist with PPM’s rights, claims, and obligations arising out of the
allegations set forth in this Assurance;

(c) Conduct an audit to determine the extent of assets misused for purposes other than
the fulfilment of PPM’s charitable mission;

(d) Determine all PPM claims and remedies that may exist arising out of the
allegations set forth in this Assurance; determine whether, within its reasonable
judgment, it is in the best interest of PPM to pursue any such claims and remedies
against Former Directors, any other PPM agents, contractors, insurance
companies, or any other parties; and pursue such claims and remedies
accordingly;

(e) Conduct a review of PPM’s bylaws, policies, and procedures, including but not
limited to internal control, whistleblower, and conflict of interest policies, and
create and revise such policies as it determines, within its reasonable judgment, is
necessary to address deficiencies and protect PPM’s assets and other interests;

(f) Review and analyze PPM’s submissions to the AGO pursuant to Minnesota
Statutes section 309.53, and determine whether, within its reasonable judgment, it
is necessary to file amended statements with the AGO, the Internal Revenue
Service, or other regulatory agencies, and file such amended documents
accordingly;

(g) Determine whether, within its reasonable judgment, it is in the best interest of
PPM to report the conduct set forth in this Assurance to state, federal, or local
civil or criminal regulatory or law enforcement authorities, and make such reports
accordingly;

(h) Upon written request by the AGO, apprise the AGO of the results of the audit
required by this paragraph and the Current Director’s intentions, plans, and
progress in pursuing any legal claims or other remedies arising out of the
allegations set forth in this Assurance;

(i) Secure new D&O insurance and put target activities and goals in place to lower
PPM’s risk profile with insurance providers;

(j) Develop appropriate business practices and ensure the Board is engaging with
each departmental discipline;

(k) Create and implement a cash management policy;

(l) Create and implement a delegation of financial authority policy; and

(m) Establish a risk control matrix identifying gaps and controls to mitigate risk.

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73. At all times, PPM, Current Directors, and all PPM directors and officers thereafter

shall:

(a) Maintain the Current Directors’ independence from Former Directors;

(b) Maintain and strictly comply with appropriate bylaws, policies, and procedures,
and with Minnesota and federal law, including but not limited to fiduciary duties
and conflict-of-interest requirements;

(c) Regularly schedule and attend board meetings, have sufficient and appropriate
knowledge of and familiarity with the operations and affairs of PPM, and act
consistently with the fiduciary duties and other standards of conduct imposed on
directors and officers of nonprofit organizations as set forth in applicable law,
including the Minnesota Nonprofit Corporation Act, Minn. Stat. ch. 317A, the
Minnesota Supervision of Charitable Trusts and Trustees Act, Minn. Stat. §§
501B.31-.45, and common law;

(d) Take reasonable steps to ensure that none of PPM’s monies or other assets are
expended or otherwise used for an improper purpose, including a purpose in
violation of section 501(c)(3) of the Internal Revenue Code, Minnesota Statutes
sections 501B.31-.45, or other applicable law;

(e) Ensure all directors and officers obtain sufficient training to apprise them of their
duties under Minnesota law;

(f) Fully, completely, truthfully, and promptly cooperate with the AGO relating to
any AGO investigation, lawsuit, or future proceeding against any Former Director
or any other parties relating to, or arising out of, the allegations set forth in this
Assurance; and

(g) Upon the written request of the AGO, promptly provide accurate, true, and
complete information, documents, and data that the AGO, in its sole discretion,
deems reasonably necessary to verify compliance with this Assurance.

GENERAL TERMS

74. PPM understands that, after the date of the approval of this Assurance by the

Court, a violation of this Assurance may subject it to sanctions for contempt pursuant to

Minnesota Statutes section 8.31, and the AGO may thereafter, in its sole discretion, initiate legal

proceedings against PPM for any and all violations of this Assurance.

75. In consideration of the stipulated relief, the sufficiency of which is acknowledged,

the AGO, upon approval of this Assurance by the Court, hereby fully and completely releases
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PPM from any and all claims of the AGO under Minn. Stat. §§ 309.53, 317A.251, subd. 1,

317A.361, 317A.255, subd. 1, 317A.501, and 501B.41, arising out of the allegations contained in

this Assurance, up to and including the date of this Assurance. The AGO through this Assurance

does not settle, release, or resolve any claim against any Former Director or any other individual,

entity, or person other than PPM. The AGO through this Assurance does not settle, release, or

resolve any claim involving any private causes of action, claims, and remedies—including but

not limited to any PPM claims against any Former Director—or private causes of action, claims,

or remedies provided for under Minnesota Statutes section 8.31. PPM through this Assurance

does not settle, release, or resolve any claim against any person or entity, including against any

Former Director. This release does not apply in any way to claims of any other State of

Minnesota agency, department, official, or division, including but not limited to the Minnesota

Department of Revenue.

76. The claims, remedies, and relief provided for in this Assurance are in addition to

all other claims, remedies, and relief available to the State of Minnesota or the AGO.

77. PPM shall not state or imply, directly or indirectly, that the State of Minnesota or

the AGO has approved of, condones, or agrees with any conduct, actions, or inactions by PPM.

78. Nothing in this Assurance shall relieve PPM of its obligations to comply with all

applicable Minnesota and federal laws and regulations, and court or administrative orders and

directives.

79. PPM, after having an opportunity to consult with counsel, knowingly,

intelligently, and voluntarily waives its First Amendment rights to the extent, if at all, such rights

are inconsistent with any of the terms of this Assurance.

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80. If this Assurance is violated, PPM agrees that any statute of limitations, statute of

repose, or other time-related defense applicable to the subject matters of the allegations

contained in this Assurance, and any claims arising out of or relating thereto, are retroactively

tolled from and after the date of this Assurance.

81. The person signing this Assurance for PPM warrants that PPM has authorized the

person to execute this Assurance, that he or she executes this Assurance in an official capacity

that binds PPM and its successors, and that PPM has been fully advised by its counsel or has

voluntarily forgone such advisement before entering into the Assurance.

82. This Assurance may be executed in counterparts, each of which constitutes an

original, and all of which shall constitute one and the same agreement. This Assurance may be

executed by facsimile or electronic copy in any image format.

83. This Assurance constitutes the full and complete terms of the agreement entered

into between PPM and the AGO.

84. Service of notices or other documents required or permitted by this Assurance

shall be served on the following persons, or any person subsequently designated by the parties to

receive such notices, by mail and email at the addresses identified below:

As to the AGO:
Carol R. Washington, Assistant Attorney General
Minnesota Attorney General’s Office
445 Minnesota Street, Suite 1200
St. Paul, Minnesota 55101
carol.washington@ag.state.mn.us

As to PPM:
Board of Directors and President
Praying Pelican Missions
8011 34th Ave South, Suite 333
Minneapolis, MN 55425

With copy to PPM’s legal counsel:

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Aaron Hall
3572 117th Ln NE
Minneapolis, MN 55449
aaron@aaronhall.com

85. The failure of a party to exercise any rights under this Assurance shall not be

deemed to be a waiver of any right or any future rights.

86. This Assurance, including any issues relating to interpretation or enforcement,

shall be governed by the laws of the State of Minnesota.

87. Nothing in this Assurance shall be construed to limit the jurisdiction, power, or

authority of the State of Minnesota or the AGO, except as expressly set forth herein with regard

to PPM.

88. Each of the parties participated in the drafting of this Assurance and agree that the

Assurance’s terms may not be construed against or in favor of any of the parties by virtue of

draftsmanship.

89. Each party shall perform such further acts and execute and deliver such further

documents as may reasonably be necessary to carry out this Assurance.

90. Each signatory shall perform such further acts and execute and deliver such

further documents as may reasonably be necessary to carry out this Assurance, including that

PPM shall promptly comply with any reasonable request from the AGO for information

regarding verification of their compliance with this Assurance. The AGO shall have all powers

specified by Minn. Stat. §§ 8.31, 309.553, 309.57, 317A.813, 501B.40, 501B.41, and all other

authority otherwise available for purposes of investigating and remedying violations of this

Assurance.

91. The AGO may file this Assurance with the Court without further notice to PPM,

and the Court may approve of and enter this Assurance ex parte and without further proceedings.

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ORDER

Having reviewed the terms of the foregoing Assurance of Discontinuance, which is

incorporated herein by reference, and which the Court finds reasonable and appropriate, it is SO

ORDERED.

Date:________________________ ______________________________
Judge of District Court

LET JUDGMENT BE ENTERED ACCORDINGLY

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