Fraud and Mismanagement Should Be Red Flag for City Funding of Credit Union
The Minneapolis Star Tribune editorial board had a great opinion piece last week investigating allegations of fraud and mismanagement for a new credit union designed to promote economic opportunities for African-Americans in North Minneapolis.
According to the Strib:
“In one of the worst scenarios that a financial institution can face, a startup north Minneapolis credit union is embroiled in allegations of fraud and mismanagement. Two top leaders of Village Financial Cooperative were terminated in August for alleged financial misconduct. Both deny the charges and have countered with allegations that they were fired because of racial discrimination.
Village Financial is an African-American-led credit union sponsored by the nonprofit Association for Black Economic Power. ABEP has been working to open the financial institution for two years and secured funding from foundations and the city of Minneapolis.
The city already has forwarded about $50,000 to the venture and has pledged two more $500,000 grants, mostly in the form of forgivable loans. But in our view, the city shouldn’t direct a dime more of taxpayer money to the project until the mismanagement concerns are resolved.”
This means more than one million dollars from the City of Minneapolis could be spent on this venture that has lacked the appropriate oversight. The story continues:
“The city had pledged $500,000 from this year’s budget to help Village Financial open, with $410,000 of the funding in the form of a forgivable loan. That aid is tied to meeting certain benchmarks, including opening a brick-and-mortar location by the end of this year. And in his proposed 2020 budget, Mayor Jacob Frey recommended allocating another $500,000 to the effort. That’s in addition to $50,000 of city money granted in 2018.
Frey told reporters that he remains supportive of the organization’s mission, but that the credit union opening is a critical milestone. “As far as the money goes, not a single dollar from either one of our budgets has gone out at this point,” Frey said.”
It will be interesting to see if Mayor Frey’s newfound fiscal conservatism will translate into the city pulling the plug on venture capital schemes like this and focus on filling potholes, but I won’t hold my breath if I were you.