Lessons from the Latest Nonprofit Leadership Scandal

By Frank DeVito

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In April 2026, the Minnesota Attorney General filed a complaint against a number of individuals, nonprofits, and for-profit companies that are all deeply intertwined. While there have been no convictions or resolutions, the allegations provide a cautionary tale about the importance of financial transparency and compliance for religious organizations. The complaint in this case contains many allegations, but there are a few central themes that serve as an important reminder and warning to nonprofits.

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The entanglement of nonprofit and for-profit entities

The complaint was filed against a church called Real Believers Faith Center, a related nonprofit dance school called Les Jolies Petites School of Dance, and several directors and officers from both organizations. It is worth quoting the beginning of the complaint in full to see all the parties against which Minnesota filed the complaint:

The State of Minnesota, by its Attorney General, Keith Ellison, for its Complaint against Les Jolies Petites School of Dance d/b/a Les Jolies Petites School of Dance Gymnastics (“Les Jolies”); Real Believers Faith Center d/b/a Poppy Construction R-B-F-C Builders d/b/a RBFC 5000 Men’s Ministries d/b/a RBFC Cultivators Ministries d/b/a Cookhouse Fullgospel Ministries d/b/a RBFC Lion’s Den Africa d/b/a R.B.F.C. Music Group Real Roudy Righteous Reloaded Kingdom Kings & Mad Love d/b/a Power Generation (“Real Believers”); and Sharon Cook, Larry Cook, Danyale Potts, Emily Neuhaus, Risheka Remus, Makada Williams, and Sunsearay Washington, individually . . .  

The named parties reveal one of the central issues in this case: Larry and Sharon Cook, the founders of the two nonprofits at issue, allegedly “engaged in the misuse of nonprofit assets and founded for-profit businesses with the same name as nonprofit organizations to create confusion as to where donations were being deposited and for whose benefit.” This is a serious problem. The church and the other nonprofit had several fictitious names they were legally using for the two entities; but they also allegedly created for-profit companies with nearly identical names, apparently so they could rely on the confusion of donors and supporters to move money from nonprofit to for-profit companies.

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The “personal piggy bank”

The complaint alleges that Larry and Sharon Cook misused over $2 million over several years. The complaint further alleges that nonprofit assets were “siphoned through cash withdrawals, CashApp payments, and pledged as collateral for risky loans that served no charitable purpose.” Large amounts of nonprofit funds were allegedly spent on everything from designer clothing to jewelry. Based on the complaint, it also appears that over $50,000 was spent between 2018 and 2024 on personal credit card payments.

If the allegations are true, this isn’t just about noncompliance and the mixing of nonprofit and for-profit funds. This is about abuse of donor generosity and the entire nonprofit system. Donors give generously to religious and charitable works because they trust the leadership will spend that money to further the exempt purposes of the nonprofit organization to which they donate. When nonprofit leaders spend money on anything that does not further the mission of the organization, that is a problem. The lavish purchases alleged in this case make for a newsworthy reminder of this point. But more importantly, this case presents an opportunity to reflect on the need for nonprofit leaders to be good stewards of the money entrusted to their organizations by donors. Nonprofit assets have been given to the organization, generally tax-free, in order to further the organization’s exempt purposes. Every dollar should be spent intentionally to further the mission.  

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The lack of compliance

The complaint alleges that this misuse of funds was accompanied by disregard for the laws that govern the operations and compliance of nonprofit organizations. “Defendants not only misused charitable funds, but they operated without basic governance safeguards, failed to maintain tax-exempt status, failed to maintain registration with the [Attorney General’s Office], and dissolved a nonprofit mid-investigation without the legally required notice to the AGO in an attempt to evade oversight.” Religious organizations that work with Napa Legal know the central importance of maintaining tax-exempt status, maintaining charitable solicitation registration, and otherwise complying with applicable law. Failure to do so can alert government authorities and increase the likelihood of investigations and enforcement actions.

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Practical Takeaways for Nonprofits

Obviously, if the allegations in this case are true, the central problem is not simply noncompliance but the intentional misuse of nonprofit dollars for personal expenditures and for-profit business endeavors. But assuming that readers are not engaging in illegal activities and are operating their nonprofit organizations in good faith, what are the practical takeaways from this case?

First, be careful not to mix nonprofit organizations with for-profit endeavors, at least not without intentional planning and advice from your attorneys. When an organization deceptively mixes nonprofit and for-profit organizations (for example, by giving them identical names and so confusing donors and supporters about which organizations are nonprofits and which are for-profit businesses), there is a great danger of committing (or at least appearing to commit) fraud and deception. This can result in criminal liability. Beyond that, the mixing of nonprofit organizations with for-profit business carries a great risk of creating a conflict of interest, especially when directors or officers of a nonprofit (or their family members) have an interest in the for-profit company. To learn more about conflicts of interest, start here.

Second, beyond the obvious admonition not to use donor dollars for personal spending, this case is a good reminder to be a good steward. Your donors believe in your mission, and they trust your organization’s leadership to spend every dollar to further that mission. Carefully evaluate how your organization spends its money. Track and regularly reevaluate your organization’s spending to avoid even the appearance that anyone affiliated with the nonprofit is personally benefiting from the organization’s spending. This will also help to ensure that funds are being spent prudently to advance your organization’s mission. For a reminder of the fiduciary duties that nonprofit leaders owe to their organizations, review the duties of care, loyalty, and obedience.

Finally, legal compliance matters. Religious organizations should adopt a spirituality of compliance, treating their little (and sometimes tedious) acts of legal compliance as ways to achieve personal and organizational excellence. A practical effect of excellence in compliance is to avoid putting a target on your organization’s back. As the Minnesota government noted in this case, the fact that the organizations involved did not maintain tax-exempt status or keep up necessary state registrations was a red flag -- the nonprofits automatically lost their tax exemptions after failing to complete annual tax returns for several consecutive years. When government agencies see that an organization is not compliant with basic legal requirements, they are likely to take a closer look. Even if your organization is not engaged in any wrongdoing, having to deal with government investigations can cost your organization a lot of time, energy, and money.  

While the allegations in this case are extreme, they are a good reminder of the importance of having good legal counsel, avoiding conflicts, being good stewards of your organization’s funds, and maintaining compliance so that your organization can achieve its mission with excellence and avoid the many dangers of noncompliance.  

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