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.
Here's what happened:
Me'Lea Connelly and Joe Riemann, ABEP executive director and CFO, respectively, were trying to get the credit union up and running before being removed in August. An ABEP statement said the board had received "information that presented organizational mismanagement, gross negligence, and misconduct of nonprofit finances and the treatment of its workers'' that prompted the firings.
ABEP gave that information, which alleged "reported misuse of grant funds" to the Minneapolis Police Department in early September. According to an MPD spokesman, the department is reviewing the complaint.
Yet in separate interviews with Star Tribune reporters, Connelly and Riemann denied any wrongdoing and accused the board of racial discrimination. Connelly is black and Riemann is white, and they are involved in a romantic relationship. Connelly alleges that the board forced her to fire Riemann because of his race, then terminated her when she challenged the reason for letting him go.
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. Philanthropic donations, including a two-year, $430,000 launch grant from the Jay and Rose Phillips Foundation, also supported the plan.
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.
The worthy mission of the credit union is to promote economic empowerment for African-Americans on the North Side — an area with a high concentration of poverty. But while this cloud of uncertainty hangs over the credit union, the city's taxpayers should be protected from further risk.
