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A state lawsuit against an Eden Prairie man, accusing him of financial mismanagement and taking hundreds of thousands of dollars from a nonprofit for personal use, has ended in a settlement.

More than a year after Minnesota Attorney General Lori Swanson sued Gardner Gay, 53, the leader of A Brighter Day Foundation, in Hennepin County District Court, the two sides reached a settlement July 7, with Gay banned from nonprofit boards and agreeing to pay back $120,000 to the foundation.

"When you donate money and time to charities, you hope your investment pays off and really helps people," said Zachary Crain, an attorney for the foundation's board. "This case is one of a number of cases around where those investments haven't paid off."

In March 2014, the state sued Gay and the foundation, alleging violations of state charitable and nonprofit laws and accusing him of spending hundreds of thousands of dollars from the nonprofit on personal extravagances such as gyms, shopping and travel despite the program essentially being defunct.

A message left with a number listed for Gay wasn't returned Wednesday. But he said in court documents that his actions were approved by a board of directors and that he was owed $50,000 in pay a year.

In 1995, the program started bringing inner-city, low-income, high-achieving students to attend high school in Eden Prairie. Community fundraisers and hundreds of supporters' donations brought tens of thousands of dollars into the program each year.

But in 2010, the program, which started as a unit of the national group A Better Chance (ABC), became dissociated from the group and the name was changed. Also that year, the IRS revoked the foundation's tax-exempt status because it hadn't filed returns for three years. In 2011, two homes donated to the program fell into foreclosure, and by 2013, the last student went through the program. That year, a majority of its board directors resigned, and the program became essentially defunct, according to court documents.

In the 2014 lawsuit, investigators said that Gay spent $4,255 between 2013 and 2014 at places like Target and the Mall of America and that from 2008 to 2014 he wrote more than $157,000 in checks from the charity's account to his children, wife and himself for "reimbursements," among other charitable assets he used.

Now, in the settlement, Gay agrees to not work or participate on a nonprofit board for 25 years, he is banned from being employed as a nonprofit executive director and is prohibited from managing or overseeing the finances of a nonprofit.

"I am disappointed that ABD and close to $1 million in community assets was lost and it is unlikely that any of it will be recovered," said Joe Stoebner, an Eden Prairie business owner.

The foundation also agrees to dissolve and any remaining assets will go to Edina's A Better Chance Foundation, which is still affiliated with the national group.

"We're pleased with the settlement," said Ben Wogsland, spokesman for Swanson's office. "We're going to pursue the payment and we'll keep pursuing it."

Kelly Smith • 612-673-4141