September 21, 2010; Grand Forks Herald
There is a reason why NPQ believes that paid staff should not sit on nonprofit boards, and this tale exemplifies the problem. Boards are not meant to be acting in their members’ financial interests. In this case, of the organization’s board’s five members, two were paid—and paid generously, in the six-figure range. One of those paid members was also owner of a coffee shop in which the organization “invested.”
This tale of woe involves Praying Pelican Missions (PPM), a nonprofit founded in Duluth, Minnesota, in about 2003, although it later moved operations to Minneapolis. As reported in the Grand Forks Herald, the Attorney General’s Office (AGO) in Minnesota has filed a petition for approval of an Assurance of Discontinuance. This is, in effect, a deal struck with the current Board of Directors to ensure that the organization has changed its leadership, and many of its operating policies and procedures that had led to and ultimately approved some very shady behavior.
PPM was founded by Matthew Pfingsten with a mission to “plan and lead international and domestic mission trips and share the gospel of Jesus Christ,” according to the 2016 IRS Form 990. Through a network of connections to churches around the world and in the US, PPM arranges for individuals and groups to go on mission trips to provide assistance and aid to local communities.
About 10 years after its founding, PPM’s board of directors apparently approved a significant investment in Pelican Coffee, a coffee shop Pfingsten wanted to create. According to the papers filed by the AGO, the board sought some advice and were encouraged to establish Pelican as a subsidiary of PPM, maintaining control over it.
It seems the board chose not to follow this advice and approved Pfingsten’s creation of Pelican as a for-profit, with himself as 51-percent owner and PPM owning the remaining 49 percent. They wanted him to be able to operate smoothly and easily without too much requirement to check in with them. In the end, Pfingsten used PPM’s money to open a for-profit coffee shop of which he was the sole owner.
The story gets worse. The original intent had been for the coffee shop to be a social enterprise, helping fund PPM mission trips. Over the years, PPM apparently invested close to $1 million in the coffee shop and never received a penny of return. For example, the 2016 IRS Form 990 lists an investment of more than $400,000 in Pelican. Some PPM staff served as employees of the coffee shop, and their salaries were completely covered by the nonprofit, not the coffee shop.
As the decisions to invest in and support Pelican were being made, Pfingsten was serving as the nonprofit’s CEO and board president. He was earning in excess of $132,000 in 2016. In total, there are five directors listed on that filing with the IRS, and another, Jason Swartz, was also an employee earning more than $100,000. Clearly there is conflict of interest here, and the AGO reports that it was never brought up at board meetings. Pfingsten was allowed to participate in discussions and votes that would lead to investment in his coffee shop.
The conflict of interest goes yet one more level down. Participants in the mission trips planned by PPM were directed to Mango Creek Travel, a for-profit corporation. You guessed it: Pfingsten was involved as an officer of Mango Creek. In that way, by sending mission trip participants to them, Pfingsten was making money from both organizations.
The final determination by the AGO is that the employees, officers, and staff of PPM were not acting in the best interests of the nonprofit. On a few occasions, Pfingsten appears to have lied to the AGO during a deposition. Board directors continually chose not to inform the AGO of actions being taken that directly affected their investigation while it was ongoing—including the ultimate sale of Pelican Coffee. Misleading and untrue statements were included in several filings with the IRS, though the organization’s 2016 Form 990 clearly declares the investment as a business transaction with an interested person.
In the end, the entire board of PPM, including both Pfingsten and Swartz, resigned and have no dealings with the organization at all, according to the Assurance of Discontinuance. A new board has been installed, most of whom do not reside in Minnesota, as it happens. The organization continues to operate, arranging mission trips around the world and organizing for hurricane relief.
In a statement, Attorney General Keith Ellison described this as a case of one person putting his own interests above those of the organization and its mission, and that the board of directors was “asleep at the switch.” A very generous assessment indeed.—Rob Meiksins