As new allegations of misspending emerge and state officials move to seize control of the embattled Community Action of Minneapolis, board members have suspended the agency's longtime chief executive.
State officials had refused to continue working with the agency if Bill Davis remained in charge, said board members, who ordered Monday that Davis not be paid during the indefinite suspension.
On Tuesday, the state asked that a court-appointed receiver be named to help recover more than $800,000 in taxpayer money that a Department of Human Services audit determined had been spent for travel, board retreats, celebrity cruises, alcohol and a personal car loan.
In the petition filed in Ramsey County District Court, state Department of Commerce investigators said that leaders of the group that provides heating assistance, weatherization and career counseling to low-income Minneapolis residents had used federal tax dollars to buy a Chevrolet Tahoe and spent more than $20,000 on questionable expenses. A complete Commerce Department audit of the agency is underway.
Manuel Rubio said Tuesday that he and other board members are making a last-ditch effort to save the agency, including distancing themselves from Davis. "The state would not work with us on anything until he was gone," Rubio said.
Davis, who could not be reached for comment Tuesday, has said he did nothing wrong. He had earlier vowed to appeal the state's decision last month to immediately cut off funding to the agency.
Board Chair Mike Anderson confirmed that Davis' suspension is indefinite and without pay. Davis is entitled to $264,358 in deferred compensation, according to the organization's 2012 tax documents.
In the petition filed Tuesday, the state asks for the return of more than $800,000, plus access to the organization's books, records, passwords, access codes, statements, deeds and all other financial documents.
The state is seeking a court-appointed receiver to get a more complete accounting of all of Community Action's financials and find out how money was spent. The state will recommend a receiver to the court at a later time.
The newly discovered $20,000 in alleged misspending occurred with the organization's weatherization funds, according to court records. Since 2012, the organization allegedly overpaid contractors for attic insulation and incorrect remodeling resulting in insulation levels that were not cost-effective.
"The department will not know the full extent of disallowed costs until the final audit is completed," Janet Streff, a Commerce Department official, said in a signed affidavit.
Court records also say the Commerce Department recently provided the organization with more than $100,000 for expenses. "It is unknown if any of that money is still in CAM's possession," the records said.
The court documents also reveal a previously undisclosed loan to an unidentified Community Action staffer. That employee is required to pay back the loan in biweekly payments of $212 before December 2015. The loan has a 3.75 percent interest rate. The initial loan amount is unknown and comes in addition to a personal car loan to Davis outlined in the most recent audit.
The state's court documents question the validity of the current board. The state said that even the organization's attorney does not know how many board members are currently serving or whether the board has a quorum to conduct business.
Only four members remain on the board, Rubio said. That's compared with 11 a month ago. Many, including DFL state Sen. Jeff Hayden and U.S. Rep. Keith Ellison, abruptly resigned after the Human Services audit was obtained by the Star Tribune. Hayden and Ellison served during the time covered in the audit, but had appointed alternates to serve on their behalf.
The ongoing turmoil already is having political implications.
Senate Republicans filed an ethics complaint alleging that Hayden participated in the misuse of taxpayer funding. Hayden denies any wrongdoing and says he looks forward to the ethics hearing to clear his name.
The ethics committee has scheduled a first hearing on the complaint Oct. 22.
The Department of Human Services said Davis' suspension does not change the state's course of action.
On Sept. 26, DHS and the Commerce Department terminated all state and federal contracts to the organization.
The organization has until the end of the month to appeal the termination. Meanwhile, Community Action of Suburban Hennepin has taken over Minneapolis' energy assistance program.
Rubio said it was unclear whether the board and the organization will appeal the state's decision.
"A lot has to be figured out," Rubio said. "The board is doing what it has to do to try to get people their jobs back."
Funding streams continue to be closed off for the organization. Earlier in October, Xcel Energy and CenterPoint severed their contracts with Community Action, ending the organization's main source of money other than tax dollars.
Said Mary Sandok, a spokeswoman for Xcel Energy: "We believe this step is in our customers' best interests, given the state's concerns and its removal of the weatherization program — which ties closely to the energy savings program — from Community Action of Minneapolis."
CenterPoint provided similar services to the organization. "We feel in the best interests of our constituents, and in alignment with the state's actions, that we should terminate the relationship regarding the weatherization program," spokeswoman Rebecca Virden said.