Duluth nonprofit leader investigated for alleged financial mismanagement

DULUTH – A prominent Duluth nonprofit is under fire for alleged financial mismanagement and fostering a hostile work environment, problems that have led to an unfair labor practice charge, a “no confidence” vote by union workers against its director and an external investigation.

The director of Community Action Duluth (CAD) and its board allege race and sex have played a role in attacks on the organization’s leader, Classie Dudley.

The 60-year-old nonprofit is part of a national organization and serves low-income populations with food, tax preparation and job training, helping nearly 1,800 people in 2021, according to its most recently posted annual report. Some of its workers say they worry about its viability under the current leadership.

Workers have faced obstacles to successfully do their jobs, said employee Sam Lindblad, who blamed “mismanagement of the organization.”

The American Federation of State, County and Municipal Employees (AFSCME) Local 5 union workers, of which the nonprofit employs 12, also accused Dudley of sexual harassment. They would not explain further at a news conference last week. Workers also detailed thousands of dollars in outstanding payments to farmers market vendors, as CAD runs two such markets and offers financial matches to SNAP benefits for shoppers. November market days were abruptly canceled at the end of October.

Employees also said a work vehicle was repossessed, credit cards had been declined and a power bill had been unpaid, leading to a dayslong shutoff in the nonprofit’s greenhouse. At least one board member has resigned over the controversy.

Employee CeCe Netzer said sexual harassment allegations were brought to the board in late September, and the board declined to investigate them.

Dudley said outstanding invoices total $78,000, with about $40,000 of that intended for farmers market vendors. The nonprofit’s annual budget is about $2.9 million.

Dudley said that because it operates with reimbursable grants, CAD doesn’t always have enough cash to pay monthly bills. It has struggled financially this fall, she said, partly due to the federal government shutdown and partly because the farmers market program continues to grow. Vendors should be paid in full by December, she said, pointing to paperwork processing issues that account for the vehicle, credit card and power shutoff problems.

Former finance director Lynn Habhegger said last week in an interview that she quit several years ago because of Dudley, who she perceived as unqualified for her position.

Habhegger accused Dudley of using “the racism card like it’s a club. She hits you over the head with it,” Habhegger said, noting Dudley called her a racist in a hearing over unemployment benefits.

Dudley, who is Black, is head of the local chapter of the NAACP and previously operated a Duluth homeless shelter.

The state Department of Children, Youth and Families oversees Community Action programs through its Office of Economic Opportunity. A Star Tribune review of several years of recent reports shows the state office found CAD to be an “at risk” agency in 2022, a few months after Dudley was hired.

The report cited disruptive and ineffective board meetings, staff interference, and a lack of support for Dudley. It directed several “corrective actions,” including board training on legal and ethical responsibilities and for leadership to hold staff accountable to personnel policies. A board member who no longer serves had incited some of the problems, the report said.

Subsequent reports noted high turnover, staff stretched thin due to program growth and a need to improve reporting processes, but no new corrective actions.

In a statement, the Minnesota Department of Children, Youth, and Families said it is aware of concerns raised about CAD and is reviewing complaints made against it.

AFSCME filed the unfair labor practice charge with the National Labor Relations Board last week, alleging retaliation threats and intimidation toward an employee related to a grievance, said Ken Loeffler-Kemp, a field representative for the union. The nonprofit‘s leadership hasn’t been communicative with the union, he said, and many of its issues are long-standing.

She served less than a year and learned about concerns in October. She wasn’t satisfied with the response from the board when she made suggestions to address them, she said, and she was “disappointed in the lack of communication by the organization with the public.”

SolFed Farm, one of CAD’s farmers market vendors, said on social media it hasn’t been fully paid.

“We are owed thousands of dollars dating back since August,” impacting vendors and customers, the post reads.

Azrin Awal, the board’s interim secretary and a fellow City Councilor, said she has faith in the board and CAD leadership’s ability to “overcome the current program struggles and rebuild trust” and “hold each other accountable.”

Most board members are from marginalized communities, Awal said, and they try to balance ensuring protocols and guidelines are followed while acknowledging what she sees as a different level of scrutiny for those who aren’t white men.

The CAD board said in a six-page statement to media Thursday that the pattern of “misinformation, sensationalized narratives and public targeting is not happening in a vacuum.”

The board recognizes, the statement reads, “broader systems and dynamics that often subject leaders of color, especially Black women, to disproportionate criticism, unnecessarily harsh judgments and public narratives that question and attempt to undermine their competence, integrity or authority.”