A Hennepin County judge ordered developers behind a proposed East African housing community to hand over documents to the Minnesota Attorney General’s Office as part of its probe into the project.
Nolosha Development must hand over a list of clients who’ve signed pre-reservation agreements to live in the development, all complaints it has received from clients, all refunds it has issued to clients and all marketing and advertising material used to promote the development.
Hennepin County District Judge Christian Sande, however, denied the Attorney General Office’s request to identify all people who have paid money or downpayments to Nolosha, and chided the office for asking questions in depositions that he ruled were outside of the scope of its investigation.
The Attorney General’s Office is investigating whether Nolosha Development is engaging in consumer fraud by selling $25,000 pre-sale agreements to prospective homebuyers for land in Lakeville that it doesn’t yet own or have permits to develop. Attorney General investigators say that Nolosha has collected more than $1 million from clients seeking homes.
The FBI is also conducting a similar, separate federal investigation into Nolosha.
Nolosha has filed several court documents firmly denying any untoward business dealings.
About 50 community members supporting Nolosha attended a hearing on the matter in Hennepin County District Court Thursday afternoon, packing the courtroom beyond capacity and overflowing into the hallway.
Assistant Attorney General Mark Iris told Sande at the start of the hearing that his office has no problems with Nolosha’s mission, which is marketed as fighting against health and wealth disparities in the East African community through home ownership.
“Our office does have a problem if they’re raising money on the basis of misrepresentation,” Iris said. “If we ignored complaints from the public, that this is the biggest Ponzi scheme, we’d be doing a dereliction of duty.”
In a court document filed earlier in the case, Nolosha CEO Abdiwali Abdullah said that the $25,000 payments gave Nolosha’s customers “the opportunity to accept a future opportunity to purchase a home,” and did not guarantee them an actual home.
Nolosha attorney David Aafedt characterized the attorney general’s investigation Thursday as a “relentless attack” on Abdiwali and his 160 clients.
“With the Attorney General’s Office’s often touted mission of allowing people to live in dignity, the office should be the project’s biggest supporter and cheerleader,” Aafedt said.
Aafedt argued that the attorney general’s investigation relies on false information from a “disgruntled former intern,” and that the office is using a “stolen partial client list” to call up Nolosha clients in an attempt to compel them to support the investigation.
Aafedt also said Nolosha is on track to make a purchase in November of a 37-acre parcel of land in Lakeville for the project.
He strongly criticized several questions Iris asked Abdiwali in an April deposition, describing it as “beyond harassment.”
Aafedt read aloud questions that Iris asked: “Are any of your employees pedophiles? Do you have reason to believe he is a homosexual? Did your sister just pick up felony charges?”
“I cannot conceive of how these are relevant, especially in a real estate investigation,” Aafedt told the court afterwards.
Iris said that Aafedt was taking the questions out of context, and argued that they were related to retaliation a whistleblower experienced after contacting the Attorney General’s Office about Nolosha.
Abdiwali’s sister, Hamdi Elayas Abdullahi, who is not a Nolosha employee, was charged earlier this month with felony harassment of the whistleblower after impersonating him on social media and making inflammatory statements.
Sande, however, said he didn’t think Aafedt took the questions out of context. He pressed Iris on whether the questions were within the scope of the attorney general’s investigation.
“Does the scope of your investigation go beyond consumer fraud and deceptive trade practices?” Sande asked Iris.
“No, I would say that’s relevant information —,” Iris said.
“How?” Sande said, interrupting Iris.
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“I think that’s a smear campaign,” Iris said of the alleged retaliation against the whistleblower.
Many of the statements the whistleblower made about alleged fraud at Nolosha were later backed up by the investigation, Iris added.
“It’s adding to the credibility of what he’s saying,” Iris told the judge.
Sande, in his ruling, said Iris’ line of questioning exceeded the limits of the investigation.
“The attorney general does not identify how alleged retaliation against a whistleblower is an act of consumer fraud or a deceptive trade practice,” Sande wrote. “Questioning based solely on relevance to alleged harassment or whistleblower retaliation is outside the subject matter of the investigation.”
Sande came close to scolding Iris for his questions, calling them “loaded questions,” and saying he wasn’t surprised by Aafedt’s reaction to them.
At the end of the hearing, Sande told the court he would “entertain a motion to appoint a special master if conduct as what has gone on in the deposition continues.”
“That is a shot across the bow for counsel to not continue that type of behavior,” Sande said.
Clients claim harassment
In preparation for the hearing, Nolosha submitted several affidavits to support its side of the case.
In one sworn affidavit, Abdiwali accused the Attorney General’s Office of being “oppressive” toward Nolosha and its clients.
“I have done my best to comply with the State’s investigation, but both our clients and I have felt harassed and oppressed,” Abdiwali wrote in a sworn affidavit submitted to the court. “I have been informed from clients that the Attorney General’s Office has been calling them and spreading misinformation about Nolosha, such as, stating that the Nolosha Development will never happen, that Nolosha has stolen their money, and clients are entitled to receive more money in return.”
The attorney general opened the investigation last fall and later issued two civil investigative demands, compelling Nolosha to turn over documents for the investigation.
In June, the attorney general filed a motion in court alleging that Nolosha wasn’t complying with these demands, and failed to hand over a list of its customers, their contracts, refund requests and the company’s marketing materials. The office is now asking the judge to force Nolosha to hand over the documents.
As part of the court case, Nolosha submitted affidavits from 11 clients with identical language claiming that Nolosha was “open and transparent” with them about how long the development process would take.
Each affidavit also said that the project was “critical for my family to provide us with a safe community and an opportunity to find my family a home.”
Four of the 11 clients said that although they had “no complaints against Nolosha,” they requested refunds because they were “concerned” that the attorney general’s investigation will delay the project. One of the clients said in her affidavit that she had been contacted by the Attorney General’s Office “even though I did not want to talk to them.”
“If this office continues to contact clients, I believe it will prompt existing clients to request refunds, just as I have, as I felt uneasy that when they called me,” the client wrote in her affidavit.
A similar affidavit from a second client was more blunt in her criticism against the attorney general’s investigation, and particularly against Iris.
The woman said that Iris called her “4 times a day for 3 days straight.”
“It made me very scared and terrified,” she wrote. “I felt harassed. Who gave him permission to call me and harrass me?”
Iris moved Thursday to strike the woman’s affidavit from the record, arguing that she called the Attorney General’s Office 10 times one day and that they had to eventually block her number. Sande denied the request.
Nolosha also submitted an affidavit from Jim Kumon, a developer with Electric Housing, which contracted with Nolosha earlier this year. Kumon’s affidavit said Nolosha is working diligently with the city of Lakeville to move the project forward, and that Nolosha met in May with staff from the city’s public works, stormwater, economic development and planning departments.
Lakeville officials notified police about Nolosha
The Attorney General’s Office also submitted several affidavits to support its investigation. They include an affidavit from a former client who said he paid $12,500 for a pre-reservation agreement and sought a refund, but only received $10,500 back.
“I would still like to get the remaining $2,000 back because I do not feel any progress was made in the time they held my money and that should be reason enough to refund all my money,” the former client wrote.
Lakeville Planning Manager Kris Jenson wrote in another affidavit that she learned about Nolosha when two East African women, one of whom was interested in paying a deposit, approached her about it in April 2023.
“One woman showed me Nolosha’s website and explained that they had been given information indicating that Nolosha’s homes would be move-in ready by November 1, 2023,” Jenson wrote. “I explained to them that this timeline was impossible because there was no way a property development project could be completed that quickly.”
The two women had driven to the parcel of land Nolosha wants to buy, and told Jenson they were surprised to see that nothing had been developed on it.
“At the end of the meeting the woman who was going to pay a deposit to Nolosha said she was glad she had not already put money down,” Jenson wrote.
Jenson then notified her superior about the meeting, which she wrote is common practice for such meetings, “including when we see a company selling something using inaccurate statements.” Jenson’s superior then alerted Lakeville Police Chief Brad Paulson about Nolosha’s project.
Jenson wrote that she has since met with Nolosha officials three times this year, most recently earlier this month. In two of the meetings, Nolosha planners showed her sketches of the proposed project. But, Jenson said, Nolosha has not yet submitted an application to the city, the first step to obtaining permits to build on the land.
“This 37-acre parcel in Lakeville is challenging to develop for a number of reasons, regardless of who the developer is,” she wrote. “For example, both the topography and the significant wetlands on the site present challenges for the use of the site.”
