Minnesota AG, feds probing Nolosha-Lakeville development marketed to Somali families

A planned Lakeville housing development aimed at Somali families is under investigation by both state and federal agencies, officials confirmed this week.

In a legal motion filed Thursday, the Minnesota Attorney General’s Office says Nolosha Development has twice refused to provide investigatory documents — including a list of its customers, their contracts, refund requests, and the company’s marketing materials.

The motion alleges that not only is Nolosha collecting money from prospective buyers without a real estate license, but that the owners are spending money lavishly on salaries and other perks.

Also Thursday, a U.S. Attorney’s Office spokeswoman confirmed that Nolosha is under federal investigation related to its attempt to sell lots on a property that is tied up in the federal Feeding Our Future food aid fraud.

Nolosha CEO Abdiwali Abdullahi dismissed the Attorney General’s motion and investigation in a statement Thursday, stating that it was “without merit and is based upon misinformation being spread by a disgruntled former intern, as well as competitors of Nolosha.”

“Nolosha looks forward to addressing the baseless allegations and moving forward with this community-based and community-supported project with over 1,400 hundred families on our waitlist and counting, and all of those who are aware of these baseless allegations remain committed to [the] project,” Abdiwali said.

‘Reality of development project bleak’

Sahan Journal reported earlier this week that Nolosha is also under investigation by the Minnesota Department of Labor.

A tipster earlier this month alerted the Department of Labor that 160 clients had paid Nolosha $25,000 to reserve a future home in Nolosha’s planned community in Lakeville, where the company aims to build 160 housing units, a mosque, a school, restaurants, and more. Nolosha Development does not own the 37-acre parcel, and lacks both a building license and a real estate license, according to state records.

The parcel slated to become Nolosha-Lakeville was purchased by another buyer in May 2022 using money allegedly stolen in the Feeding Our Future child nutrition scheme, according to federal indictments . As a result, the federal government filed a notice indicating the land had pending litigation in October 2022, effectively stalling sale of and development on the land until its legal dispute related to the Feeding Our Future case was over.

Nolosha spokeswoman Carol Schuler previously told Sahan Journal that the company is on track to purchase the parcel this fall through an agreement with the U.S. Attorney’s Office. But Tasha Zerna, a spokeswoman for the U.S. Attorney’s Office, refuted that claim.

“The government has not entered into any agreement with Nolosha Development or its CEO, Abdiwali Abdullahi,” Zerna said in a statement. “This land is subject to forfeiture to the government as part of ongoing criminal cases arising out of the Feeding Our Future investigation. The land cannot be sold without a formal stipulation or court authorization. The government has not entered into a formal stipulation and the court has not authorized the sale of this land.”

Zerna said the U.S. Attorney cannot comment further on the ongoing federal investigation into Nolosha.

The Attorney General’s motion, filed by Assistant Attorneys General Mark Iris and Katherine Kelly, alleges that the project “is far from move-in ready.”

“The reality of the development project is bleak,” the motion reads.

The Attorney General’s motion alleges that Nolosha has raised $1 million, all from Somali families seeking a home, and is far short of the $3.4 million it will cost to buy the Lakeville parcel. That’s also a fraction of the full cost to develop Nolosha.

“Nolosha knows the actual cost of the project is closer to $250 million and would probably not be started until 2026,” the motion reads.

Earlier this week, Schuler, the Nolosha spokeswoman, said that an investigator from the Attorney General Office interviewed Abdiwali earlier this year.

“He was grilled by the AG for three hours, and they couldn’t come up with anything to come back at him for,” Schuler said. “They asked him a lot of hard questions about everything going on, and there was nothing there. So they dropped it.”

The Attorney General’s motion filed Thursday calls Schuler’s comment that the office has closed its investigation “patently false.”

The Attorney General’s investigation stems from an August 2023 complaint from a former Nolosha employee who reported concerns that Nolosha was engaging in deceptive sales tactics to collect thousands from Somali families.

The whistleblower reported that customers who paid Nolosha as far back as 2020 “had become disillusioned and were requesting full refunds; however Nolosha was charging them a $5,000 cancellation fee even though the development was long overdue.”

Financing a vision

Abdiwali is not licensed to sell real estate, according to the motion, so “he invented a product he called ‘Pre-Reservations’ so that his customers would finance his vision for a community that he named ‘Nolosha Lakeville.’

“Nolosha’s business model is to charge families $25,000 for ‘a general, non-unit specific interest offer to purchase a residential unit in the Community,’” the motion reads. “Customers are told that the pre-reservation fee can be used as a down payment on their home in the community when construction is complete.”

Anyone wanting out of the pre-reservation agreement is charged a hefty fee which has grown over time, according to the motion.

“Initially customers were required to forfeit 10% of their $25,000 payment if they asked to cancel,” the motion reads, “but at one point Mr. Abdullahi switched his contractual terms so that he can keep 20% of their payment if they cancel for any reason.”

Schuler previously told Sahan Journal that two clients canceled their agreement and received refunds. Attorney General’s Office investigators contacted four Nolosha customers using a Somali interpreter. All four had demanded a refund from Nolosha, according to the motion.

“At his deposition, Mr. Abdullahi stated any customer that complained to the AGO would get a 100% refund,” the motion reads. “The following day, that offer was rescinded by his attorney.”

Abdullahi’s deposition came after two failed attempts from the Attorney General’s Office seeking the documents it’s now asking a court to force Nolosha to hand over.

The Attorney General’s Office filed its first civil investigative demand seeking the documents from Nolosha in December of last year. Nolosha responded by accusing the Attorney General’s Office of “conducting inappropriate investigations driven by pure politics,” the motion reads. The Attorney General’s Office filed another civil investigative demand in February and got similar results.

Nolosha nowhere close to developing land

According to the motion, Nolosha told customers that the development was being built out in three phases. The first phase was supposed to be complete in November 2023, with several homes built and ready for move-in. The second phase was supposed to be complete in May of this year, with more homes available and ready to be occupied.

But Nolosha is not close to this.

“First and foremost, Nolosha does not own the land that it promised customers it would develop homes on,” the motion reads. “It has submitted an offer to purchase a 40-acre parcel in Lakeville on April 22, 2023, for $4 million but there have been four extensions to the closing date.”

The current closing date is set for November 5 of this year for a purchase price of $3.4 million, according to the motion. But even if Nolosha is able to buy the land, it faces several obstacles to making the development a reality.

For one, the federal government filed a lis pendens on the property, effectively stalling development on it until the Feeding Our Future legal matter is resolved. If the government succeeds in convicting the person responsible for contributing stolen money to buy the land, then it likely seizes the land.

Further complicating the sale is the fact that the person Nolosha is trying to purchase from doesn’t own it outright, but is buying it on a contract-for-deed sale from Homes by Witt, a real estate company. Abdirahman Siraj, who is buying the land through a contract for deed from Homes By Witt, is also having trouble paying his monthly payments for the land, according to the filing. So Nolosha has since stepped in and “has been making the monthly payments on the contract for deed directly to Homes by Witt to avoid a cancellation of the contract,” according to the motion.

Nolosha has less than $1 million and CEO Abdiwali, during his deposition, admitted that he wasn’t sure how he’d be able to pay for the full $3.4 million purchase for the land in November, according to the motion. The motion also states that Nolosha hasn’t taken preliminary steps to ensure the project moves forward, including applying for zoning and variance permits that the Lakeville City Council would have to approve.

Nolosha has not submitted a feasibility analysis or a sketch to Lakeville, despite being told these would be its first steps to making the development into a reality, according to the motion.

The company is also spending the money it does have “lavishly on unnecessary expenses,” the motion alleges. This includes employing five to six receptionists, a $1,000 per-month office space and a salary for Abdiwali that ranges between $2,000 to $4,000 per month.

No staffer working for the company has land development experience, according to the motion.

In marketing materials, Abdiwali said he and his wife have a health care background, and they launched the project with a vision of creating a healthier community for East African families. On Thursday, he said the investigations would not derail the project.

“We won’t let this distract us and will continue to focus on our work to build a united and thriving community,” he said Thursday.

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