A federal investigation of St. Paul’s Grand Avenue Business Association is underway after police received a report of possible financial mismanagement.

The St. Paul Police Department contacted the association in May — just after the initial cancellation of the association’s Grand Old Day annual June parade and festival — to offer an audit of the financials, GABA president Bob Lawrence wrote to members in an email last week.

“GABA cooperated and provided all requested documents. (And we will continue to cooperate with any government investigation.),” wrote Lawrence, who became president last month.

In 2011, the nonprofit association listed $182,000 in net assets, according to IRS filings. By the end of 2017, the organization’s reserves had dwindled to $16,700. A new executive director was brought on that year; her immediate predecessor had lasted a matter of months.

Jon Perrone, GABA executive director from 2014 to 2016, said he found out about the investigation from the media on Monday. He said no investigators have talked to him.

Perrone said he doesn’t see how there could have been financial improprieties during his tenure.

“There were too many checks and balances in place,” he said. “The board members received monthly financial statements … and the books were being looked at by an accounting firm every year when they filed the taxes. There’s no doubt in my mind that what the board has done in the past has been above board and legal.”

INITIAL POLICE REPORT IN MAY

A St. Paul police investigator filed an initial report on May 10.

“An investigator was made aware of possible financial mismanagement related to the Grand Avenue Business Association and an investigation was initiated,” said Steve Linders, a St. Paul police spokesman.

Linders said Monday the investigation remains active.

In July, St. Paul police notified GABA’s board “that the audit findings were sufficient to open an investigation,” Lawrence wrote. “The case was taken over by the US Attorney’s office.”

Citing unnamed sources, KSTP-TV reported Sunday that the Secret Service, a division of the Department of Homeland Security, and IRS are also involved because GABA is a nonprofit organization.

Representatives from the U.S. Attorney’s office and Secret Service said on Monday it was general policy to neither confirm nor deny the existence of an open investigation.

The news station said the investigation is primarily focused on GABA’s spending during the years 2014 through 2018, “when the organization started losing tens of thousands of dollars which prompted the initial cancellation of Grand Old Day.”

Perrone said during his years at GABA, the organization “made great leaps and bounds, in terms of what they did for the avenue.”

The board approved spending “significant money on a new website in 2015,” along with funds for the association’s 50th anniversary celebration and banners on Grand Avenue, Perrone said. For the Grand Old Day event, the association was “barely breaking even, if not deficit spending,” Perrone said.

The KSTP report referenced GABA board members spending $3,000 for a night at Mystic Lake Casino in January 2016, the association paying $200 for a staff member’s flight to Las Vegas in February 2016, and more than $5,000 in “happy hour” expenses in 2015 and 2016.

Perrone said the association went to Mystic Lake for a board retreat and analysis of strengths, opportunities, weaknesses and threats. There were probably 10 or 11 people there and some people spent the night, Perrone said.

“Associations do it all the time, ” Perrone said. “… That was the first one that we did off site.”

As for the Las Vegas plane ticket, GABA paid for it because Perrone said he already had a ticket to Las Vegas, but had to rebook it when he found out he was needed in St. Paul for a meeting with the Summit Hill Association about that year’s Grand Old Day permit.

The happy hours and other events were for membership networking, according to Perrone.

Two other directors served GABA after Perrone — Winnie Tan and Connie DeLage. The association currently has no staff. Neither Tan nor DeLage was available for comment Monday night.

TURNOVER AT ASSOCIATION

This year, GABA announced on April 23 that Grand Old Day, their signature event would be canceled. But a week later GABA said the event would be held after all, prompted largely by a $100,000 public fundraising effort. Some 200,000 attendees flocked to Grand Avenue for the 2.5-mile long Grand Old Day parade and celebration.

The association had a quick succession of executive directors in recent years, with the last one hired in 2017.

Lawrence provided a timeline of events in his email to members:

GABA’s president and treasurer resigned from the board in April. “The employment relationship between GABA and the Executive Director ceased,” he wrote.

“After 10 days of looking at the financials” and consultation, “the decision was made to cancel Grand Old Day,” Lawrence continued. “… With the information the Board had at the time, GABA’s Board believed that there was a strong possibility that producing Grand Old Day would bankrupt GABA.”

When Grand Old Day was held on June 2, it was successful and the profit was $88,444.

“As you undoubtedly know, this past year has been filled with hills and valleys,” Lawrence wrote. ” … I continue to believe that the Grand Avenue Business Association has great potential.”

While the Grand Old Day event itself has been profitable, GABA as an association has run deficits since 2012, according to IRS forms compliled by ProPublica. Related Articles Google parent agrees to $310M misconduct lawsuit settlement

Staffers at MPR’s music stations The Current and Classical MPR vote to unionize

With new shops and street improvements, Saturday’s ‘Rice and LarpenTOUR’ showcases three cities

Metro Transit workers reject contract offer, vote to authorize strike

St. Paul City Council approves $600,000 charge for downtown improvement district

GABA PRESIDENT: WORK WILL CONTINUE

In an interview on Monday, Lawrence, a State Farm agent who became president of GABA in July, said he joined the board in January and became vice president after multiple board resignations in April. He chaired the revived Grand Old Day effort on GABA’s behalf.

“The only thing that I know that’s transpired recently is that a couple people told me they’d been contacted by the police,” Lawrence said. “I haven’t spoken to the police. I haven’t spoken to the U.S. Attorney. We have an attorney that represents the Grand Avenue Business Association, and they’ve been in touch.”

He said the GABA board, which is largely composed of new members who joined over the past year, will continue to do its work uninterrupted. Planning is underway for the annual Grand Meander, a winter holiday stroll.

“We got a head’s up on this back in June, and we’ve all continued to move forward because we believe in what the business association does. If in fact we had a few bad actors, that doesn’t cause us to run away,” said Lawrence, who added with a laugh: “Some of us even doubled down and were dumb enough to say we would be president.”

Former GABA board member Bob Kowalski declined to discuss whether he had been contacted by police.

“I’m not going to comment on anything until this investigation is over,” he said. “I don’t know enough to give an informed comment on what’s going on.”

Dan Marshall — a previous member of the association and proprietor of Mischief Toy Store on Grand — left the organization two years ago after disappointment with some of its priorities. Marshall, who said he had no background on the investigation, said the new board gave him confidence.

“They’re a good bunch of people,” he said.