Ellison alleges fraud by developer marketing Lakeville community to Somali Americans

A Minnesota housing developer looking to build a 37-acre development aimed at the state’s Somali-American community stands accused of fraud by Minnesota Attorney General Keith Ellison.

Ellison sued in Hennepin County District Court on Wednesday, accusing Abdiwali Abdullahi of fraud over how he marketed and procured down payments for Nolosha, his proposed housing development in Lakeville.

The lawsuit alleges Abdullahi fraudulently advertised the homes, interest plans, construction timelines and community amenities to customers looking to secure a spot at Nolosha.

Many of those buyers had been asked to pay $25,000 down payments. The lawsuit seeks to stop Nolosha’s “misrepresentations and seeks full refunds for the hundreds of families who paid significant sums for their dream home.”

The lawsuit is presented as a way to secure “speedy relief” for customers whom the Attorney General’s Office claims are being denied refunds as the project continues to be delayed while an active investigation plays out in court. It charges Abdullahi and Nolosha with one count each of violations of the prevention of consumer fraud act; violations of the uniform deceptive trade practices act; and violations of the false statement in advertisement act.

Calls and messages to David Aafedt, the attorney who has represented Nolosha in previous civil proceedings brought by the Attorney General’s Office, were not returned.

The lawsuit alleges that Nolosha used deceptive marketing materials and language to entice clients. The advertisements said buyers would get homes with three to five bedrooms for between $370,000 and $500,000. They said sales would be done in accordance with Muslim beliefs that prohibit collecting interest on a loan. They also referred to the development as Nolosha Lakeville even though the company did not have any construction permits when it began marketing the development.

The suit alleges that Nolosha collected more than $1 million in “pre-reservations” from 160 prospective buyers. Once those 160 lots were spoken for, Nolosha began charging customers $500 to be added to a waitlist. There are more than 1,500 customers on the waitlist.

The suit alleges there is no plan for single-family homes at the development, which will instead be multifamily homes. Buyers will have to obtain either a traditional mortgage, with interest, or “obtain a loan from a Sharia-compliant lender” that Nolosha knew would charge a “profit rate” on top of the cost of the house. It also alleges that, “most egregiously,” customers will not be able to move into Nolosha in 2023 or 2024 because the development will not be ready for “many more years at best.”

It also says that when the Attorney General’s Office requested that Nolosha pay customers a full refund due to the delays, Nolosha refused.

The Attorney General’s Office contends that Nolosha doesn’t own the development’s proposed site in Lakeville, but offered to buy the land for $4 million in April 2023. Four extensions to the closing date have since been granted, the latest setting that date for Nov. 10 and the price at $3.4 million.

Abdullahi has said he has a signed purchase agreement for the property.

The lawsuit states that Nolosha has lacked even basic communication with Lakeville and has not submitted a comprehensive plan to the city about the development, let alone broken ground. Attached to the lawsuit is a photo of the proposed site, calling it “just undeveloped wetlands.”

It accuses Abdullahi of enriching himself as the “sole full-time employee of Nolosha,” earning a salary between $2,000 and $4,000 per month.

Many of the other arguments in the lawsuit have been presented before. Ellison’s office has been investigating the development since 2023.

Nolosha alleges the investigation began because of a disgruntled employee. The Attorney General’s Office refers to the employee as a whistleblower.

That investigation had not led to formal accusations of fraud until Wednesday, but both sides traded public accusations about harassment and manipulation at a motion hearing in August, which was attended by dozens of members of Minnesota’s Somali American community.

After that hearing, Judge Christian Sande ruled Nolosha needed to provide certain documents to the Attorney General’s Office. He also gave Nolosha a partial protection order against the Attorney General’s Office, saying the investigation had veered outside the alleged violations.

The Attorney General’s Office alleges that, so far, Nolosha has not complied with the court order to turn over information.

The next motion hearing in the that case is scheduled for Oct. 21.