Minneapolis architectural firm accused of firing whistleblower who discovered millions missing

A principal architect at one of the top firms in Minnesota alleges in a lawsuit that he discovered the company was diverting millions of dollars to a secret bank account and was fired after he repeatedly brought his discovery to senior leadership.

The lawsuit, filed by Todd Novak, lays out the quickly deteriorating relationship of what was a promising career with Minneapolis-based RSP Architects.

RSP hired Novak in 2019 to be a senior associate to help lead the company on multifamily architectural projects.

Novak had earned his master’s degree in architecture from the University of Minnesota and quickly established himself in the field. He was the lead on major projects while working for Ryan Companies and Mohagen Hansen Architecture, including the redevelopment of the Pillsbury A Mill — a National Historic Landmark on the banks of the Mississippi in Minneapolis — and the Nolan Mains Development at 50th and France in Edina.

RSP has a lengthy history of award-winning architectural work, especially in Minnesota and Arizona. Its list of projects include turning Block E into Mayo Clinic Square in Minneapolis, designing the Target Wing of the Minneapolis Institute of Arts and working on numerous projects with Target, Mayo Clinic and Mortenson. The lawsuit states that the company’s budgeted revenue for 2024 was $88.5 million.

Once Novak got started, he secured contracts for RSP to design mixed-use/multifamily projects like the Northstar Center redevelopment in downtown Minneapolis and multifamily buildings at Viking Lakes in Eagan. In 2021, he was promoted to principal architect and given national oversight of RSP’s work in retail, hospitality and mixed-used properties.

David Norback, RSP’s chief executive, said in a statement announcing the promotion that Novak represented the company’s “next generation of leadership” and his role was a confirmation of the national growth of the company.

The lawsuit filed in Hennepin County District Court this month alleges that as Novak climbed the corporate ladder he uncovered millions of dollars in missing funds in RSP’s finances and began continuously raising questions about it.

In March, shortly after he had been interviewed as a candidate to replace the retiring Norback as CEO, Novak was fired.

The suit accuses RSP of retaliation in violation of the Minnesota Whistleblower Act and seeks unspecified compensation for loss of income, mental anguish, emotional distress and other financial and emotional loss.

Emma Denny, the attorney representing Novak, said she had no comment on the pending litigation. Lisa Lamm Bachman, the attorney representing RSP, said her client denies the allegations and any suggestion of financial impropriety.

According to the lawsuit:

Novak first became concerned about the finances of the company in August 2023 when RSP hired Dean Gratz as its new financial controller. Gratz was the third person in that role at RSP in two years. One month later, Norback announced he was planning to step down as CEO in 2024.

Novak, along with several other internal and external candidates, applied for the job.

Once a month, Novak was attending financial meetings with RSP leadership, including Norback. Budget reports and financial statements were provided for review.

Since Novak was applying for the CEO position he began intensely studying the financial documents and discovered there was between $2 million and $6 million unaccounted for “between the summary of overhead spreadsheet and the individual summary breakdown sheets.”

The amount of missing money was growing exponentially month after month.

Novak began raising his concerns at the monthly financial meetings. Gratz, the new financial controller, began looking into the matter and three months later told Novak he had learned money was missing from the statements, the statements came from multiple sources and that certain corporate bank accounts were secretly held and only accessible by Norback and former RSP financial controller Pat Parrish.

The missing funds mattered for several reasons, including that RSP ran an employee stock ownership plan that was funded based on company profits.

Novak continued to notify several top executives and principal architects at the firm about his concerns over the missing money. In February, he began working with Michael Carter, RSP’s director of business development for federal government.

Carter told Novak he was having a “difficult time certifying RSP’s finances” for government contracts and that he and other executives had refused to sign off on financial statements.

At the RSP financial meeting in February, things came to a head. Novak brought up the discrepancy again and asked Gratz to explain it. Gratz directed the question to Cheri Welch, the company’s former financial controller who had been helping Gratz get acclimated into the job.

Welch then directed the question to Norback who “became visibly heated and snapped back at Novak that, ‘it’s discretionary.’”

Two days after that meeting, Gratz was fired. Novak was soon notified that he was being removed from the CEO selection process. He continued to raise his concerns about the company finances and a lack of confidence in the company’s board members and executive committee.

On March 14, Novak was invited to a Zoom meeting where he was informed by Norback that five board members had decided that due to the state of the economy and a softening marketplace for architecture, he was being let go. Novak argued that he had been bringing in new contracts and that his studio was one of the busiest at the company, including signing a $2.1 million proposal for a 13-story project in Rochester the day before.

Norback responded saying, “we have lost confidence in your ability to lead.”

Novak’s direct supervisor, Steve Fautsch, was in the meeting. Novak asked him why he was being fired if he had never received any negative feedback about his performance. Fautsch told him he had heard Novak was plotting to take his job — an accusation Novak vehemently denied.

When Novak said he felt he was being fired for bringing up the missing money, Norback said that RSP had the “cleanest financial records.” He sent a company-wide email later that day announcing the company had fired Novak.

In the following weeks, Novak would be given contradictory information about his firing. A board member told him the board never met to discuss firing him and that Norback and Fautsch had told the board they were firing Novak and “that was the extent of it.”

The lawsuit states that Novak believes the $2 million to $6 million that is unaccounted for is being “fraudulently diverted” to accounts that are hidden from the financial controller and are used at the discretion of Norback, Fautsch and Joe Tyndall, an executive who led RSP’s regional office in Phoenix before retiring in 2023.

Novak argues that this means RSP also “knowingly submitted inaccurate, and thereby fraudulent, overhead and associated financial statements to the federal government as required for federal contracts.”

A summons was served to RSP in September. The case has been assigned to Judge Edward Wahl.