The Minnesota Attorney General’s Office is investigating a company that plans to build a housing development in Lakeville for Somali-American families, saying $25,000 “reservations” are being sold for homes on land the company doesn’t own.

The allegations were included in a court filing that’s part of a civil investigation of Nolosha Development by the attorney general. The office declined to comment on the case, which was first reported by Sahan Journal, and there’s no indication of a criminal investigation.

In an interview, company CEO Abdiwali Abdullahi said he has done nothing wrong.

Abdullahi said he plans to create near the intersection of Kenwood Trail and Interstate 35 “the first community built from the ground up with a focus on public health and community wealth-building” for East African customers.

The company’s website says all of the 160 lots on the 37-acre development site are reserved.

“The idea came from really our background in public health and our background within the community,” said Abdullahi, speaking of himself and his wife, Sumayya Farah.

The walkable development would have a mosque, community center, parks and commercial spaces along with condominiums, townhouses and detached houses, Abdullahi said. It would address problems ranging from low homeownership rates among East Africans to youth issues like substance abuse.

According to the June 27 court filing by the Attorney General’s Office, a whistleblower alleged Abdullahi was collecting money using “deceptive and fraudulent representations,” including claims he already owns the site.

The filing said the investigation into Nolosha began in late 2023 and that “the reality of the development project is bleak.”

The Attorney General’s Office filed the memo in an attempt to gain Nolosha’s cooperation. But the company has refused to share a customers list, marketing materials or the names of anyone who has asked for a refund, the memo said.

Abdullahi called the Attorney General’s Office allegations “insane” and “baseless” and said they were made by a disgruntled former intern. He didn’t give the office all the documents it asked for, such as the customer list, which he said is private information.

Nolosha has instead turned over many other documents as “evidence that our project is actually true,” he said.

Abdullahi said 1,400 families have expressed interest in the project and that it has the backing of Somali community leaders.

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

But the land is caught up in the federal investigation into widespread fraud in pandemic-era free meal programs.

Tasha Zerna, a spokeswoman for the U.S. Attorney’s Office, said the parcel is “subject to forfeiture to the government as part of ongoing criminal cases arising out of the Feeding Our Future matter.”

Abdullahi said Nolosha has “an active purchase agreement” for the property and that the company’s attorney didn’t know about the federal legal action until after the contract was reached.

Abdullahi said he has no connection to the Feeding Our Future case.

He admitted the project will take longer than expected but said Nolosha has updated customers on the changes.

He said the company “isn’t doing anything out of the ordinary that any other developer wouldn’t be doing,” which includes due diligence steps like site design, studies and working with the city.

Abdullahi said construction will begin once needed permits are granted by the city of Lakeville. The company hopes to submit a formal application this month, he said.

Justin Miller, Lakeville’s city administrator, said the city has had “preliminary meetings” with Nolosha, “but nothing has been officially submitted nor approved.”

Abdullahi pushed back against the Attorney General’s Office’s assertion that having families put $25,000 down on a home before it was built is unusual. It’s “a familiar thing that folks back home do,” he said.

People haven’t had a problem putting down the money, though some have paid only a portion so far, he said.

“Let’s say the $25,000 deposit was this big number, right?” he said. “Wouldn’t our customers decide not to put that down?”

Martin Mohammed, a real estate agent with Coldwell Banker, said that having a developer collect money up front for a house isn’t unusual in East Africa. If money is exchanged in the United States before a home is built, though, it must be put in an escrow account, which is different from in Somalia, he said.

He also said there must be “clear communication” to customers about the zoning, school district and type of housing being built before they invest.

In the Attorney General’s Office’s filing, Abdullahi is quoted in a deposition saying he isn’t sure whether the community’s homes will be owned collectively or sold directly to buyers, who will pay for the development’s streets, or whether customers will need to pay monthly fees or association dues.

While the filing said Abdullahi couldn’t sell land because he didn’t have a real estate license, he said he doesn’t need one. Nolosha has hired a real estate attorney and other professionals, like architects and urban designers, to help with specific tasks, he said.

He said the company will pick a general contractor soon, so it doesn’t need a builder’s license, either.

“We’re kind of like the quarterback; we’re putting everything in place,” Abdullahi said.

The Attorney General’s Office has harassed and misled his clients, he said.

“Our customers ... felt that the AG’s office was kind of planting seeds of doubt in their minds” about the project’s feasibility, he said.

Abdullahi said the company has returned the money of any customer who wanted it, minus the 10% or 20% stipulated in the contracts they signed.

Nolosha’s customers feel good about the community being built, Abdullahi said.

“I do think that we can make this happen and all of the folks in our community that are backing this project want to see it happen,” he said.

A hearing on the Attorney General Office’s motion is scheduled for Aug. 22.