A St. Paul charter school’s founder and former superintendent has agreed to pay the Minnesota Attorney General’s Office $220,000 as part of a settlement agreement after it alleged she lost more than $4 million of the school’s money in an illegal hedge fund investment.
Minnesota Attorney General Keith Ellison in December sued Christianna Hang, alleging she invested $5 million of Hmong College Prep Academy’s money without the approval of the school’s board of directors, in violation of law and against the advice of the school’s lawyer and accountant. According to the school’s 2021 year-end audit, the value of the investment fell to $684,762.
State law prohibits schools from investing in hedge funds, which often use risky investment strategies.
“The lapse in judgment that led Ms. Hang to invest millions of nonprofit assets into an obscure hedge fund is truly astonishing,” Ellison said in a statement Monday. “I am pleased that we were able to obtain as much relief as possible for Hmong College Prep Academy in this action. This lawsuit is an important reminder of why nonprofit directors and officers are required under Minnesota law to act in the best interest of their organization.”
Ellison’s office will give the money to Hmong College Prep Academy to partially compensate it for its loss. The charter school also settled with the New Jersey hedge fund Woodstock Capital Partners and investment manager Clark Reiner last year.
Hmong College Prep Academy sued Woodstock in federal court in 2021 after Hang’s 2019 investment.
Under that settlement agreement, Reiner and Woodstock are to pay Hmong College Prep Academy $400,000. However, while they were obligated to pay the sum by December, the funds were still not available as of late May and representatives for the charter school filed an unopposed motion in U.S. District Court in June to enforce the settlement agreement within five business days.
An attorney with the school reached Monday declined to comment on the motion or its status.
Hang chose Woodstock on the advice of Kay Yang, an unregistered investor from Wisconsin, according to Ellison’s December complaint.
Hang resigned from the school in 2021 after the investment details became public and the school was criticized in a report from the Office of the Minnesota State Auditor, according to the Attorney General’s Office. Ellison’s office then began an independent investigation.
A federal court in Wisconsin later ordered Yang to pay millions in restitution and penalties related to her unregistered investment activity. Hang and her husband lost $125,000 of their own money investing with Yang, according to Ellison.
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