Minnesota lawmaker accused of fraud asks: What's an 'employee?'
By Jared Strong | The Center Square
(The Center Square) — A state lawmaker in Minnesota seeks to dismiss a fraud complaint against his company, arguing that his accuser lacks proof and that the definition of the word “employee” is disputable, according to federal court records reviewed by The Center Square.
At issue is about $319,000 in federal pandemic relief money that went to Golden Shovel Agency, a website development and marketing company in Little Falls, Minnesota. The money — distributed in the form of forgivable loans — was meant to ensure employers could cover payroll and other expenses when the coronavirus upended commerce in 2020 and 2021.
But Golden Shovel didn’t have traditional payroll. State Rep. Ron Kresha, a Republican who co-owns the business, said in a sworn deposition in late 2020 that the company had “no employees” and instead utilized independent contractors.
In his recent request to dismiss the fraud litigation, Kresha argues “there was significant confusion surrounding the PPP loan applications, particularly as to the definition of ‘employees.’”
The deposition was part of unrelated litigation initiated by one of his former independent contractors, who had alleged Golden Shovel was using software she developed without permission, court records show.
But in a first application to the Paycheck Protection Program, which was supposed to cover about two months of expenses, the company reported it had 17 employees with a payroll of $123,000 and rent of about $16,000.
Kresha also testified that Golden Shovel’s rent was minimal — another business of his owned the building.
The second application to the program about a year later said the company had 20 employees with a payroll of $165,000 and no rent.
After obtaining a copy of Kresha’s deposition — which occurred after the first loan application and before the second — resident Troy Scheffler filed a federal lawsuit against Golden Shovel last year, alleging it had fraudulently obtained the federal assistance.
In his qui tam lawsuit, Scheffler is suing on behalf of the federal government and can receive about a quarter of what the suit recovers. Federal prosecutors had the option to join the lawsuit but declined, he said.
The U.S. Attorney’s Office for Minnesota did not respond to a request to comment for this article.
Kresha and his attorneys also did not respond to requests to comment. They have derided the lawsuit as politically motivated and recently threatened to seek sanctions against Scheffler and his attorney if they don’t dismiss the suit, according to a letter Scheffler provided to The Center Square.
“Scheffler repeatedly refers to Kresha as ‘Minnesota State Representative Ron Kresha,’ highlighting the underlying political basis of Scheffler’s frivolous motives,” the letter says.
The letter alleges that Kresha’s former independent contractor involved in the other lawsuit wanted to “smear Kresha politically” and gave Scheffler the information he needed to do it. Kresha says the suit is tantamount to harassment.
Scheffler was a third-party candidate for the statehouse in 2024 and lost to a Republican and Democrat. Republican state leadership considers Scheffler “a serial frivolous litigant and unreliable source,” according to an email Scheffler provided The Center Square that was penned by House Speaker Lisa Demuth and was addressed to her fellow Republicans. Some state lawmakers support Scheffler’s efforts.
Scheffler told The Center Square he has a “duty and obligation” to challenge what he sees as malfeasance among elected officials.
“Politicians shouldn’t be above the law,” he said.
It’s unclear when a judge will decide whether to grant Kresha’s motion to dismiss the lawsuit, which seeks damages and penalties of about $966,000. His letter to Scheffler gave a deadline of this week to drop the lawsuit before Kresha would seek sanctions.
In 2022, Kresha sent a letter to the state Attorney General Keith Ellison, a Democrat, questioning his response to massive pandemic fraud in the state that was tied to providing food to children.
“It is clear this scheme could have been thwarted much sooner if your office had taken these fraud concerns more seriously,” Kresha wrote.
Kresha is not seeking reelection this year. His seventh term in office will end early next year.
Jared Strong is an investigative reporter for The Center Square based in the Midwest. He is a lifelong Iowan who has worked for news organizations – big and small – for more than 20 years. He and his wife have three children, a small flock of chickens and an old Case tractor.