Clawbacks reduced to two years

The statute of limitations on so-called “clawback lawsuits” has been trimmed from six years to two years.

Signed April 3 by Gov. Mark Dayton, a new law that took effect the next day aims to protect nonprofits and religious groups from the lawsuits that are often used in an attempt to recover funds stolen from Ponzi-scheme victims.

Rep. Greg Davids (R-Preston), who sponsors the law with Sen. Benjamin Kruse (R-Brooklyn Park), said the legislation comes as a result of the Tom Petters case. A trustee for the Petters fraud victims is currently trying to get millions of dollars back from charities that received Petters-run foundation donations, in some cases many years after the donation was made.

Because the donated money was fraudulently obtained by the donor, state law allows demands to give the money back so it can be fairly distributed among all victims. The law requires recipients to return tainted contributions, if a lawsuit seeking the return is begun within two years after a donation.

Although he understands the bill could hurt investors in Ponzi schemes, Davids said it’s very difficult for charities operating on a shoestring budget to return large sums of money they may have received and already spent many years ago.

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