Attorney General sues nonprofit over software sales

Minnesota's attorney general sued a California nonprofit Wednesday, accusing the company of falsely telling parents that money from the sale of college entrance test prep software would be funneled into scholarships for poor children.

Attorney General Lori Swanson filed the lawsuit in Hennepin County against Dream Scholars Foundation, a San Diego-based nonprofit. The lawsuit says Dream Scholars also falsely told parents it was affiliated with their children's schools and that their children had requested the SAT and ACT test-preparation software, which sold for $165.

"These kind of companies are tugging on Minnesotans' heart strings," Swanson said. "People here are generous, so these kinds of appeals do work."

Phone calls and e-mails to Dream Scholars Foundation were not immediately returned.

"It's really disheartening," said Chris Lizee, 53, of Shorewood, who bought Dream Scholars material for her daughter last year. "People are falsely claiming to be a charitable cause in a time when it's already hard for actual charities to get donations."

The lawsuit says the company does not have charity tax-exempt status from the Internal Revenue Service and isn't registered to solicit charity donations in Minnesota. As of November, the company had not awarded any scholarships directly to students and made only $23,000 in charitable contributions since its inception in 2008, according to the lawsuit.

Dream Scholars' Web site says the company will begin making charitable contributions this year to "remove the obstacles hindering motivated and deserving students" from attending college. It also says applicants must be residents of California.

Lizee said a caller from the company knew her daughter's name and school and claimed the girl had indicated she wanted the software.

"I was really surprised and excited. It meant she was showing interest in something she had never shown interest in before," Lizee said. But when the software arrived in the mail, Lizee's daughter had never heard of it. Lizee said she tried to return the product but has yet to get her money back.

The lawsuit also accuses Dream Scholars of offering a free 30-day trial of the software, then charging parents a $55 monthly fee without permission.

Assistant Attorney General Nate Brennaman said the company has sold products to dozens of Minnesotans. He did not know of other states where Dream Scholars Foundation was doing business.