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Post date: July 10 2013

A.G. Schneiderman Obtains $950k Settlement From Former National Arts Club Leaders For Years Of Self Dealing

Former President Aldon James And Brother John James Permanently Barred From Running Nonprofits In New York

Schneiderman: My Office Will Hold Accountable Those Who Abuse Their Nonprofit Positions For Personal Gain

NEW YORK - Attorney General Eric T. Schneiderman announced today that his office has obtained a $950,000 settlement resolving claims by his office of self-dealing and breach of fiduciary duty against Aldon James, the former president of the historic National Arts Club in New York City. The Attorney General's comprehensive settlement also resolves outstanding litigation between the club and James, his brother John James and their colleague, Steven Leitner, over the improper use of their memberships and positions in the club.

“After 100 years, the National Arts Club remains one of New York's important cultural institutions,"Attorney General Schneidermansaid.“Today's settlement allows the club to close the door on years of bitter discord and start to recover from the havoc that Aldon James and his cohorts wrought. The message is clear:Those who abuse nonprofits for personal gain will be held accountable by my office.”

Under the settlement, the James brothers and Leitner must vacate their premises at the club by the end of July and cannot contest their expulsion from the club. The James brothers are permanently barred from serving as an officer, director or fiduciary of any nonprofit in New York State.

In September 2012, following an 18-month investigation, the Attorney General filed a lawsuit against Aldon James charging him with breach of fiduciary duty, waste of the club’s assetsand false filings with the office’s Charities Bureau. The suit alleged that James took advantage of his position as president of the club to commandeer more than a dozen apartments, offices and other rentable club spaces, which he and his twin brother used for years without paying any rent. It also alleged that Aldon James used club funds to go on personal shopping sprees at antique shops, flea markets and vintage clothing stores, and that they used club space to hoard the huge quantities of acquired items.

In addition, the lawsuit charged Aldon James with improperly removing $274,000 from the Kesselring Fund, a restricted club endowment fund intended to support the dramatic arts. The suit charged that he used that fund to finance the restoration of the club building’s façade.

The settlement obtained by Attorney General Schneiderman resolves the suit and also brings to an end all of the various lawsuits in the ongoing court battle between the club and the James Parties. In addition to restoring funds to the club's general accounts, the settlement requires the club to apply$274,000 of the restitution obtained to replenish its Kesselring Fund. The club remains subject to an earlier agreement with the Attorney General’s office that provides for governance reforms and tighter financial controls.

Under the terms of the agreement, the club will receive $900,000 and the Attorney General’s office will receive $50,000 to defray costs incurred investigating this matter.

The settlement was approved by Justice Carol Edmead of New York County Supreme Court.

The National Arts Club was founded in 1898 to stimulate, foster and promote public interest in the arts. The club is located in the landmarked Tilden Mansion at 15 Gramercy Park South in Manhattan. Its membership has included three former United States presidents, Theodore Roosevelt, Woodrow Wilson and Dwight D. Eisenhower, and many leading American artists andarts patrons.

This lawsuit was handled by Charities Enforcement Section Chief David Nachman and Assistant Attorney General Steven Shiffman, under the supervision of Charities Bureau Chief Jason Lilien, Executive Deputy Attorney General Alvin Bragg and First Deputy for Affirmative Litigation Janet Sabel. Assistant Attorney General Barbara Quint also worked on the investigation.