Former Club President Barred, Must Pay $1 Million In Restitution

July 10, 2013       The NonProfit Times      

Charges of self-dealing have left the former president of a New York City arts organization and his cohorts to pay $1 million in restitution and permanently barred from being directors of any charity in the Empire State.

New York Attorney General Eric Schneiderman today announced 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 114-year-old National Arts Club.

The club will receive $900,000 and the Attorney General’s office will receive $50,000 to defray costs incurred investigating the matter, under the terms of the agreement approved by New York County Supreme Court Justice Carol Edmead.

The settlement also resolves outstanding litigation between the club and its former president as well as his twin brother John James and former board member Steven Leitner. The James brothers and Leitner must vacate their premises at the Manhattan club by the end of the month and cannot contest their expulsion from the club. The James brothers are permanently barred from serving as officers, directors or fiduciaries of any nonprofit in the state.

An investigation in early 2011 led to the attorney general filing a lawsuit last September against Aldon James, charging him with breach of fiduciary duty, wasting the club’s assets and false filings with the state’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 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, using the club’s space to hoard the huge quantities of acquired items.

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

The settlement 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 brothers. 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 the Kesselring Fund. The club remains subject to an earlier agreement with the Attorney General’s office that stipulates tighter financial controls and governance reforms.

Founded in 1898 to stimulate, foster and promote public interest in the arts, the National Arts Club is located in the landmarked Tilden Mansion at 15 Gramercy Park South. The club had revenue of more than $2 million in 2011, the most recently available tax form for the organization, with nearly two-thirds of that generated from membership dues.