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Aldon James Will Not Face Criminal Charges in National Arts Club Scandal

By Amy Zimmer | September 21, 2012 12:48pm | Updated on September 21, 2012 1:15pm

MANHATTAN — Aldon James, the embattled ex-president of the prestigious National Arts Club, has been slapped with a $2 million lawsuit by the state Attorney General's office after allegedly using the Gramercy Park club for personal benefit, but won't face any criminal charges, officials announced Friday.

The lawsuit follows a series of stories first reported by DNAinfo.com New York that showed how James, his twin brother, John, and their friend Steven Leitner used the club to hoard antiques, papers, arts and other junk they'd buy on flea market sprees — allegedly with club funds — in several of the rooms of the 114-year-old landmark they rented at below-market rates or for free.

The District Attorney's office had also been investigating the club, but is not pursuing criminal charges.

“After a thorough investigation, this office has concluded that the mismanagement at the National Arts Club is more appropriately handled through the civil action filed today by the Attorney General’s office," Executive Assistant District Attorney Adam Kaufmann said in a statement.

"The conduct we and the Attorney General uncovered, described in the complaint, does not rise to the level of provable criminal conduct," he said, adding it did, however, illustrate that "waste, misallocation of assets, and fiduciary breaches are unacceptable in non-profits."

The AG's suit accused James of exploiting the club for personal gain to the tune of $1.75 million.

James’ use of the apartments deprived the club of at least $1.5 million in rental income that could have flowed into the arts institution in the last six years alone, the AG’s office said, which is seeking more than $2 million in restitution.

The AG's office said it is also seeking to bar James from running charities ever again.

“For years, Mr. James took advantage of his role as the leader of the National Arts Club to deprive the organization of valuable assets that should have been used to advance its charitable mission. The time has come for real accountability,” Attorney General Eric Schneiderman said in a statement.

“This lawsuit demonstrates that my office will not tolerate leaders of charities abusing their position for personal gain,” he added. “Our message is loud and clear: You serve your organization; the organization isn't there to serve you."

James also regularly used $250,000-worth of club money to foot the bill for his personal meals and for personal car service and taxi rides, the AG’s investigation found.

"James exercised nearly absolute control over the club's operations and affairs," the lawsuit stated. "[He] cemented that dominations by using all the powers available to him as president, his knowleged of the club's membership, his round-the-clock presence as a tenant of the club and a unique mixture of charm, intimidation, secrecy and deception."

The lawsuit stated that James, who was subpoenaed to testify during the investigation, invoked his Fifth Amemendment privilege against self-incrimination more than 500 times and declined to answer "substantive questions" from the AG.

That silence, however, did not stop James from "waging a relentless legal campaign," costing the club hundreds of thousands to litigate, the suit added.

James’ lawyer, Gerald Shargel, called the lawsuit "absurd" and vowed to fight it.

"The idea that Aldon James misappropriated money is utter nonsense," Shargel said. "He served the National Arts Club for 25 years, and every decision he made he made for the benefit of the club and not himself."

The Attorney General acknowledged that the club has implemented major reforms since Dianne Bernhard took over for James in March 2011 and is requiring more changes, including a reconstituted board, a new audit committee that will be charged with financial oversight and making the club's much-coveted apartments equally available to members "at no less than fair market value."

Bernhard — who will step down when her term ends next May, as per the agreement — commended the AG’s investigation and said, “It’s now time for all of us to get our focus back on art, our mission and sharing our rich resources with the world.”