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Attorney General James Wins Dismissal of NRA’s Fraudulent Bankruptcy, Fight for Dissolution to Continue in New York

NEW YORK – New York Attorney General Letitia James today scored a major victory in her case against the National Rifle Association (NRA) when a federal bankruptcy court in Texas rejected the organization’s claims of bankruptcy after the NRA sought to reorganize in Texas, stating, “that the NRA did not file the bankruptcy petition in good faith.” Despite its attempts to escape New York’s jurisdiction, Attorney General James will now continue to pursue her enforcement action against the NRA, in addition to seeking a number of other forms of relief she requested when initially filing her lawsuit last summer.

“Weeks of testimony have demonstrated that the NRA and Wayne LaPierre simply filed chapter 11 bankruptcy to avoid accountability,” said Attorney General James. “This trial underscored that the NRA’s fraud and abuse continued long after we filed our lawsuit. Without a doubt, the board was deceived when bankruptcy language was hidden in Mr. LaPierre’s contract earlier this year. Today’s order reaffirms that the NRA does not get to dictate if and where it will answer for its actions. The rot runs deep, which is why we will now refocus on and continue our case in New York court. No one is above the law, not even one of the most powerful lobbying organizations in the country.”

Last August, Attorney General James filed a lawsuit against the NRA and four of the organization’s current or former top executives for failing to manage the NRA’s funds; failing to follow numerous state and federal laws, as well as the NRA’s own bylaws and policies; and contributing to the loss of more than $64 million in just three years. The suit was filed against the NRA as a whole, as well as Executive Vice-President Wayne LaPierre, former Treasurer and Chief Financial Officer Wilson “Woody” Phillips, former Chief of Staff and the Executive Director of General Operations Joshua Powell, and Corporate Secretary and General Counsel John Frazer.

This past January, in an effort to avoid accountability, the NRA filed for chapter 11 bankruptcy even though the organization still claimed to have healthy financial reserves. Over the course of the bankruptcy trial, LaPierre and other senior leaders admitted that the bankruptcy was simply a way of avoiding New York’s enforcement action, yet still stated that they believed that New York courts and judges could be trusted to fairly and impartially oversee the case.

In today’s decision, U.S. Bankruptcy Judge Harlin Hale of the Northern District of Texas condemned the NRA’s attempts to avoid accountability, making clear that the organization’s actions were “not an appropriate use of bankruptcy.”

Specifically, Judge Hale said, “The question the Court is faced with is whether the existential threat facing the NRA is the type of threat that the Bankruptcy Code is meant to protect against. The Court believes it is not. For the reasons stated herein, the Court finds there is cause to dismiss this bankruptcy case as not having been filed in good faith both because it was filed to gain an unfair litigation advantage and because it was filed to avoid a state regulatory scheme. The Court further finds the appointment of a trustee or examiner would, at this time, not be in the best interests of creditors and the estate.”

Judge Hale also went on to specifically lay blame for the fraudulent bankruptcy at LaPierre’s feet: “What concerns the Court most though is the surreptitious manner in which Mr. LaPierre obtained and exercised authority to file bankruptcy for the NRA. Excluding so many people from the process of deciding to file for bankruptcy, including the vast majority of the board of directors, the chief financial officer, and the general counsel, is nothing less than shocking.”

The case against the NRA will proceed in the New York County State Supreme Court, where Attorney General James will continue to fight for the organization’s dissolution; for removal of two of its top leaders, LaPierre and Frazer; for full restitution of tens of millions of dollars from LaPierre, Phillips, Powell, and Frazer; for penalties; and for the four individuals to never be able to serve on the board of a charity in New York state again.

Lead trial counsel for the Office of the Attorney General (OAG) in this proceeding was Special Counsel for the Litigation Bureau Monica Connell, along with Bureau Chief James Sheehan, Bureau Co-Chiefs of the Enforcement Section Emily Stern and Yael Fuchs, and Assistant Attorneys General William Wang, Sharon Sash, Jonathan Conley, and Stephen Thompson — all of the Charities Bureau; with additional assistance from Legal Assistant Nyna Sargent and Assistant Attorneys General Peggy Farber of the Charities Bureau and Lucas McNamara of the Environmental Protection Bureau. The OAG was also represented in the bankruptcy proceeding by co-counsel Gerrit Pronske, Eric Van Horn, and Jason Kathman of Spencer Fane LLP. The Charities Bureau is a part of the Division for Social Justice, which is supervised by Chief Deputy Attorney General Meghan Faux and First Deputy Attorney General Jennifer Levy.

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Attorney General Ellison sues company for posing as charity helping service members, funneling donations to owner

Minnesota Attorney General Keith Ellison today announced that his Office is suing a company calling itself Contributing 2 Combatants and Coast 2 Coast Marketing, and its owner, Jacob Choinski, for violating charitable-solicitation and consumer-protection laws by defrauding Minnesota donors. The lawsuit alleges that the company, formally named PNW C2C Marketing, LLC (“C2C”), went door to door in Minnesota neighborhoods and misrepresented that C2C was a nonprofit soliciting donations to send care packages to servicemembers overseas. The lawsuit further alleges that Choinski spent the funds collected for his personal use — and did not spend a single dollar on care packages since C2C’s inception in July 2018.  

“Choinski enriched himself by using C2C to exploit Minnesotans’ generosity in the name of benefiting military service members who are serving all of us overseas,” Attorney General Ellison said. “This conduct is truly despicable. Our military members serving overseas undertake a tremendous sacrifice from which we all benefit. I will continue to aggressively pursue every company and person that exploits our service members’ sacrifice and preys on Minnesotans’ generosity.” 

C2C is a for-profit Minnesota limited liability company that claims to sell the cost of shipping a care package to service members overseas through door-to-door solicitation. C2C claims to partner with a charity to which it provides funds from its sales. C2C claims that its partner charity then sends the care packages using the money it gives the charity.  

The AGO’s lawsuit alleges that C2C has not given any money to the nonprofit with which it supposedly partners, despite soliciting over $70,000 for Minnesotans since July 2018. Choinski, as C2C’s sole owner, instead used C2C to solicit door to door in Minnesota and keep all the money received for his own purposes.  

The lawsuit also alleges that C2C deceptively represents itself as a nonprofit while soliciting and asks Minnesotans for donations, tells Minnesotans that their donations are tax deductible, and misleads Minnesotans to believe that they can choose the gender of the service member who will receive a care package and the branch of military they wish to support. The lawsuit further alleges that Choinski has been affiliated with other companies that have been accused of the same conduct as C2C in Minnesota, Iowa, and the Dakotas.

C2C has solicited throughout the Minneapolis–Saint Paul metro area, Greater Minnesota, and other states. The lawsuit, filed in Ramsey County District Court, asserts that C2C and Choinski have violated Minnesota’s Charitable Solicitation Act, the Uniform Deceptive Trade Practices Act, and the Consumer Fraud Act. 

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Stopping Charity Fundraising Phone Scams: What Consumers Need to Know

This week, the Office of the Attorney General for the District of Columbia, along with the Federal Trade Commission (FTC) and 46 agencies from 38 states, shut down the operators of a massive and long-running charity fundraising phone scam. These scammers bombarded 67 million consumers with 1.3 billion deceptive fundraising calls (mostly illegal robocalls) and duped generous Americans into donating more than $100 million to charities that never delivered the services they promised.

Consumers received calls asking them to give to charities that supposedly supported homeless veterans, victims of house fires, breast cancer patients, or children with autism—but the fundraising companies making the calls knew that these organizations spent little or none of that money on the causes they claimed to support. Instead, the fundraising companies themselves kept as much as 90 cents out of every dollar they collected on behalf of the charities.

Under the terms of a settlement, which are now pending court approval, the remaining active group of companies behind this scam will be forced to shut down. The owners and senior managers of the fundraising companies will also be required to pay back hundreds of thousands of dollars they collected through the deceptive charitable solicitations, and funds will be directed to legitimate charities that support similar causes. Many of these individuals will be permanently barred from raising money for charity, telemarketing to sell goods or services, using robocalls in any form of telemarketing, using abusive calling practices, or making any misrepresentation about a product or service.

This group of scammers is being held accountable, but there are others out there. That’s why it’s important to donate wisely and make sure your donations to charity will make a difference.

Check out charities before you give
Here are things you can do to avoid scams and make sure charities you donate to are using your money the way you expect:
•Research a charity online through online independent sources like IRS Select Check, BBB Wise Giving Alliance, Charity Navigator, GuideStar, and the National Center for Charitable Statistics.
•Ask questions—a legitimate charity, or fundraising company calling on behalf of a legitimate charity, should be able to give you the organization’s official name, address, telephone number, mission, and information about how your charitable donation will be used.
•Search the charity’s name online with the words “scam” or “complaint.” See what other people say about it.

Warning signs—charities to avoid
Here are some warning signs that tell you that a charity may not be legitimate, and you should avoid donating to them:
•The charity makes vague sentimental claims and can’t tell you specifically how your donation will be used.
•The charity asks for your payment via a money order or cash. (Never donate using cash, gift card, or wire transfer. Use a credit card whenever possible.)
•The charity tries to rush you into donating immediately and offers to send a courier to collect your contribution.
•The organization uses a name that sounds very similar to another charity’s name. Scam artists often try to take advantage of names that sound or look like those of respected, legitimate charities, which is why it’s important to do some research.

If you see these warning signs or you’re just not sure about a charity, consider donating to another organization. There are many excellent organizations that will use your donations well.

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Attorney General James Provides $2.4 Million to Brooklyn Substance Abuse Treatment Programs with Funds Derived from Fraudulent Charity Shut Down by AG’s Office

New York Attorney General Letitia James today provided more than $2.4 million to the Brooklyn Community Foundation (BCF) to fund substance abuse treatment programs throughout Brooklyn. The funds are derived from charitable assets that remained after the Office of the Attorney General (OAG) dissolved Canarsie A.W.A.R.E., Inc. for its participation in a scheme that exploited some of New York’s most vulnerable residents and defrauded Medicaid.

“Substance abuse is a harmful and pervasive issue in so many of our communities,” said Attorney General James. “Although recovery is never an easy journey, it can be a lot easier with access to reliable treatment programs. Today’s agreement ensures that these funds will finally be used in the manner in which they were intended — to support some of our most vulnerable communities. I thank the Brooklyn Community Foundation for their partnership and dedication to helping New Yorkers access these lifesaving treatment services.”

“We are deeply honored and excited to partner with the Office of the Attorney General to redistribute these funds in a way that will repair harm and provide vital resources to trusted and thoroughly vetted community-based health providers,” said Cecilia Clarke, president and CEO of Brooklyn Community Foundation (BCF). “Brooklyn Community Foundation’s approach centers community members as key decision-makers to invest in organizations that share our commitment to racial justice. We hope this partnership will serve as a powerful new model for government and foundation collaboration.”

In 2016, as a part of the OAG’s investigation into fraudulent substance abuse providers and their exploitation of individuals living in substance abuse transitional housing — also known as “three-quarter houses” — the OAG indicted Canarsie A.W.A.R.E. Inc. — a New York not-for-profit organization that provided substance abuse treatment services — and its owner for defrauding Medicaid. In September 2018, Canarsie A.W.A.R.E. pleaded guilty to grand larceny in the first degree. In 2019, the OAG won a New York Supreme Court order to dissolve Canarsie A.W.A.R.E. and distribute its assets for use by other substance abuse treatment programs. Today’s agreement between the OAG and the BCF is in connection with the OAG’s settlement of its claims against Canarsie A.W.A.R.E. Inc.

Under New York’s Not-for Profit Corporation Law, assets remaining after the dissolution of a non-profit organization must be distributed to another non-profit organization engaged in similar activities to those of the dissolving nonprofit. The BCF — a well-established grant-making organization dedicated to mobilizing people, funds, and expertise for a fair Brooklyn — will award grants to Brooklyn not-for-profit providers of substance abuse treatment. The funds will support treatment programs providing technical assistance and capacity-building support to the grant recipients, including assistance with fundraising, financial management, and strategic planning. The BCF will also conduct site visits to the grant recipients, and monitor the recipients’ use of funds through regular reporting requirements and communications. The BCF will award the grants in each of three successive years, beginning in 2021.

“I am pleased that the Brooklyn Community Foundation will be offering grants to substance abuse treatment programs that will operate in our community,” said State Senator Roxanne J. Persaud (SD-19). “The services offered are much needed as we fight the scourge of addiction while helping people to uplift their lives.”

“I applaud Attorney General Letitia James for her efforts to redistribute assets recovered in a previous settlement against a dishonest drug treatment provider back into our communities,” said Assemblymember Nick Perry (AD-58). “The $2.4 million disbursement to the Brooklyn Community Foundation should go a long way to providing much needed substance abuse treatment for those Brooklynites struggling with addiction, and get them on the road to recovery rather than on a path through our criminal justice system.”

“The Substance Abuse and Mental Health Administration reported that in 2019, more than 6 million Black Americans suffered from a mental health illness and or substance abuse issue,” said New York City Council Majority Leader Laurie A. Cumbo. “Mental health and substance abuse are urgent issues that often go unaddressed due to stigma and lack of accessible resources, and COVID-19 has further deepened the mental health and substance abuse crises our communities are facing. Although it is gravely disappointing when patients are victimized by organizations meant to help them, I could not think of a better organization to recover funds from Canarsie’s A.W.A.R.E program. The Brooklyn Community Foundation, located in District 35, has provided over $50 million dollars in grants to non-profit organizations throughout our community for over a decade. I am confident that their community-based approach will allow these newly acquired resources to reach those who need them most at a time when we are all suffering. Thank you to the Charities Bureau for making this possible and to Attorney General James for her unwavering dedication to uplifting our Brooklyn community.”

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New Hampshire Court Orders Injunctive Relief in State v Worldwide Push Foundation, Inc.

Deputy Attorney General Jane E. Young announced on Tuesday, February 23, 2021, that the Merrimack County Superior Court granted final judgment against Worldwide Push Foundation, Inc. (“WWPF”), a California corporation, for violations of the New Hampshire Consumer Protection Act and charitable trust laws.

In 2019, WWPF promoted on social media a road race entitled “Margarita Madness 5K” which was scheduled to take place at the Loudon, New Hampshire speedway on October 12, 2019. The website and social media posts promised that the race was “Where you get to celebrate with Margaritas” and indicated that the race would benefit the “Worldwide Push (Push Until Success Happens) Scholarship Foundation.” However, WWPF’s charitable entity status had been revoked by the Internal Revenue Service in May of 2019. WWPF collected thousands of dollars in registration fees but failed to obtain the necessary permits and licenses to hold the event and serve alcohol. In the weeks prior to the race date, WWPF notified the registrants that the race location had been moved to a park in Northfield, New Hampshire. WWPF, again, failed to obtain the necessary permits and licenses to hold the event as advertised. WWPF then “postponed” the event and failed or refused to refund registration fees.

In late 2019, WWPF began advertising on social media and its own website that the “Margarita Madness 5K” races were to take place at “Rollings [sic] Park” in Concord, New Hampshire on July 11, 2020, and at “Surrette Battery [sic] Park” in Northfield, New Hampshire on October 24, 2020. The race on July 11, 2020, did not take place and WWPF failed to obtain the necessary permits and licenses for the October race. WWPF collected a total of over $30,000.00 in registration fees.

In December 2019, the Director of Charitable Trusts issued a Cease and Desist letter to WWPF requiring them to cease advertising the race, return all entry fees, and register with the Charitable Trust Unit. WWPF failed to comply with all of those requirements.
The State filed a civil enforcement action against WWPF on July 10, 2020, for nine violations of the Consumer Protection Act and charitable trust laws for WWPF’s failure to comply with the Cease and Desist, committing unfair and deceptive acts in the course of commerce and charitable solicitations, and advertising services without the intent to sell them as advertised.

By the Court’s entry of Final Judgment, WWPF is permanently enjoined from advertising, organizing, soliciting, or accepting any consumer money for any event in New Hampshire unless and until it is registered with the Charitable Trust Unit. WWPF is further prohibited from committing any future violations of consumer protection or charitable trust laws. WWPF is required to refund race registration fees. The Court also awarded the State attorneys’ fees for the cost of investigating and prosecuting this civil enforcement action.

This case was investigated and litigated by the Charitable Trust Unit and Consumer Protection and Antitrust Bureau. The State was represented in this case by Assistant Attorney General Diane Quinlan, Assistant Director of the Charitable Trust Unit and Assistant Attorney General John Garrigan of the Consumer Protection and Antitrust Bureau.

This matter came to the attention of the Attorney General’s office as a result of complaints made by individuals who registered for the race. Consumers who have registered for the Margarita Madness 5K Run/Walk in New Hampshire and have not received a refund can file a complaint with the Consumer Protection Bureau online at https://www.doj.nh.gov/consumer/complaints/index.htm.