From The People v. VDARE Foundation, Inc.Judge Sabrina Kraus of the New York Court of First Instance ruled yesterday:
Respondents [VDARE] is a New York charitable non-profit organization [and tax-exempt] Incorporated in New York in 1999…
In applying for federal tax-exempt status, defendants stated their plans to conduct business from a New York office and listed the New York City addresses of two of its four directors. Respondents described their main purpose as creating a publication web page and magazine with editorial content focused on domestic and foreign policy issues.
In 2019, respondents reported a six-fold increase in revenue, from $700,000 in 2018 to approximately $4.3 million in 2019, including a one-time contribution of $1.5 million from donor-advised funds. In early 2020, respondents spent $1.4 million of these newly received funds on the purchase of Berkeley Springs Castle, a mid-century castle in West Virginia.
Public posts by defendant Chairman Peter Brimlow and others indicate that he and his family have used the castle as their primary residence since at least March 2020. During the same period, defendant also substantially increased payments to Brimlow and third-party for-profit companies he controls. In 2019, Brimelow reported that salaries more than doubled and accounted for about a third of respondents’ operating expenses. Respondents separately reported spending tens of thousands of dollars on office expenses in 2019 and paying hundreds of thousands of dollars to a third party limited liability company controlled by Brimelow at a residential address in Brimelow.
In December 2020, respondents transferred the entire estate of Berkeley Springs Castle to two West Virginia corporations incorporated five months earlier by Peter’s wife, Lydia Brimelow, The company is also a director of the respondents. Respondents turned over the castle itself and the land on which it stands to the nonprofit corporation Berkeley Castle Foundation (BCF). Respondents transferred the remaining land, including the eight parcels, to BBB, LLC, a for-profit company.
Based on the information obtained, the Attorney General opened an investigation into possible violations of New York law applicable to charities by the defendants and their leadership. The subpoena seeks: documents pertaining to respondent’s organizational structure; compliance with conflict of interest policy requirements under New York law and financial operations; the purchase and transfer of Berkeley Springs Castle; and transactions between defendants and entities controlled by the Brimelows….
[VDARE partly complied with the subpoena, but later sued] In the U.S. District Court for the Northern District of New York… [VDARE Foundation, Inc. v. James, 1:22-cv-01337 (FJS)], alleges, among other things, that Applicant’s requirements for certain disclosures threaten Respondent’s ability to conduct business; and that Plaintiff’s subpoena is a retaliatory excuse designed to interfere with Defendant’s rights to freedom of expression and association. The federal complaint seeks a statement that the subpoena violates the defendant’s First Amendment rights, barring plaintiffs from enforcing the subpoena and an injunction on damages. [The New York government then sought] Order to Compel Defendant to Comply with Investigative Subpoena…
The requirements for issuing an investigative subpoena duces tecum are that “(1) the issuing agency has the authority to participate in the investigation and issue the subpoena, (2) there is a genuine factual basis in support of the investigation, and (3) the evidence sought is reasonably relevant to the subject matter of the investigation.”
The attorney general has broad and well-established powers to issue subpoenas related to civil investigations of nonprofit conduct to determine whether to institute enforcement proceedings. “Furthermore, in evaluating the reasons for the subpoena issued by the Attorney General, there is an assumption that he or she is acting in good faith.” The party challenging a subpoena issued by the Attorney General bears the burden of determining that the subpoena is invalid. …
Petitioners’ requests for subpoenas must demonstrate “a reasonable relationship to the subject matter under investigation and to the public interest to be served.” A party must respond to an investigative subpoena unless the information sought is “entirely irrelevant to any proper investigation.”
New York State has a public policy interest in ensuring robust regulation of tax-exempt charitable entities, such as respondents and complainants, with the authority to monitor and investigate such entities when wrongdoing is suspected.
The applicant’s subpoena focuses on subject areas that fall under the laws governing nonprofit corporations. For example, the Nonprofit Corporations Act states that an entity such as Respondent may only be formed for charitable purposes and may not distribute charitable assets to members, directors, or officers. Charitable entities must also comply with the N-PCL’s express requirements for operating lawfully, including requirements for procedures for setting compensation; the process of acquisition and “sale or other disposition” of property; creation and filing of complete and accurate financial reports; consideration of related party transactions procedures; and processes for managing conflicts of interest.
The types of materials requested by the subpoena to allow the applicant to determine whether the respondent has complied with the requirements include complete copies of the respondent’s annual regulatory filings, financial transaction records, compensation records, and board meeting and review records. The required documentation will allow the applicant to determine whether there has been any transfer of charitable assets – for example, through unlawful payments to for-profit companies held by the Brimelows or other VDARE trustees. Section 7-A of the Administrative Law authorizes the Attorney General to oversee charities that solicit donations in New York, and Section 7-A requires the Attorney General to oversee such organizations to ensure, among other things, that charities do not falsely solicit Donations Pretending to use donations it receives or in a manner that is “substantially consistent” with the charity’s stated purpose.
Respondents raised First Amendment-related constitutional objections and thus had an initial threshold burden to show that providing the information sought would prejudice their First Amendment rights. However, Respondent made this argument on behalf of its donors, and Plaintiff agreed, initially to anonymize the donors and volunteers. Respondent has not determined that the subpoena would impair Respondent’s own First Amendment rights.
Moreover, the defendants’ documents themselves stress the subpoena’s reasonableness. Respondents acknowledged the key facts that first sparked Petitioner’s scrutiny — that Respondent’s founder and director, Peter Brimelow, and his wife, Lydia Brimelow (also a director), had and continue to use $1.4 million of charitable assets as their personal residence.
Defendants contend that the Brimelows are paying rent to live in the cottage beginning April 2021, but that the lease is between Lydia Brimelow and BBB, LLC, a West Virginia for-profit corporation she manages, with Lydia Brimelow as landlord and BBB the file. tenant.
Respondent’s motion and accompanying documents failed to satisfy its duty to find the subpoena invalid. Defendants, who have partially complied with the subpoena for months, have yet to determine why providing edit logs for documents they have produced raises any First Amendment concerns, or why continued production poses a threat to their existence.
While Respondents argue that redactions were required to protect the identities of contractors (including authors who contributed to the site), these are the very records that Petitioner seeks to examine as it investigates Respondents’ alleged organizational misconduct. To the extent that anonymity is used to conceal violations, “it’s not protected by the First Amendment.”
For example, the only one of the four board members who is not a member of the Brimelow family is a well-known contributor. The Attorney General may investigate the contributor’s compensation as part of the conflict of interest and board independence investigation. The Attorney General may seek the identities of other contributors to determine whether further conflicts of interest may exist.
Respondents’ dependence Americans for Prosperity v. Bonta (2021), again to no avail. The decision addresses only donor disclosures in the statewide annual filing requirement, while expressly allowing subpoenas to seek the same information as targeted investigations. In addition, Petitioner has indicated its willingness to enter into a nondisclosure provision/order to further address any concerns Respondent has. …