Republican AG sues nonprofit accused of going woke to recoup taxpayer funds: 'Pretty clear violation'

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FIRST ON FOX: Montana Republican Attorney General Austin Knudsen delivered on a threat to sue a nonprofit organization of state prosecutors that has hemorrhaged GOP support amid accusations of woke ideology and fiscal mismanagement. 

Knudsen filed a lawsuit in Montana District Court on Thursday morning against the National Association of Attorneys General (NAAG), calling for an audit and for the group to return state funds its holding and investing over financial practices he claims violate the Constitution of the State of Montana. 

The lawsuit states that NAAG's handling of public money "does not comply with Montana law" and that the group "operates without oversight from the public officials and entities the Montana Legislature has created to safeguard Montana's public funds."

Knudsen was one of several attorneys who in the last year fled NAAG, a nonprofit organization of state attorneys general that bills itself as nonpartisan.

Critics flung accusations that the group was banking money from consumer protection settlements often bigger than the cuts the states themselves received. The group also allegedly mismanaged funds from investments and dues collected from states, and is said to have promoted liberal causes while stifling conservative members' voices, Fox News Digital reported earlier this year.

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The National Association of Attorneys General has seen its revenues plummet since the high-profile exit of several GOP members, with the group contending with sagging investments and membership dues, internal documents show.

Knudsen threatened the lawsuit back in February, setting a 90-day deadline to open up the books for NAAG, which he said has become an "unreliable and improper financial steward." He demanded the group show how much of Montana’s funds they had and how the money had been invested, as well as return the funds.

"Over the last six-plus months, the disheartening revelations about NAAG have confirmed the wisdom of extricating Montana from NAAG activities," Knudsen wrote in a letter to NAAG earlier this year, citing Fox News Digital’s reporting that the group is down $53 million in revenue since last year.

The letter also cited reports that the group has heavily invested in companies that promote economic policies known as environmental, social and governance (ESG) that conservatives claim are used by the left as a social credit score to force businesses and financial institutions to adopt progressive ideologies across the globe.

Critics argue that NAAG, a group of both Republicans and Democrats that rotates leadership between the two parties, has become increasingly liberal and invests in ESG policies that are counter to the values of residents in red states.

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NAAG's newly elected president, Ohio Republican Attorney General Dave Yost, told Fox News Digital earlier this year that while he is sympathetic to some of the concerns of those in his party, he discouraged them from walking away.

"NAAG has about $200 million with the current valuation of the stock market," Yost said. "If you're really worried about that being used for left-wing projects, the worst thing you could do as a Republican is to walk away from the table [and] leave that loaded money gun in reach of the progressives. You got to stay involved and make sure that the organization actually is bipartisan."

Since sending the letter demanding answers on state funds, Knudsen told Fox News Digital NAAG has not been cooperative. 

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Montana AG Austin Knudsen is demanding that NAAG return his state's taxpayer funds. (Fox News Digital)

"Their tactic has been to just basically ignore me and hope this goes away," Knudsen told Fox News Digital. "You can only send so many letters, we’ve sent numerous letters. We’ve communicated with their chief of staff, their executive director, and had numerous conversations with them, and it's been completely unheeded. I really think they are hoping this just goes away."

O.H. Skinner, executive director for Alliance for Consumers, told Fox News Digital he applauded the legal action.

"It is encouraging to see more public officials moving to hold NAAG to account," Skinner said. "For too long, public officials happily stuffed organizations like NAAG full of money from consumer protection cases, money that should have flowed back to the states and their consumers. Thankfully that regime is ending."

Knudsen’s lawsuit asks the court to "declare NAAG to be subject to the strict accountability requirement of the Montana Constitution and to the requirements of Title 17 of the Montana Code and "declare NAAG's Chief Financial Officer, in her official capacity, to be subject to the strict accountability requirement of the Montana Constitution and to the requirements of Title 17 of the Montana Code."

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Knudsen told Fox News Digital that NAAG has been "nebulous" about providing a detailed accounting of how much of Montana’s taxpayer money they are in control of and the lawsuit asks for an "an accounting of assets under NAAG's management to determine the amount of those funds that consist of Montana's public funds" to be carried out by a special master.

"At the very least I hope for some accounting," Knudsen told Fox News Digital. "At the most we want Montana’s share of our funds that NAAG claims to be holding for us and investing for us. I think that's pretty clearly a violation of our state’s fiduciary laws."

A NAAG spokesperson replied to the lawsuit in a statement to Fox News Digital, saying, "NAAG continues to work with its members and executive committee regarding these claims and vigorously defend against them."