Montana AG Suing Legal Fund Amid Claims It Mismanaged Taxpayer Funds, Advanced Left-Wing Causes

Montana AG Suing Legal Fund Amid Claims It Mismanaged Taxpayer Funds, Advanced Left-Wing Causes
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Ryan Morgan

Republican Montana Attorney General Austin Knudsen filed a lawsuit on Thursday against a nonprofit organization of state prosecutors following allegations the organization has been mismanaging public funds.

Knudsen's lawsuit (pdf), filed in Montana district court, targets the National Association of Attorneys General (NAAG). NAAG is funded through taxpayer dollars paid by member states and the organization manages those funds, loans those funds to states to finance their legal battles, and invests those funds.
Until last year, Montana was among the NAAG member states. In May of last year, Knudsen joined Republican Texas Attorney General Ken Paxton and then-Attorney General Eric Schmitt in withdrawing their states from NAAG. Republican Alabama Attorney General Steve Marshall withdrew his state the year prior, at the time alleging a leftward political shift in the organization.
In February, Knudsen called for NAAG to return taxpayer funds Montana had invested with the organization. Now, with his lawsuit, Knudsen is pursuing an audit of NAAG to determine what share of the organization's assets come from Montana's public funds and compel the return of those funds.

Accounting Concerns

NAAG has come under increased scrutiny over questions about how it manages member funds.
In 2021, NAAG received a $15 million payment, which included a $7 million reimbursement for “costs and expenses of the States’ opioid investigations,” in a lawsuit brought by 49 states, five U.S. territories, and the District of Columbia against McKinsey & Company, reported Legal News. McKinsey & Company ultimately reached a $574 million settlement over its alleged role in America's opioid crisis, but the $15 million for NAAG was more than the average share of the payout the states and territories received in the lawsuit.
In his February letter to NAAG, Knudsen also cited a report by Fox News that the organization had lost about $37 million in investments over the prior year.
"On top of this damning evidence of daily mismanagement, I have also recently come into possession of tax documents and other internal documents that call NAAG’s entire financial structure into question," Knudsen wrote in February. "From what I have seen, it appears the entire NAAG arrangement is premised on a series of arrangements that do not square with the law in Montana, or maybe in any other state."

Political Bias Allegations

In his February letter, Knudsen also raised allegations that NAAG had invested some of the funds it manages into firms that promote environmental, social and corporate governance (ESG) frameworks. Knudsen specifically cited a January Breitbart article that identified NAAG investments in BlackRock and DFA Emerging Markets Social Core Equity Fund.
ESG is a business framework that its critics argue forces business entities to wade into politically divisive topics rather than strictly focusing on the financial benefit of shareholders. Businesses that are invested in fossil fuels, for example, would see less favorable consideration under the environmental tenets of ESG scoring. Proponents of ESG investing have been accused of pressuring corporations to support left-wing political causes and specifically boycott Republican states and Republican legislation regulating issues like abortion.

"While states like Montana are pushing back against the use of ESG in so many other areas of our citizens’ lives, NAAG is investing its money in ESG-linked investments," Knudsen wrote in February. "That is patently unacceptable."

NTD News reached out to NAAG for comment about Knudsen's lawsuit and allegations of political bias but did not receive a response by the time this article was published.

Until recently, Democrat Iowa Attorney General Tom Miller served as president of NAAG. Republican Ohio Attorney General Dave Yost was elected to replace Miller as NAAG president in December.

In January, Yost warned his fellow Republicans against withdrawing from NAAG, saying it would only strengthen the hold their left-wing political opponents have over the organization.

"NAAG has about $200 million with the current valuation of the stock market," Yost told Fox News in January. "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."