A charitable organization that has a history of misusing the donations it receives might not have the money for long court battles.
New York Attorney General Letitia James has filed a lawsuit against the National Rifle Association (NRA). The lawsuit has absolutely nothing to do with the second amendment. This isn’t about taking away people’s guns.
Instead, the NRA is in trouble because, according to Attorney General James, the charitable organization has been diverting the money it receives from donations to personal use by senior leadership of the NRA. James also states that the organization used that money for the financial gain of close associations and family.
The lawsuit is called People of the State of New York, by Letitia James, Attorney General of the State of New York v The National Rifle Association of America, Inc., Wayne LaPierre, Wilson Phillips, John Frazer, and Joshua Powell. A copy of a summons, and the complaint, can be found here. (PDF)
“The NRA’s influence has been so powerful that the organization went unchecked for decades while top executives funneled millions into their own pockets,” said Attorney General James. “The NRA is fraught with fraud and abuse, which is why today, we seek to dissolve the NRA, because no organization is above the law.”
One of the reasons why the NRA is in trouble is because it is registered as a 501(c)(4) not-for-profit charitable organization. The lawsuit alleges that mismanagement led to the waste and loss of millions of assets and contributed to the NRA reaching a deteriorated financial state.
In addition, the lawsuit alleges that NRA board’s audit committee was negligent in its duty to ensure appropriate, competent, and judicious stewardship of assets by NRA leadership. In short, the lawsuit alleges that four men “overrode and evaded internal controls to allow themselves, their families, favored board members, employees, and vendors to benefit through reimbursed expenses, related party transactions, excess compensation, side deals, and waste of charitable assets without regard to the NRA’s best interests”.
Wayne LaPierre was Executive Vice-President of the NRA for about three decades. Here are some of the things he allegedly did:
Spent hundreds of thousands of dollars of the NRA’s charitable assets for private plane trips for himself and his family, including extended family when he was not present.
He and his family allegedly also took trips to the Bahamas by private air charter during a three-year period. This cost the NRA $500,000. On many of those trips, LaPierre and his family were allegedly gifted the use of a 107-foot yacht owned by an NRA vendor. LaPierre also allegedly traveled to Africa with his wife for all-expense paid safaris, gifted by an NRA vendor.
LaPierre allegedly secured a post-employment contract for himself with the NRA, without board approval. The contract, according to Attorney General James, is currently valued at more than $17 million.
He also allegedly received more than $1.2 million in expense reimbursements in a four-year period for expenditures that “included gifts for favored friends and vendors; travel expenses for himself and his family; and membership fees at golf clubs, hotels, and other member clubs.”
Wilson “Woody” Phillips was the former treasurer and CFO and managed the books and financial operations of the NRA. He allegedly lied on financial disclosure forms, and set up a deal worth more than $1 million that benefited his girlfriend. Phillips also allegedly obtained a contract for himself worth $1.8 million, “purportedly for monthly consulting services to the incoming treasurer.” (The current treasurer knew nothing about the contract and said that Phillips never consulted for him).
Joshua Powell was former Chief of Staff and Executive Director of General Operations of the NRA. He was terminated after 3.5 years for “misappropriating NRA funds during his tenure” (among other things). He allegedly had his salary doubled retroactively to the beginning of his tenure with the NRA to $500,000. It increased again to $650,000 less than a year later. After two years on the job his salary was $800,000. He also allegedly “abused the NRA’s policy on housing and relocation reimbursements, pocketing excess of $100,000 more than NRA rules allowed.”
John Frazer was chosen by LaPierre to serve as general counsel and corporate secretary at the NRA. Between 2014 and 2018, he allegedly “failed to comply with governance procedures, make necessary changes, or advise others that governance changes had to be made.” He also allegedly “failed to ensure the NRA was in compliance with laws and policies governing whistleblowers.”
Ackerman McQueen was the NRA’s Public Relations and Advertising firm. The lawsuit alleges that a practice began between LaPierre and Ackerman McQueen’s co-founder. What it was being used for is shocking.
Ackerman McQueen allegedly paid for a variety of non-contractual, out-of-pocket expenses for LaPierre and other NRA executives, and passed those expenses to the NRA. This appears to be a way to hide the payment of personal expensive for NRA executives from the NRA itself.
After this lawsuit was announced, it appears that President Donald Trump (and others) suggested that the NRA could get out of trouble if it relocated to another state.
Attorney General James responded by reminding the NRA and President Trump that her office “shut down the president’s own foundation, recouped millions in diverted funds after unearthing the illegal use of charitable funds, and directed those funds to lawful organizations for legitimate charity purposes.” She also stated:
“…To be clear, no charity registered in New York state, including the NRA, can dissolve and relocate to another state without approval from my office or from the Supreme Court of New York. As long as our lawsuit continues, the NRA must stay right where it is and answer for their deep-rooted fraud. The facts speak for themselves and our lawsuit will continue undeterred.”
Attorney General James has a proposed resolution of this case. It involves dissolving the NRA, and asking the court to order LaPierre, Phillips, Powell and Frazier to “make full resolutions for the funds they unlawfully profited and salaries earned while employees”.
Personally, I don’t like the NRA. To me, it feels like the organization uses scare tactics as a means of influencing people to donate money to it. I expect that people who donated money to the NRA would be upset to learn that the money they donated wasn’t used in the way it was supposed to.
It is worth noting that there are plenty of gun owners who don’t like the National Rifle Association. In 2018, HuffPost posted the results of a HuffPost/YouGov poll in which nearly half of the gun owners who took the poll said they didn’t think NRA membership would benefit them personally.
The poll showed that one in four respondents indicated that a reason they chose not to join the NRA was because the disagreed with the NRA’s political beliefs. Another 22 percent said they didn’t feel the NRA represented people like them. A total of 23 percent of respondents said NRA membership was “too expensive”.
On August 6, 2020, Attorney General Karl A. Racine tweeted: “#BREAKING: We are suing the NRA Foundation for misusing charitable funds. Donors gave money to fund firearms safety, firearms education and marksmanship training. Instead, that money was diverted to support wasteful spending by the NRA and its executives.”
The District of Columbia Attorney General Karl A. Racine. has also filed a lawsuit against the NRA for misusing charitable funds to support wasteful spending by the NRA and its executives. This lawsuit alleges that the NRA Foundation violated District laws by allowing charitable funds to be used for non charitable purposes, failing to operate independently, and placing the NRA’s interests ahead of its own charitable purposes.
The part about failing to operate independently refers to the NRA Foundation’s Board of Directors, which was allegedly controlled by the NRA. That’s not supposed to happen because the Board of Directors was supposed to provide oversight. Instead, the Board allegedly allowed the NRA to exploit the NRA Foundation through multi-million-dollar loans. One of those loans was $5 million — that the NRA has never paid back to the NRA Foundation.
A copy of the complaint can be found here. (PDF)
It will be interesting to see what happens as a result of these lawsuits. Do not expect that the outcome will be revealed soon. These lawsuits could end up working their way though the system and to the Supreme Court. I’m unconvinced the NRA and/or the NRA Foundation will have the money to fight against these lawsuits for that long.
Originally published at https://bookofjen.net on August 24, 2020.