Just over a year ago, New York Attorney General Letitia James — who had labeled the National Rifle Association a terrorist organization during her election campaign — filed suit against the National Rifle Association for alleged violations of New York law governing the management of non-profits chartered there. She asked the court to dissolve the NRA given the mismanagement and corruption she said her investigators had uncovered.
Yesterday, she updated her complaint agains the Associated and the named defendants (Wayne LaPierre, Wilson “Woody” Phillips, Joshua Powell, and John Frazer) laying out even more allegations of wrongdoing and willful disinterest in investigating the wrongdoing she alleged last year. You can read the entire document here.
Here’s the gist of her case . . .
Efforts to question or challenge LaPierre’s leadership are quashed or ignored. For example, LaPierre retaliated against the NRA President after personally lobbying him to take on the position. LaPierre withdrew his critical support after the President began to independently assess the governance of the NRA upon learning of complaints by whistleblowers, senior staff and donors.
Senior members of the NRA’s financial staff jointly made a formal whistleblower complaint to the Audit Committee of the NRA Board in 2018 itemizing numerous practices that abused NRA assets. Employees also complained about (former COO Joshua) Powell’s practices and behavior, which LaPierre, himself, described as “abusive.” But these complaints were never properly investigated or meaningfully addressed. Defendants failed to comply with, maintain, and ensure compliance with whistleblower policies consistent with New York law and permitted or personally retaliated against those who questioned their wrongdoing.
As a result of these failures, the NRA, at the direction of the Individual Defendants and with a series of failures of required oversight by its Board, has persistently engaged in illegal and unauthorized activities in the conduct and transaction of its business. Individual Defendants— in their roles as officers and directors—routinely circumvented internal controls; condoned or partook in expenditures that were an inappropriate and wasteful use of charitable assets; and concealed or misreported relevant information—made possible by the Board’s negligent oversight of management—rendering the NRA’s annual reports filed with the Attorney General materially false and misleading.
Defendants abdicated all responsibility for ensuring that the NRA’s assets were managed prudently and in good faith. The Attorney General commenced this action in August 2020. The original complaint provided the Defendants with detailed factual allegations about the NRA’s past and ongoing governance failures. Despite having this information, the Defendants and the Board failed to take appropriate action to investigate the allegations and failed to adequately remediate identified deficiencies.
Instead, in the twelve months since the commencement of this action, the Defendants failed to adequately investigate the allegations in the complaint, undertook an incomplete and opaque process that failed to reliably identify excess benefits received by NRA officers and directors, and failed to adequately instruct and oversee the work of the NRA’s new external audit firm.
Shortly after the NRA’s Chief Financial Officer attempted to verify representations in the NRA’s Form 990 for 2019, LaPierre fired him. And in January 2021, LaPierre, with the knowledge and approval of a small group of loyalists but without the knowledge or approval of the full Board, filed a petition under Chapter 11 of the U.S. Bankruptcy Code in Texas in an attempt to evade this action.
LaPierre’s process for unilaterally authorizing the bankruptcy was found by the bankruptcy court to be “nothing less than shocking.” Following an expedited discovery schedule and trial that cost the NRA tens of millions of dollars in legal fees and other costs, the court concluded the bankruptcy petition was not filed in good faith and dismissed the proceeding.
The court also warned that, “should the NRA file a new bankruptcy case, [it] would immediately take up some of its concerns about disclosure, transparency, secrecy, conflicts of interest of officers and litigation counsel, and the unusual involvement of litigation counsel in the affairs of the NRA, which could cause the appointment of a trustee out of a concern that the NRA could not fulfill the fiduciary duty required by the Bankruptcy Code for a debtor in possession.”
As a result of these persistent violations of law by the Defendants, the Attorney General seeks a finding by this Court that the NRA is liable to be dissolved pursuant to (a) Notfor-Profit Corporation Law (“N-PCL”) § 1101(a)(2) based upon the NRA’s pattern of conducting its business in a persistently fraudulent or illegal manner, abusing its powers contrary to the public policy of New York and its tax exempt status, and failing to provide for the proper administration of its trust assets and institutional funds; and/or (b) N-PCL § 1102(a)(2) because directors or members in control of the NRA have looted or wasted the corporation assets, have operated the NRA solely for their personal benefit, or have otherwise acted in an illegal, oppressive or fraudulent manner.
The Attorney General requests that this Court determine, in the exercise of its discretion under Section 1109(b)(1) of the N-PCL, that the interest of the public and the members of the NRA supports a decision to dissolve the NRA.
— New York Attorney General Letitia James in an amended complaint agains the National Rifle Association filed yesterday.
