Chickens Coming Home To Roost

When the NRA leadership began its purges and retaliation against dissenting board members, we predicted that this would backfire. The Attorney General would cite the retribution as proof that the NRA leadership was not open to reform and honesty, or even to self-investigation, but would instead punish anyone who dared even to suggest reviewing its conduct.

The backfire has begun. Selections from the NY Attorney General’s Opposition to the Motion to Dismiss:

“Far from being “conclusory,” the Complaint contains 27 paragraphs detailing the ways in which LaPierre, with assistance from other NRA employees and board members, froze Dissident No. 1 [Ollie North] out of his leadership position after Dissident No. 1 questioned and sought to investigate the Brewer Firm’s expenses. FAC ¶¶ 462–489. Indeed, as alleged in the Complaint, the NRA’s retaliation has included seeking to revoke Dissident No. 1’s membership status and instigating a lawsuit towards that end. Id. ¶ 489.”

“The NRA also ignores the numerous other allegations of retaliation in violation of New York law, which are asserted in the Complaint. For example, the NRA ignores the allegations that it refused to assign four board members to any committees of the board after they requested an investigation into issues that included allegations raised in the Complaint. Id. ¶¶ 490–494. And how the NRA refused to undertake an investigation into allegations of harassment, including by the Brewer firm, raised by one of the NRA Whistleblowers. Id. ¶ 516. And how the NRA’s Audit Committee, the board committee with primary supervisory authority over the NRA’s whistleblower policy, failed to adequately document what steps, if any, it took in response to whistleblower complaints, and failed to provide information about the whistleblowers to its independent auditor. Id. ¶¶ 511–513, 541.”

“Executive Law § 172-d(1) makes it unlawful for any person to “[m]ake any material statement which is untrue in,” among other things, any “financial report … required to be filed pursuant to” Article 7-A of the Executive Law. Where such a violation occurs, the Attorney General is given the authority, under Executive Law § 175(2)(d), to bring “an action or special proceeding … against a charitable organization and any other persons acting for it or on its behalf to enjoin such organization and/or persons from continuing the solicitation or collection of funds or property or engaging therein or doing any acts in furtherance thereof.”

“The NRA does not cite any authority in support of its argument that the Attorney General should have alleged that the NRA Board “knew of, approved, or participated in any alleged ‘false statements’ in the NRA’s filings with the NYAG.”

“The NRA does not refute that Frazer or any other NRA employee was not acting as an authorized agent of the NRA when they signed materially false filings submitted to the Attorney General. “[S]ince corporations, which are legal fictions, can operate only through their designated agents and employees, the acts of the latter are, in a sense, the acts of the corporation as well.” People v. Byrne, 77 N.Y.2d 460, 465 (1991) (citation omitted). The NRA can and should be held responsible for the acts of its agents like Frazer.”

“The NRA does not refute that Frazer or any other NRA employee was not acting as an authorized agent of the NRA when they signed materially false filings submitted to the Attorney General. “[S]ince corporations, which are legal fictions, can operate only through their designated agents and employees, the acts of the latter are, in a sense, the acts of the corporation as well.” People v. Byrne, 77 N.Y.2d 460, 465 (1991) (citation omitted). The NRA can and should be held responsible for the acts of its agents like Frazer.”

“The Complaint is replete with examples of Frazer’s knowledge of his and others’ misconduct at the NRA. For example:• Frazer was aware of the NRA Whistleblower’s and board members’ concerns about financial mismanagement at the NRA (FAC ¶¶ 490, 505);

Frazer was aware, as the officer primarily charged with overseeing the NRA’s whistleblower policy, that the policy was not being adequately enforced due in part to his own failures (FAC ¶¶ 559, 567); and

Frazer failed in his responsibility of presenting the NRA’s Audit Committee with the information necessary for it to consider conflicts of interest and related party transactions (FAC at ¶¶ 517–536).

All of the above resulted in material false statements in the NRA’s regulatory filings, including the failure to disclose related party transactions; failure to disclose payments to vendors; and failure to accurately answer questions about the NRA’s governance and policies. FAC ¶ 568. Frazer has not acted in good faith, and thus is not entitled to rely on N-PCL § 717 even if it were applicable to the Seventeenth Cause of Action.”

“In her Fourth Cause of Action, the Attorney General alleges that Frazer violated the fiduciary duties he owed to the NRA under N-PCL §§ 717 and 720 by “failing to provide competent representation, in that he failed to act with reasonable diligence in representing the NRA and to use the thoroughness and preparation reasonably necessary for the representation of the NRA throughout his tenure, including by failing to make sufficient inquiry into and analysis of the factual and legal problems under his responsibility, and by failing to use methods and procedures meeting the standards of competent practitioners.” FAC ¶¶ 672–676. In her Eighth Cause of Action, the Attorney General alleges that Frazer, as a trustee of charitable assets, failed to properly administer those assets in accordance with EPTL § 8-1.4.”

“Finally, the Attorney General has sufficiently plead that Frazer violated both his fiduciary duties and his obligation to properly administer charitable assets, and that he is not entitled to rely on a defense of good faith. Ten paragraphs of the Complaint are devoted just to Frazer’s incompetent supervision of the NRA’s compliance with New York law, and his failure to ensure the accuracy of the NRA’s annual filings with the Attorney General. FAC ¶¶ 286–296. Frazer’s misconduct regarding supervision of the NRA’s conflict-of-interest and related-party-transaction policies, his failure to appropriately handle related party transactions, and his failure to follow proper procedures regarding procurement, are also detailed in the Complaint.”

“It is well accepted that “the business judgment rule does not protect corporate officials who engage in fraud, self-dealing or make decisions affected by conflict of interest.” Wolf v. Rand, 258 A.D.2d 401, 404 (1st Dept 1999). The Complaint alleges that LaPierre, together with his direct reports, including Frazer, overrode and evaded internal controls to allow themselves and others 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. See, e.g., FAC ¶ ¶ 143, et seq. The Complaint further alleges that LaPierre abused his position as a fiduciary to the NRA to obtain millions of dollars in personal benefits in the form of undisclosed excessive compensation. FAC ¶ 9. With respect to the Board more broadly, the Complaint alleges that the majority of the NRA Board members disregarded their responsibilities under the bylaws and governing law concerning oversight or compensation of corporate officers for the purpose of accommodating LaPierre and his senior officers. Id. ¶ 428. Id. ¶ 428″

One thought on “Chickens Coming Home To Roost

  1. I volunteered as a docent at the NFM for about ten years after retiring from government service. We did tours, some scheduled and some ad hoc. One senior curator and I did “night at the museum” for Cub Scouts, Boy Scouts, and other youth organizations. We even had a group of Girl Scout’s for which Doug W. came up with a special program on the amazing life and story of Annie Oakley. We were doing God’s work, exposing these kids to all that is good about guns and American history. It is very sad that while we were doing this, we were being sold out for Brione suits. Pathetic. McKim

    Like

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