NY Vs. NRA; Judge’s Key Order Published

Last year, Judge Cohen entered a key order in NY lawsuit, refusing to consider dissolving the NRA as a corporation, since he considered the corporation the victim rather than the perpetrator of corruption. The order is now officially published. It’s very worth reading; it does a great job of summing up the Attorney General’s allegations. It begins:

“The Attorney General’s allegations in this case, if proved, tell a grim story of greed, self-dealing, and lax financial oversight at the highest levels of the National Rifle Association (NRA). They describe in detail a pattern of exorbitant spending and expense reimbursement for the personal benefit of senior management, along with conflicts of interest, related party transactions, cover-ups, negligence, and retaliation against dissidents and whistleblowers who dared to investigate or complain, which siphoned millions of dollars away from the NRA’s legitimate operations.”

It continues: “The NYAG alleges that LaPierre routinely abused his authority as executive vice-president of the NRA to cause the NRA to improperly incur and reimburse LaPierre for expenses that were for LaPierre’s personal benefit and violated NRA policy, including private jet travel for purely personal reasons; trips to the Bahamas to vacation on a yacht owned by the principal of numerous NRA vendors; use of a travel consultant for costly black car services; gifts for favored friends and vendors; lucrative consulting contracts for ex-employees and board members; and excessive security costs (id. ¶ 144).

According to the complaint, the NRA incurs substantial costs as a result of LaPierre’s private air travel (id. ¶ 147). LaPierre testified that it is NRA policy that he travel by private aircraft at all times, for security reasons (id.). He testified further that he is not aware of any limits under this policy on the kind of plane he can charter, how far he can go, or the amount of money he can spend on the flights (id.). LaPierre admitted under oath that he has no knowledge of a written policy permitting charter travel, and the NRA has never produced one (id. ¶ 148). NRA records show that between June 2016 and February 2018, the organization paid for numerous private flights for LaPierre’s wife and extended family, even when LaPierre himself was not a passenger (id. ¶ 149).”

The judge continues: “For example, in July 2017, LaPierre authorized a private flight for his niece and her daughter to fly from Dallas, Texas, to Orlando, Florida (id. ¶ 151). LaPierre testified that this

“was another example where I was getting [my niece] together with my wife to work on the Women’s Leadership Forum events. She had tried to travel commercial. All the commercial flights they had—there was a mechanical problem. She was stuck there at the airport until 12:30 or 1:00 at night with a child trying to fly commercial” (id.).

The cost of the flight was more than $26,995.

Attorney General alleges a litany of purportedly improper benefits and abuses of power. Among other things:

• At LaPierre’s instigation, the NRA allegedly reimbursed him for numerous expenses that were personal, including gifts to friends and favored employees (id. ¶ 199). Between 2013 and 2017, LaPierre was reimbursed for more than $1.2 million in expenses, including over $65,000 for Christmas gifts for his staff, various donors, and friends (id. ¶¶ 200-201).

• Between 2009 and 2017, LaPierre expensed over a hundred thousand dollars in membership fees for a golf club located in the Washington, D.C. area (id. ¶ 207). LaPierre testified that he uses the golf course for both personal and business reasons (id.). In its annual filings with the Attorney General for 2014 to 2018, the NRA asserted that it required substantiation prior to reimbursing these expenses, but the NYAG has not found any evidence that this occurred (id.).

• In the last 15 years, LaPierre has allegedly directed the NRA to pay officers, directors, and former employees millions of dollars in “consulting” agreements without Board approval and in violation of the bylaw prohibition on salary or other private benefits to directors without Board authorization (id. ¶ 355).

• LaPierre allegedly secured for himself a lucrative post-employment contract with the NRA, which obligates the NRA to continue to pay LaPierre for years after he departs the organization—at a higher rate than his compensation as executive vice-president (id. ¶¶ 435-442). The Attorney General alleges “[t]here is no evidence that the NRA Board or a designated committee reviewed or approved” this “poison-pill” contract (id. ¶¶ 2, 436).”

. . . . . .

“So too for the NRA’s (now former) treasurer, who was instructed by LaPierre, in the weeks leading{**74 Misc 3d at 1012} up to the bankruptcy filing, to wire $5 million to the Brewer firm trust account but “absolutely did not think it was for [a] bankruptcy filing” (id. ¶ 635). As for the current treasurer, she first learned of the NRA’s decision to file for bankruptcy when she received a company-wide announcement after the petition was filed (id. ¶ 636).”

. . . . . . .

“The (bankruptcy) court was especially troubled by the way in which LaPierre filed for bankruptcy:

“What concerns the Court most though is the surreptitious manner in which Mr. LaPierre obtained and exercised authority to file bankruptcy for the NRA. Excluding so many people from the process of deciding to file for bankruptcy, including the vast majority of the board of directors, the chief financial officer, and the general counsel, is nothing less than shocking” (In re National Rifle Assn. of Am., 628 BR at 284-285; complaint ¶ 642).

The (bankruptcy) court also alluded to “cringeworthy facts” regarding financial improprieties, both from the past and “still ongoing”:

“As counsel for the NRA acknowledged on the record, there were cringeworthy facts during this trial. The movants have presented evidence of the NRA’s past misconduct. Some facts regarding the NRA’s past conduct were not available to this Court because the NRA’s former treasurer asserted his rights under the Fifth Amendment during large swaths of his deposition.

“Some of the conduct that gives the Court concern is still ongoing. The NRA appears to have very recently violated its approval procedures for contracts in excess of $100,000.”