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New York Attorney General Sues N.R.A. and Seeks Its Closure

"The NRA Says It’s in Deep Financial Trouble, May Be ‘Unable to Exist’
A new legal filing by the powerful gun group against the state of New York paints a grim picture
August 3, 2018 11:10AM ET "

Video - N.Y. Attorney General Sues to Dissolve N.R.A. Over Corruption By Reuters
The New York attorney general, Letitia James, alleged that years of corruption by National Rifle
Association executives undermined its ability to operate as a nonprofit. Mike Segar/Reuters

By Danny Hakim

Aug. 6, 2020

New York’s attorney general issued an existential challenge to the National Rifle Association on Thursday, arguing in a lawsuit that years of runaway corruption and misspending demanded the dissolution of the nation’s most powerful gun rights lobby.

While the legal confrontation could take years to play out, it constitutes yet another deep blow to an organization whose legendary political clout has been diminished by infighting and financial distress.

The suit was swiftly followed by two others: The N.R.A. struck back with a federal lawsuit against the office of the attorney general, Letitia James, claiming her action was politically motivated and violated the organization’s First Amendment rights. And the attorney general of Washington, D.C., filed suit against the N.R.A. and its charitable foundation, alleging that the N.R.A. misused millions of dollars of the foundation’s funds.

Ms. James — who has special jurisdiction over the N.R.A. because it was chartered as a nonprofit in New York 148 years ago — also sued four current or former N.R.A. leaders, seeking tens of millions of dollars in restitution. In addition to Wayne LaPierre, the longtime chief executive, they are John Frazer, the organization’s general counsel; Josh Powell, a former top lieutenant of Mr. LaPierre; and Wilson Phillips, a former chief financial officer.

While allegations of mismanagement and lavish spending by Mr. LaPierre and others have emerged from the N.R.A.’s internecine warfare over the last year, the New York suit lays out a broad litany of new allegations of corruption and greed from executives who Ms. James said “looted” the N.R.A.

Mr. LaPierre is accused of raiding N.R.A. funds to bankroll an extravagant lifestyle, even though he was already paid millions in direct compensation by the organization.

Over six and a half years, the suit said, a personal travel consultant for Mr. LaPierre was paid $13.5 million, largely on no-bid contracts. Private flights were chartered for Mr. LaPierre’s wife and his niece. He took frequent trips to the Bahamas on the N.R.A.’s dime, often decamping to a 108-foot yacht called “Illusions” that was owned by an N.R.A. contractor and included a chef and four staterooms. He lavished gifts from Neiman Marcus and Bergdorf Goodman on his inner circle, and once put his niece up at a Four Seasons hotel for eight nights at a cost of more than $12,000, according to the complaint.

The lawsuit accuses the N.R.A. and the executives of “violating numerous state and federal laws” by enriching themselves, as well as their friends, families and allies, and taking improper actions that cost the organization $64 million over three years. Ms. James is also seeking to oust Mr. LaPierre and Mr. Frazer, and to bar all four men from serving on nonprofit boards in New York again.

The lawsuit, which was filed in State Supreme Court in Manhattan, is a civil action, and it outlined a number of alleged tax violations. Ms. James said during a news conference that she was referring the matter to the Internal Revenue Service in addition to taking her own action, and did not rule out making a future criminal referral.

"It’s an ongoing investigation,” she said. “If we uncover any criminal activity, we will refer it to the Manhattan district attorney. At this point in time we’re moving forward, again, with civil enforcement.”

In a statement, Mr. LaPierre said: “This is an unconstitutional, premeditated attack aiming to dismantle and destroy the N.R.A. — the fiercest defender of America’s freedom at the ballot box for decades. We’re ready for the fight. Bring it on.”

President Trump, in comments Thursday .. https://tinyurl.com/yxf7vcye , said, “That’s a very terrible thing that just happened,” adding that “the N.R.A. should move to Texas and lead a very good and beautiful life.”

The N.R.A., however, cannot move its assets to another state amid the investigation, and even if it is dissolved, it would have to start over largely from scratch.

N.R.A. officials have denounced Ms. James, a Democrat, since she referred to the group as a “terrorist organization .. https://www.ebony.com/news/letitia-tish-james-on-becoming-new-yorks-next-attorney-general/ ” during her 2018 campaign and vowed to investigate it. As they have often done when under attack in the past, the N.R.A. officials are likely to step up their fund-raising efforts by stoking anger about the investigation among their more than five million members.

“You could have set your watch by it: the investigation was going to reach its crescendo as we move into the 2020 election cycle,” the N.R.A.’s president, Carolyn Meadows, said in a statement.

She also called the inquiry “a power grab by a political opportunist” and said “we not only will not shrink from this fight — we will confront it and prevail.”

The attorney general’s office previously presided over the dissolution of President Trump’s scandal-marred charitable foundation, but the N.R.A. is a far larger organization that is expected to put up a more prolonged fight.

The N.R.A. has long wielded immense power in the nation’s politics. But amid its deepening troubles, it has taken an unusually low profile during this election season, though it said Thursday .. https://freebeacon.com/2020-election/exclusive-nra-plans-to-spend-tens-of-millions-in-battleground-states/ .. that it would spend tens of millions of dollars this year in battleground states.

Its finances have been strained by internal strife costing tens of millions of dollars in legal fees, including a messy divorce from Ackerman McQueen, the advertising and strategy firm that was its most important contractor for decades.

The organization’s finances have also been badly damaged by the pandemic, which forced it to cancel its annual convention and a number of fund-raising events. And it has faced a revolt from some donors, who disagree with Ms. James’s politics but would also like to oust Mr. LaPierre and his team.

Ms. James’s lawsuit is the culmination of an inquiry that began in February 2019 and played out amid revelations in the news media regarding the organization’s spending and governance practices.

Among the numerous alleged violations laid out by Ms. James’s office, some were related to false reporting of annual filings both to the state and the I.R.S. Her office also cited “improper expense documentation, improper wage reporting, improper income tax withholding” and failing to make required excise tax reporting and payment, among other issues.

Mr. LaPierre is also said to have secured a post-employment contract without board approval worth more than $17 million.

There were allegations of incompetence as well. Mr. LaPierre hired a convicted embezzler as a personal assistant who, according to the complaint, went on to be repeatedly accused of using N.R.A. funds for her own expenses. Mr. Frazer, the general counsel, was described as overmatched by his job; he had only 18 months in private practice, and no corporate legal experience. Mr. Frazer did not comment.

Mr. Phillips, the former treasurer and chief financial officer, presided for years with Mr. LaPierre over the N.R.A.’s governance practices. He failed to disclose a personal relationship he had with the chief executive of a company paid $1.4 million by the N.R.A., and after his retirement was paid $30,000 a month for consulting work he did not perform, according to the complaint.

His lawyer, Mark Werbner, disputed the last point, saying Mr. Phillips “definitely did work as part of the consulting agreement,” but offered few specifics. Mr. Werbner added that Mr. Phillips “acted in good faith and is very surprised these transactions are being characterized differently.”

Like Mr. LaPierre, he made use of a contractor’s luxury yacht, though with a slightly different name — it was called “Grand Illusion.”

The lawsuit also claims that testimony by the chairman of the N.R.A.’s audit committee indicated that he had little awareness of its governance role and no knowledge of state law concerning such committees and was unfamiliar with the committee’s own charter, which states that it oversees the organization’s financial integrity.

N.R.A. officials have conducted their own internal audit and defended many of their practices, though several top officials have been forced out amid an internal dispute over how it is run, including Oliver North, its former president, and Christopher Cox, the former top lobbyist. Mr. North, a right-wing pundit, is referred to in the complaint as “Dissident No. 1,” and is said to be cooperating with the inquiry.

A number of accusations were leveled at Mr. Powell, a former top aide to Mr. LaPierre who was dismissed for allegedly misappropriating N.R.A. funds. The complaint says that a consulting firm called McKenna was hired by the N.R.A. to oversee “Project Ben-Hur .. https://www.youtube.com/watch?v=frE9rXnaHpE ,” which aimed to restructure the organization and its banking relationships. The firm paid Mr. Powell’s wife $30,000 a month as an independent contractor, through a newly formed company called SPECTRE .. https://www.youtube.com/watch?v=6Gi0VDZzjtQ , a conflict that Mr. Powell took steps to hide, according to the complaint.

In a statement, Mr. Powell’s lawyer said his client “was fired by Wayne LaPierre and the N.R.A.’s lawyers for his efforts to correct much of the misconduct cited in the attorney general’s complaint,” adding that “allegations directed at him in this lawsuit will be shown to be the result of false accusations made by Wayne LaPierre and others.”

Legal experts said that while Ms. James’s complaint was serious and exposed vast problems, dissolving the organization would face challenges in court.

Sean Delany, a former head of the charities bureau in the office of the attorney general — the same division now handling the case — said, “I think the facts are very strong, but I think the remedy of dissolution is a stretch, because the A.G. would have to prove that the organization is so rife with fraud that there isn’t anything sufficiently substantial in the organization’s charitable programs to make it worth saving.”

But David Samuels, a former deputy chief of the same bureau, said, “It appears that they have a strong case under New York law for dissolving the N.R.A.” New York’s law on conflicts of interest and related party transactions was tightened in 2013, he noted.

“The current lawsuit cites, in part, violations of these provisions designed to prevent misuse of charitable assets,” Mr. Samuels said.

Nicholas Bogel-Burroughs and John Ismay contributed reporting.
A version of this article appears in print on Aug. 7, 2020
, Section A, Page 1 of the New York edition with the headline: New York Sues N.R.A. in Bid To Dissolve It. Order Reprints | Today’s Paper | Subscribe

Related Coverage

Dec. 18, 2019 Inside Wayne LaPierre’s Battle for the N.R.A.
https://www.nytimes.com/2019/12/18/magazine/wayne-lapierre-nra-guns.html

May 14, 2019 At the N.R.A., a Cash Machine Sputtering
https://www.nytimes.com/2019/05/14/us/nra-finances-executives-board-members.html

https://www.nytimes.com/2020/08/06/us/ny-nra-lawsuit-letitia-james.html

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