‘Fraught With Fraud and Abuse’: NY Attorney General Sues to Dissolve the National Rifle Association

New York State Attorney General Letitia James on Thursday filed suit to disband the National Rifle Association following an 18-month investigation that she said found the gun rights group is “fraught with fraud and abuse.”

The lawsuit takes aim at the NRA and four top officials, including its longtime leader Wayne LaPierre, who’s accused of using millions of dollars in charitable funds on his lavish lifestyle.

“The NRA’s influence has been so powerful that the organization went unchecked for decades while top executives funneled millions into their own pockets,” James said in a statement. “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.”

Minutes after James’ announcement, D.C. Attorney General Karl A. Racine announced a separate lawsuit against the NRA Foundation, stating that the group misused charitable funds to “support wasteful spending by the NRA and its executives.” The lawsuit alleges that “the foundation’s board of directors was controlled by the NRA and allowed the NRA to exploit it through risky multimillion-dollar loans—including a $5 million loan that the NRA has never repaid.”

NRA President Carolyn Meadows slammed the New York AG’s lawsuit in a Thursday statement, calling it a “baseless, premeditated attack on our organization and the Second Amendment freedoms it fights to defend,” and that the pro-gun organization would “confront it and prevail.”

“It’s a transparent attempt to score political points and attack the leading voice in opposition to the leftist agenda,” Meadows added. “This has been a power grab by a political opportunist—a desperate move that is part of a rank political vendetta. Our members won’t be intimidated or bullied in their defense of political and constitutional freedom.”

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The New York attorney general’s 139-page lawsuit alleges that the NRA’s chief executive and several other top leaders engaged in a decades-long pattern of fraud, committing more than a dozen instances of alleged financial misconduct. Some examples include misusing charitable funds for personal trips, private jets, and expensive meals, and awarding contracts to family, friends, and former employees to ensure loyalty. All told, the lawsuit alleges the NRA drained $64 million from the nonprofit in three years.

In addition to disbanding the NRA, James is calling for the removal of LaPierre, who has held the organization’s top post for 29 years. The attorney general states that LaPierre and others used the group’s funds to finance their high-end lifestyles. The lawsuit also names General Counsel John Frazer, former CFO Woody Phillips, and former Chief of Staff Joshua Powell.

At the center of this fraudulent scheme was a secret agreement between the NRA and its former advertising firm, Ackerman McQueen, the lawsuit alleges. Before the two acrimoniously parted ways last year, the groups had an agreement in which LaPierre and his inner circle rerouted millions of dollars to fund their opulent lifestyles. The lawsuit alleges Ackerman McQueen would pay for the expenses, then bill the NRA for these large sums and call them “out of pocket expenses.”

In one example, the lawsuit states that between 2013 to 2018, Ackerman McQueen “paid LaPierre’s travel consultant a $4,000 monthly fee at the direction of LaPierre and Phillips, which was in addition to the monthly fees the NRA paid to her directly. Ackerman passed these expenses on to the NRA.”

All told, the attorney general’s office alleges it found that Ackerman McQueen billed the NRA $70 million in 2017 and 2018 for its “public relations and advertising,” including “out-of-pocket” expenses. Despite the secret deal, the NRA sued Ackerman McQueen last year over its billing practices, prompting the advertising firm to countersue and allege defamation.

According to the lawsuit, while the NRA once boasted a $27.8 million surplus in 2015—that figure declined by $64 million three years later, in part due to the lavish personal spending by the group’s top leadership.

“For nearly three decades, Wayne LaPierre has served as the chief executive officer of the NRA and has exploited the organization for his financial benefit, and the benefit of a close circle of NRA staff, board members, and vendors,” the lawsuit states.

“LaPierre has undertaken a series of actions to consolidate his position; to exploit that position for his personal benefit and that of his family; to continue, by use of a secret ‘poison pill contract,’ his employment even after removal and ensuring NRA income for life; and to intimidate, punish, and expel anyone at a senior level who raised concerns about his conduct.”

LaPierre is accused of using the organization’s funds on private trips for himself and his family—including eight visits to the Bahamas and an all-expenses-paid safari in Africa. He also spent more than $3.6 million on luxury black-car services and travel consultants in the last two years alone.

“LaPierre often visits the Bahamas in the summer as well. During these trips, he stays on a 108-foot yacht owned by the MMP Principal. The yacht, named Illusions, is equipped with four staterooms, a 16-foot jet boat, and two jet skis. LaPierre described Illusions as ‘a big, big yacht’ with a crew that includes a chef,” the lawsuit states. “LaPierre testified that “[o]ccasionally one of our other family members” has stayed on the yacht with him and his wife, including his sister and her husband, and perhaps others.”

In another example of alleged fraud, prosecutors said that during the NRA’s annual meetings, LaPierre would frequently ask “the president of Mercury Group to pay for LaPierre and others—including LaPierre’s family—to stay at a luxury private hotel, apart from the host hotel at which NRA employees and board members were staying.”

While several people have attempted to sound the alarm on LaPierre’s gross misuse of NRA funds, the lawsuit alleges all those who spoke out were retaliated against because the gun group does not have a policy “protecting whistleblowers.”

The suit details one bizarre instance of retaliation in the spring of 2018, against “Dissident 1,” who was working for Fox News at the time when LaPierre asked him to run for president of the NRA—an unpaid gig.

To make this palatable, LaPierre is accused of convincing Ackerman to take the helm of Dissident 1’s American Heroes program, and therefore provide compensation similar to what Dissident 1 enjoyed at Fox. “LaPierre suggested as the means of making me the president of the NRA that I take the job with Ackerman McQueen,” Dissident 1 testified.

But Dissident 1 was said to actually take his fiduciary responsibilities as president seriously, and was promptly “alerted to certain problems by internal whistleblowers, NRA board members, and major donors.” Among the issues he took on was allegations of sexual harassment against Josh Powell, whether he had been vetted, and where he came from in the first place.

Dissident 1 was particularly spooked by $2 million in monthly fees paid to the NRA’s outside counsel, Brewer, Attorneys & Counselors, without it being clear that they were authorized or reviewed. La Pierre and Frazier are said to have greased the wheels for a quick, expensive, no-other-bids deal to take on the Brewer firm to help with “compliance review.”

Dissident 1 sent various memos and other documents expressing concern about the Brewer situation to the NRA board counsel, general counsel, and audit committees, among others. These efforts were for naught, because instead of anyone internally digging into Brewer invoices, Frazer allegedly got an outside firm to do so. Normally that might be a sign of independence, but the inquiry was said to be very limited.

Eventually, La Pierre shut down attempts at an independent audit and helped squelch Dissident 1’s renomination. He eventually resigned as president.

NRA Spent Tens of Thousands on Hair and Makeup for CEO’s Wife

Thursday’s lawsuit is the latest hit in a long-running battle between New York and the NRA, which has been chartered in the state since 1871. During her campaign for attorney general, James threatened to investigate the NRA’s nonprofit status and in 2018 likened the group to a “terrorist organization.”

In addition to LaPierre, the lawsuit also details alleged fraud carried out by Phillips, Powell, and Frazer. Phillips, who managed the NRA’s financial operations until 2018, allegedly lied on several financial discloser forms and even set up numerous deals that financially benefited him and his girlfriend.

“At LaPierre’s direction, Phillips, the former Treasurer and Chief Financial Officer, instituted a practice whereby millions of dollars in entertainment and travel expenses incurred by NRA executives were billed to the NRA as disbursements by the NRA’s largest vendor,” the lawsuit states. “This practice evaded both the NRA’s own accounting and Board-established expense reimbursement process, and IRS requirements for proper expense reimbursement.”

James alleges that Phillips set up a contract for himself just before he retired after 26 years—which was worth $1.8 million. While the agreement was purportedly inked for future consulting services, the New York attorney general said the new treasurer was not aware.

The lawsuit alleges LaPierre hired Frazer without checking if he had proper qualifications or expertise in nonprofit and tax-exempt organization laws.

As a result, the complaint says, Frazer failed to update the NRA’s compliance with legally required board-governance procedures and “failed to ensure that the NRA was in compliance with laws and policies governing whistleblowers.” Additionally, the attorney general says, Frazer repeatedly certified false or misleading annual statements from the NRA.

The lawsuit further notes how LaPierre’s “senior assistant,” who has served under him for 25 years, has a previous criminal record of embezzling funds and, during her tenure at the NRA, was accused of using the organization’s funds for personal expenses. Even after an internal investigation resulted in the revoking of her corporate credit card, the unnamed assistant continued to use other employees’ cards to rack up expenses.

According to the lawsuit, LaPierre’s senior assistant “had the NRA pay for approximately $18,000 in expenses incurred in connection with her son’s wedding in Minnesota,” which she never reimbursed. Additionally, per the attorney general, she used thousands of dollars worth of NRA funds for black-car trips for her husband and son. “LaPierre’s Senior Assistant’s misconduct, including her long history of inappropriate spending, reflects negligent oversight on the part of LaPierre,” the suit claims.

The lawsuit also details a bizarre and lucrative scheme the NRA’s Officer Compensation Committee allegedly set up to further compensate LaPierre—even in the event of his ouster.

Among other things, the OCC allegedly failed to consult a slew of high-level officers in fashioning the cushy arrangement, which would actually have increased LaPierre’s compensation in the event of his ouster, whether by losing re-election or retirement. According to the lawsuit, LaPierre copped to this in testimony, saying: “I noticed that and kind of shook my head at it when I saw it.”

Prosecutors allege the deal would have paid at least $1 million per year—including $1.3 million in 2019—and plans were afoot to extend it to 2025. More bizarre still, LaPierre’s “name and likeness” were deemed so valuable that an NRA presidential memo suggested he would need to be locked down until as long as 2030, in a consultant capacity. That deal would have brought him $1.5 million annually, before falling back to $1.3 million.

Only LaPierre, then-NRA President Phillips, and then-NRA second vice president were said to be parties to the arrangement.

The NRA allegedly failed to properly tally LaPierre’s compensation when reporting it to the attorney general, specifically by failing to include travel and other personal expenses for which he was said to be reimbursed. This is alleged to be taxable income that should have been reported. The same was said to apply for Powell, Phillips, and Frazer.

To further avoid detection, the lawsuit alleges the NRA made false statements on its charitable filing to New York State for at least four years and hid that it was draining its accounts for top leadership’s financial gain. In at least two occasions, the NRA allegedly obtained loans—each $5 million—from the foundation. The second loan was never repaid.

The lawsuit states that LaPierre and named top leadership must repay the millions they stole from the NRA “as well as payments or reimbursements to them made in violation of IRS requirements and the NRA’s bylaws, policy and procedures, and/or without the authorizations required by the NRA’s bylaws, policy, and procedures.” The repayments, James said, should come in addition to their immediate removal.

The announcement came the same morning that news broke that the NRA is planning to spend millions to sway close races in battleground states for the upcoming 2020 election, according to the Washington Free Beacon.

Jason Ouimet, who runs the NRA’s lobbying arm and political action committee, told the outlet that the pro-gun group plans to spend heavily to help re-elect President Donald Trump in several swing states, including Arizona, Colorado, Pennsylvania, North Carolina, and Wisconsin. During the last election cycle, the NRA spent $50 million to boost the Republican Party—but was outspent by gun-control groups.

“We’ll be in those places at every level,” Ouimet said, describing Democratic nominee Joe Biden as “100 percent anti-gun.” “You are literally going to be dealing with the potential confiscation of firearms. You’re literally going to be told you can't carry in certain places. You can’t own certain things for self-defense. Folks need to understand that.”

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