NRA Loses Landmark Trial Over Millions in Wasted Donor Funds

(Bloomberg) -- The National Rifle Association and its longtime leader Wayne LaPierre were found liable for violating New York law with lavish spending of donor funds, denting the gun rights group’s invincible aura after a six-week trial and years of embarrassing revelations in court.

Most Read from Bloomberg

A jury in lower Manhattan concluded on Friday, its fifth day of deliberations, that the NRA misused its charitable assets under state law governing nonprofit organizations and that LaPierre breached his duty to the group by enriching himself in the process, including with flights to the Bahamas.

It wasn’t a total win for the state. New York failed to prove a number of wrongful related-party transactions. The jury found LaPierre caused $5.4 million in damages to the NRA but that he had already paid back over $1 million. The state had said that between 2014 and 2019 the group paid $10.4 million in private charter flights alone.

Former finance chief Wilson “Woody” Phillips was found to have caused $2 million in damages.

The verdict, capping a civil lawsuit that New York Attorney General Letitia James filed in 2020, is perhaps the biggest legal setback for the NRA since it was founded in 1871. It is especially resonant in an election year on a polarized American political landscape in which gun rights, crime and mass shootings are particularly heated.

But the NRA case was most notable for showing the self-dealing and turmoil at the top of the once high-flying nonprofit. It played out after years in which the NRA saw a sharp decrease in its funds and membership and drew to a close as LaPierre retired at 74, citing health problems, following three decades as the face of the gun lobby.

“This verdict is a major victory for the people of New York and our efforts to stop the corruption and greed at the NRA,” James said in a statement.

The NRA said in a statement the verdict confirms that the group “was victimized by certain former vendors and ‘insiders’ who abused the trust placed in them.” President Charles Cotton said the organization appreciates “the service of the jury and the opportunity to present evidence about the positive direction of the NRA today.”

LaPierre didn’t respond to questions from reporters as his security detail escorted him to his van after court.

Perception of Strength

“One of its biggest assets has been the perception of its strength,” Ohio State University accounting professor Brian Mittendorf said of the NRA before the verdict. The allegations of corruption on display in open court for weeks on end could shake that perception, said Mittendorf, who has studied the organization’s finances.

From 2016, when the NRA helped elect Donald Trump president, through 2022, its revenues fell more than 40% and member dues by half, according to court documents and filings with the Internal Revenue Service. At the same time, its legal fees multiplied by six, surpassing $40 million, and it has reduced spending on programs for its members.

The organization said it remains vital.

“The NRA has more than 4 million members and represents millions of other law-abiding gun owners,” a spokesman said in a statement before the verdict. “Our adversaries continue to predict the ‘demise’ of the NRA — in the face of landmark legal victories, legislative wins at every level, and a wave of grassroots support.”

Lavish Spending

The extravagant spending was on display throughout the trial. It included $600,000 in private flights to the Bahamas alone, for LaPierre and his family, one adding up to $37,000. Testifying on and off for three days, he told the jury that his friend and NRA vendor David McKenzie paid for yacht outings. LaPierre splurged on $274,000 in boutique suits, all on an NRA vendor’s dime.

One high point of the trial was the testimony of Oliver North, the conservative stalwart and former NRA president who says he was forced out after raising concerns about the spending. North testified that in 2019 he pushed for an outside audit of the NRA’s finances but that LaPierre refused.

“I was absolutely stunned,” North testified about the spending allegations. “It’s called corruption.”

During its deliberations the six-member jury requested some 4,000 pages of documents. The jurors filed into the courtroom periodically to hear answers to questions they had sent to New York State Supreme Court Justice Joel Cohen as they waded through a long and detailed verdict sheet.

Power Broker

LaPierre was a formidable power broker. In 2016 the NRA spent more on Trump than it had on any other candidate. The Republican frontrunner in this year’s presidential election, Trump has leveraged gun rights as a potent campaign issue and often spoken at the NRA’s annual convention. He promised an NRA crowd this month that “no one will lay a finger on your firearms” if he is elected.

The NRA forged “a political identity around guns, where guns weren’t seen as tools for recreation and defense, but instead as sort of symbols of their values and political beliefs,” said Matthew Lacombe, a political science professor at Case Western Reserve University who researches the group.

Famous Face

LaPierre’s face was so valuable to the organization that it signed an agreement with him to continue using his name, signature and image after his retirement — at an annual cost of $500,000 to the group, court filings show. That agreement has since been stricken.

Despite the verdict, the NRA will continue to wield considerable influence, said Adam Winkler, a law professor at the University of California, Los Angeles, who studies gun policy. It has proved adept at mobilizing voters and cemented its impact by lobbying for judges, from state courts to the Supreme Court, who support its cause. The decline in its fortunes “comes at a time when gun rights are particularly strong,” Winkler said.

Michael Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP, helped found and currently supports Everytown for Gun Safety, which advocates safety measures.

Read More: NRA Spending More on Lawyers as Revenue Falls, Membership Lags

Lawyers for the defendants argued that the attorney general, a Democrat, had sued their clients to fulfill a promise she made on the campaign trail, where she characterized the NRA as “an organ of deadly propaganda.”

But James has broad powers to investigate nonprofit groups registered in New York, where the AG’s office has been more vigilant than many in holding nonprofits to account, said Linda Sugin, a Fordham University law professor who studies charities. Sugin said James’s case centered on the proposition that NRA executives breached their fiduciary duties in a way that defied the group’s very mission.

--With assistance from Beth Wang.

(Adds details and context in first section.)

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.