A jury verdict in a high-profile New York trial confirms what the National Rifle Association of America (NRA) contended all along – that it was victimized by certain former vendors and “insiders” who abused the trust placed in them by the Association. The jury found no cause to remove NRA General Counsel and Secretary John Frazer, the remaining NRA employee who is an individual defendant in the action.
NRA officials set a confident tone today following the verdict in the New York Attorney General v. NRA lawsuit. In August, 2020, the NYAG filed a “dissolution lawsuit” against the NRA, along with claims against four individual defendants: former EVP Wayne LaPierre; Frazer; former CFO Wilson Phillips; and former Chief of Staff Joshua Powell.
During a 24-day jury trial, the NRA established the NYAG cannot prove self-dealing or bad faith by the NRA Board of Directors. The NRA disputed key allegations in the NYAG’s complaint – namely, that any governance issues at the NRA are “persistent.” As importantly, the NRA established that it adopted new policies and accounting controls, displaced vendors and “insiders” who abused the Association, and accepted reparations for costs determined to be excess benefits. Most of these corrective measures – part of an internal investigation ignited by the NRA Board – were adopted before the NYAG filed her lawsuit.
The NRA’s commitment to good governance was on full display during the trial proceedings.
“We appreciate the service of the jury and the opportunity to present evidence about the positive direction of the NRA today,” says NRA President Charles Cotton. “NRA members should be heartened by the NRA’s commitment to best practices, and we will continue to amplify our compliance record in the pivotal next phase of these proceedings. To the extent there were control violations, they were acted upon immediately by the NRA Board beginning in summer 2018.”
The six-person jury found that many of the business arrangements in which the NRA entered were appropriate and did not qualify as improper related party transactions. However, the six-person jury rendered a verdict that found the NRA failed to properly administer the organization and its assets, and that it violated whistleblower protections of New York Nonprofit Law.
With respect to other individual defendants, the jury found Mr. LaPierre and Mr. Phillips violated their statutory obligations to discharge the duties of their position in good faith and with care. The jury found the monetary harm suffered by the NRA for each individual was $5.4 million and $2 million, respectively. (Defendant Powell reached a settlement with the NYAG prior to the start of the jury proceedings.)
The jury decision paves the way for the second phase of the proceedings – a bench trial before Justice Joel M. Cohen where the judge is expected to rule on any final remedies against defendants.
In the final analysis, individual defendants could face financial awards payable to the NRA. No money damages will be awarded against the Association.
The NRA’s case focused on its compliance efforts, and the organization’s commitment to good governance following summer 2018 whistleblower complaints and the substantial evidence that it was the victim of fraud by a number of its vendors. When the NRA Board was alerted to these facts, it led an investigation into spending allegations and determined that certain individuals participated in transactions that ran afoul of NRA policies and procedures. Trial testimony confirmed the NRA Board was unaware of the arrangements in question.
In furtherance of its governance reforms, the NRA terminated a string of vendors, including Ackerman McQueen/Mercury Group, Associated Television, International, Under Wild Skies, and a travel consultancy. It cancelled consulting arrangements with certain NRA board members, adopted a new whistleblower policy in 2020, and recently hired a new compliance manager.
“A parade of NRA witnesses and independent experts established that the NRA was the victim of actions that were pursued in secrecy and not in the interests of the Association – by former vendors and fiduciaries,” says NRA counsel William A. Brewer III. “In any event, the NYAG’s case focused on the past and the NRA lives in the present. It was the NRA that ultimately established the record being pursued by the NYAG. Our client looks forward to phase two of these proceedings – emboldened by its record of good governance.”
Although it was not a matter before the jury, the NRA effectively demonstrated that the NYAG’s lawsuit was motivated by political animus. As a candidate for NYAG in summer 2018, Letitia James called the NRA a “terrorist organization” and “criminal enterprise.” She vowed to pursue the NRA if elected, and quickly did so upon taking office in 2019.
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