How Dare NY AG Catch NRA Execs Looting $64 Million From 'Charity'!

How very dare she indeed!

If the National Rifle Association's founders had known that their gun group would devolve into a self-perpetuating orgy of corruption dedicated to shoveling cash into its board members' pockets, they probably wouldn't have chartered it in New York. The Empire State's laws governing public charities are the strictest in the nation, particularly after they were revamped in 2013 . But by then Wayne LaPierre had already been the NRA's Executive Vice President for 22 years, and old habits die hard.

When Letitia James was elected New York's attorney general in 2018 specifically vowing to take on the NRA using the state's public charity laws, the gun group had a "Come to Jesus" moment and tried to get its house in order, but by then it was too late. There were too many people invested in keeping the gravy train running, and anyway it was too late toun- commit all the financial shenanigans. Sixty-four million dollars' worth. 

Which brings us to yesterday, when James announced a civil suit seeking to dissolve the NRA and laying out a stinging indictment of its management for unjustly enriching themselves with the connivance of the organization's board, many of whose members were also lining their pockets with donor cash.

In addition to the NRA itself, the named defendants are chief of staff Josh Powell , former chief financial officer Wilson Phillips , former general counsel John Frazer, and of course Wayne LaPierre himself. The NRA's grifting board is not a defendant, but it gets quite a bit of ink in the complaint for total failure to comply with its legal oversight requirements.

Wayne LaPierre

The AG's filing leaves no doubt that the NRA's failures lie almost entirely with Ol' Wayne, who became head of the organization in 1991 and proceeded to rot the fish completely. From his "consulting budget," AKA a slush fund he used to dole out six-figure contracts to his wife's friends, to tens of thousands of dollars in Christmas gifts he expensed to the NRA every year (the statutory limit is $250 per gift, LOL), to the credit card he used to hide his spending by routing it through the advertising company so it would show up as "program expenses" on the charity's disclosure — you name it, Wayne grifted it .

His official compensation topped $1 million every year, rising from $1.43 million in 2017, to approximately $1.78 million in 2018. New York law requires charitable boards to substantiate executive pay with benchmarks and comparison to similarly situated employees. But his pals on the compensation committee greenlighted the raise after just a cursory examination, despite the fact that the organization was bleeding cash.

But wait, there's more! Not only did the board agree to to extend LaPierre's contract through 2025 with six-figure raises every year, they agreed to continue paying him upwards of $1 million for five years after he retired simply to retain the right to his "likeness" until 2030.

And that was only his official compensation! We've already talked about the personal travel agent who was paid more than $20,000 per month to book flights for LaPierre. But LaPierre routinely used charter planes to ferry his wife and her niece — both of whom were on the NRA's payroll, natch — around the country, billing the expenses to the NRA through the media company Ackerman McQueen. A favorite destination was the Bahamas, where they'd stay on a 107-foot yacht belonging to one of the NRA's main marketing vendors — a gift LaPierre failed to disclose for "security," so the ninja assassins wouldn't murder him, or something.

No? Well, would you buy that those stays were business trips because any time his wife and niece were together, they discussed business?

[A]ny time I get the two of them together anywhere, there is a benefit for the NRA. It could be in Nebraska, it could be like a corporate retreat in Aspen. It could be a — you know, I mean, I consider it a good thing to get them together. Yeah, they got together in the Bahamas. They — it could have been in Washington. It just — it's — it — but keeping [his wife's] head [in] the game on this and getting her with [my niece], there is a substantial benefit to the NRA that is — that is in the — proof is in the dollars that come into the NRA. I mean, did they enjoy being there, yeah. I mean, on the other hand, did NRA get a benefit of them being together, yes, absolutely.

Put your pitchforks down, people! There's so, so much more, but let's move on to the rest of this motley crew.

Josh Powell

For reasons unclear, LaPierre decided this failed catalogue dude with zero relevant experience would be the perfect chief of staff for a national charity with 550 employees. And despite multiple complaints of him behaving inappropriately toward women, one of which resulted in an $89,000 settlement, it looks like Wayne thought he did a pretty good job.

Powell's salary was set at the discretion of LaPierre. When he first joined the NRA in June 2016, Powell's salary was set at $250,000. A month later, it was retroactively increased to $500,000 by Phillips and LaPierre.

After Powell had been at the NRA for approximately a year, in the third quarter of 2017, Powell's salary was increased to $650,000, again by Phillips and LaPierre. In March 2018, Phillips and LaPierre retroactively raised Powell's salary again to $800,000 as of January 1, 2018. There was no change in his position at that time.

The NRA was also nice enough to pay hundreds of thousands of dollars in rent, travel, entertainment, and internet and phone charges for the golden boy, many of which do not appear to have been declared as taxable income. Paging the IRS!

Powell's most-favored-employee status came with some perks. He was able to enter into verbal contracts on the company's behalf, including a seven-figure deal with consulting firm McKenna & Associates, Inc. to manage the fallout from the NRA's disastrous "Carry Guard" insurance program which made the organization so toxic that banks didn't even want to hold its money.

The project was called — I shit you not! — "Project Ben-Hur." But that's not the funny part. The funny part is that McKenna hired Powell's wife to "consult" for $30,000 per month, and the NRA increased its payments to the company accordingly. This is a classic "related party transaction" which should have been disclosed to the board, a fact Powell knew damn well, as the AG's pleading points out.

In fact, upon information and belief, Powell instructed his wife not to attend meetings when [NRA general counsel] Frazer would be present to avoid drawing Frazer's attention to the fact that she worked at McKenna. In doing so, Powell not only disregarded his disclosure obligations under the NRA's conflict of interest policy, but took affirmative steps to hide the conflict from the NRA officer he was supposed to disclose it to.

Powell was fired in 2020 after the NRA decided to get its books in order and came to the conclusion he'd been abusing the company credit card. Womp womp!

Wilson "Woody" Phillips

The NRA's former chief financial officer started out at the organization in 1992. He's Wayne LaPierre's guy, and his sins are Wayne's sins, just less obvious. He stayed on the yacht; he forgot to mention his pre-existing relationship with a vendor over several years; he approved all manner of verbal contracts and unsubstantiated reimbursements; he ran interference with the auditors when they had the nerve to ask for more information; and on and on.

Or, as his successor testified to the AG's office, he had a "'non-robust process' for reviewing NRA employees' credit card expenditures." AHEM.

And for his non-robust efforts, he was rewarded upon his retirement with a "consulting contract" paying him $30,000 per month for five years, although no one appears to know of any actual consulting work he did to earn the cash. The contract was approved by LaPierre (of course!) and one of his trusted VPs, but not presented to the board for review as mandated by New York law and the NRA's own bylaws. Ooopsie! 

Which leads us to today's lawtalkin' vocab term:  ex gratia payments. That would be, in layman's terms, "money for nothing," and it's illegal for a public charity to enter into a contract to just give money away when it doesn't have to.

Naughty, Wayne! Naughty Woody!

John Frazer and the Board

John Frazer, an attorney with scant private practice experience, who is not licensed to practice law in New York, should never have been in charge of ensuring the NRA's compliance with New York's public charity law. As the AG's complaint put it:

There is no indication from Frazer's seven years with a law license—only 18 months of which entailed representing clients—that he had relevant legal experience in corporate governance, corporate compliance, tax exempt organization requirements, not-for-profit organization requirements, or the law governing boards and board procedure. There is also no indication that Frazer, based on his experience, had familiarity or legal experience with the NPCL, the governance requirements of the New York Nonprofit Revitalization Act, the EPTL, the requirements of the Internal Revenue Code with respect to 501(c)(3) or (c)(4) nonprofits, reporting, transactions with disqualified persons, or excise tax reporting and payment obligations.

But his professional failures, although not arising out of personal greed, are in some ways the most devastating. He was the lawyer; he was in charge of ensuring that the NRA's board complied with New York law; and year after year he put his name on legal reports swearing that everything in the NRA shop was on the up-and-up. It wasn't. 

Under his aegis, Wayne LaPierre and his cronies were allowed to loot the NRA in total disregard of New York statute, federal tax laws, and the charity's own bylaws. The board had a legal obligation to supervise the NRA's employees and expenditures, and Frazer had professional obligation to give them the tools do it. Instead, millions of dollars went out the door without any accounting, and board members, many of whom were themselves taking money from the NRA, rubber stamped each and every expenditure, sometimes retroactively.

Here's just a sample:

On April 28, 2019, the Committee retroactively approved approximately $3,692,000 paid by the NRA to Unified Sportsmen of Florida over a nineteen-year period. Board Member No. 5 is the Executive Director of Unified Sportsmen of Florida. At the same meeting, the Committee also prospectively approved future payments by the NRA to Unified Sportsmen of Florida.

On April 28, 2019, the Committee retroactively approved approximately $326,000 in grants from the NRA to the New Jersey Rifle and Pistol Clubs, Inc. over a fourteen year period. The president of the New Jersey Rifle and Pistol Clubs, Inc. is a board member of the NRA. At the same meeting, the Committee also prospectively approved new transactions between the New Jersey Rifle and Pistol Clubs, Inc. and the NRA.

And speaking of ex gratia payments, check out the golden parachute for the NRA's guy in charge of the Carry Guard program:

The Managing Director retired from the NRA in January 2016. According to the NRA's Form 990 for that year, he was paid a full year's salary—approximately $630,000. He was also paid by the NRA after his retirement—$713,000 in 2017 and $535,000 in 2018. During this same period, the Managing Director was also being paid by Lockton Affinity. In 2016, Lockton Affinity paid the Managing Director $455,753, and in 2017, he was paid $522,426.

That is NOT HOW CHARITIES ARE SUPPOSED TO GO! And it's not Frazer's fault exactly. But it's not not his fault, either.

The Remedy

Naturally the NRA is screaming about a political hit job and Trump is barfing out unhelpful nonsense.

"That's a very terrible thing that just happened," he told reporters yesterday. "I think the NRA should move to Texas and lead a very good and beautiful life. And I've told them that for a long time. I think they should move to Texas."

Good plan, Your Dementedness! Wonder why it never occurred to your pal Wayne to pack up and move his operation to the Lone Star State. Might have something to do with New York retaining jurisdiction so that lawbreakers can't just pack up and leave town at will. Just a guess!

But more to the point, there's a reason Cecile Richards and Ilyse Hogue aren't in jail right now, and it's not because Republican attorneys general wouldn't dearly love to do LOCK HER UPS to the leaders of pro-choice non-profits. It's because they didn't do crimes! Unlike Wayne LaPierre. 

So now the New York attorney general is seeking to dissolve the NRA and donate its assets to a real charity, bar LaPierre and his cronies from serving as an employee or board member for any New York public charity, and force those assholes to pay back all their ill-gotten gains, including excessive compensation, plus interest.

And Another Thing!

As bad as the NRA looks here, the IRS looks WORSE. Every section of this complaint points out that this conduct violated both New York law and the federal tax code. Moreover, most of the information was disclosed publicly in the media last year. It was all out there, and yet somehow, somehow the IRS has taken exactly zero interest in apparent lawbreaking by one of the nation's most prominent charities.

Wonder why.

[ People of New York v. NRA ]

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