Law 360 Reports on NRA Reaction to NYAG Filing
May 8, 2024 – Law360 reports that Brewer client the National Rifle Association of America (NRA) responded to a filing by the New York Attorney General (NYAG) in which she asked a New York judge not to "reverse" a Manhattan jury's verdict. The jury verdict was entered in the NYAG vs. NRA lawsuit on February 23, 2024.
NRA lawyer William A. Brewer III told the publication, "In her response to the NRA's motion for judgement post-trial, the NYAG advances a number of novel legal theories to save the claims she presented at trial ... The NYAG's theories have no grounding in existing law. We look forward to responding."
The report states, "In February, jurors found that [former NRA Executive Vice President Wayne] LaPierre, who resigned on the eve of trial, as well as general counsel John Frazer and retired Chief Financial Officer Wilson 'Woody' Phillips, breached their fiduciary duties. Frazer was additionally held responsible for the false filings and Phillips for the related-party transactions. The verdict requires LaPierre to repay $4.4 million in ill-gotten funds to the NRA for his breaches, while Phillips must pay back $2 million."
A second phase of the proceedings is scheduled to begin in July – a bench trial before Justice Joel M. Cohen, in which 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.
Read the report here.
The Reload: NRA Foundation Settles DC Lawsuit
April 18, 2024 – Reload editor and CNN contributor Stephen Gutowski today reported on the consent agreement between Brewer client the National Rifle Association of America (NRA), the NRA Foundation, and the District of Columbia Attorney General (DCAG).
According to the report, per terms of the consent order, the NRA Foundation will "adopt a conflict-of-interest policy, a board and officer compliance training program, and new standards for lending money or doing business with other NRA entities. It also agreed to limit loans to the NRA’s other operations to only charitable purposes in line with the group’s educational mission. However, it admitted no wrongdoing and avoided the more severe sanctions the AG initially sought to impose."
Gutowski wrote that the NRA disputes claims made by DCAG Brian Schwalb after the order was signed and "demanded he retract them in a letter to his office that was obtained by The Reload. It noted the lawsuit initially asked the court to appoint an overseer for the Foundation, a condition not included in the deal, and the Foundation didn’t admit to any wrongdoing in the settlement. It also asserted the NRA had agreed to pay back the Foundation for an outstanding loan before DC filed its lawsuit."
“The DCAG’ spins’ today’s settlement in avoidance of the facts: the DCAG long ago abandoned any claims of wrongdoing against the NRA,” William Brewer, the NRA’s outside counsel, said in a statement. “Even by DC standards, this is rank political gamesmanship – an after-the-fact justification for a failed lawsuit by these officials.”
The Hill Reports on NRA Settlement with DCAG
April 17, 2024 – The Hill reported today on a settlement agreement between Brewer client the National Rifle Association of America (NRA), the NRA Foundation, and the District of Columbia Attorney General (DCAG). The reporting includes comments from firm partner William Brewer, who responded to statements from DCAG Brian Schwalb as “distorted and untruthful.”
As stated by the NRA, “On April 16, 2024, the NRA and NRA Foundation entered into a consent order [resolving an August 2020 lawsuit], whereby the DCAG dismisses all claims against the NRA. The order contains no adverse finding against the NRA and no allegations regarding the use of funds of the NRA Foundation. There are no fines or penalties whatsoever against the NRA. DCAG Schwalb described the settlement differently.”
As reported by The Hill, the NRA also fought back against Schwalb’s characterization of the settlement in a statement to The Hill, with NRA counsel William Brewer calling it “distorted and untruthful.”
“The DCAG ‘spins’ today’s settlement in avoidance of the facts: the DCAG long ago abandoned any claims of wrongdoing against the NRA,” Brewer wrote. “Even by DC standards, this is rank political gamesmanship — an after-the-fact justification for a failed lawsuit by these officials.”
Brewer continued, claiming that many of the claims Schwalb alleged against the NRA Foundation were unfounded, specifically noting that the settlement agreement includes no accusations or implications of wrongdoing by the organization.
“In the face of these facts, the DCAG settled its lawsuit — abandoning all claims against the NRA and NRA Foundation,” he wrote.
Read more here.
Law360: NRA, LaPierre, Execs Seek to Ax Verdict
April 8, 2024 – Law360 reports that Brewer client the National Rifle Association of America (NRA) is asking a New York judge to "throw out a Manhattan jury's verdict." A jury verdict was entered in the NYAG vs. NRA lawsuit on February 23, 2024.
According to the report, in its "motion for judgment notwithstanding the verdict, the NRA argued that prosecutors did not prove that the organization itself failed to protect its charitable assets. The group said there was no proof at trial that its charitable assets, as opposed to noncharitable assets, were improperly administered, nor was there proof of a 'sustained or systematic failure of the board to exercise oversight.'"
"The trial record clearly demonstrates that the NRA was the victim of hidden arrangements and control overrides orchestrated by former insiders working with a handful of their favorite vendors," NRA attorney William A. Brewer III told Law360. "The record also demonstrates the NRA Board took swift, decisive action when it became aware of such conduct."
"The Board's commitment to good governance was on full display during the jury trial," he added. "The NRA appreciates the service of the jury, but believes it improperly attributed individual misconduct to the NRA. As such, the Association seeks judgment in its favor on all remaining counts."
Read the Law360 report (subscription required).
New York Sun Publishes Editorial in Support of NRA
March 5, 2024 – The New York Sun published an editorial today in support of Brewer client the NRA. The editorial, “Good News for the NRA – and New York,” commented on the “dissolution lawsuit” filed by the New York Attorney General against the NRA. A jury trial recently concluded in the matter.
The Sun wrote, “We wouldn’t want the week to go by without a word of congratulations to the National Rifle Association, one of America’s most venerable and distinguished civil rights organizations. The worst of the legal onslaught launched by Governor Andrew Cuomo and Attorney General Letitia James has passed. Despite their best efforts to close the doors of the NRA, a Manhattan jury’s verdict leaves the organization intact.”
The publication continued, “Someday, no doubt, the historians are going to mark what happened in this case as a politically motivated prosecution designed to dismantle a non-profit organization whose views cut against the liberal orthodoxy prevailing in the Empire State. Why else would General James emphasize the NRA’s role as “the largest and most influential pro-gun organization in the nation” when she filed her suit “seeking to dissolve” the group?”
NRA Responds to New York Trial Verdict; Decision Validates NRA’s Position Regarding Wrongdoing by Certain Vendors and Insiders
February 23, 2024 – 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.
The NYAG originally sought to put the NRA out of business. She had claimed the actions in question led “to the loss of more than $64 million in just three years.” But the allegations by the NYAG that survived to the jury-verdict stage were starkly diminished relative to their complaint: as jury deliberations approached, the government was forced to drop half of its whistleblower allegations for lack of evidence, along with a number of conflict-of-interest claims.
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.”
Of particular importance, the six-person jury found that of 10 related-party transactions of which the NRA was accused, the NRA Audit Committee was found to have properly reviewed and ratified 8 of them. However, 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.
Other New York Actions: Defending Free Speech
Against the backdrop of the NYAG trial, the NRA is preparing for another case involving New York government officials. On March 18, 2024, the U.S. Supreme Court will hear arguments in the NRA’s First Amendment case against former financial regulator Maria T. Vullo.
In a May 2018 lawsuit, the NRA alleged that Vullo, at the behest of former New York Governor Andrew Cuomo, took aim at the NRA and conspired to use the regulatory power of the New York Department of Financial Services (DFS) to “financially blacklist” the NRA – coercing banks and insurers to cut ties with the Association to suppress its pro-Second Amendment speech. The NRA argues that Vullo’s actions as DFS superintendent were meant to silence the NRA – using “guidance letters,” backroom threats, and other measures to cause financial institutions to “drop” the Association.
The NRA's First Amendment claims withstood multiple motions to dismiss. But in 2022, after Vullo appealed the trial court’s ruling, the Second Circuit struck down the NRA’s claims.
On February 7, 2023, the NRA petitioned the U.S. Supreme Court, seeking review of the Second Circuit decision. On November 3, 2023, the Court granted review on the following question: Does the First Amendment allow a government regulator to threaten regulated entities with adverse regulatory actions if they do business with a controversial speaker, as a consequence of (a) the government’s own hostility to the speaker’s viewpoint or (b) a perceived “general backlash” against the speaker’s advocacy?
Since that time, more than 190 individuals and organizations have filed 22 amicus briefs in support of the NRA’s legal position. If successful, the NRA ultimately aims to prove Vullo, Cuomo and others conspired with James to penalize the NRA for its protected speech. Such developments could help the Association resurrect First Amendment claims against James, as well as unseal materials from an earlier discovery phase of the case.
“The NRA is eager to break the seal on facts surrounding an unprecedented weaponization of power against the NRA and its speech,” says Brewer. “There is little question former and current public officials were conspiring with Everytown and others to financially damage and politically suppress the NRA. Their actions harmed democracy and the rule of law – and letting relevant facts and documents remain secret does, too.”
Law 360 Reports on NRA Trial, Closing Arguments
February 15, 2024 - Law360 reported on the conclusion of a six-week trial concerning the New York Attorney General Letitia James’ (NYAG) case against the National Rifle Association of America (NRA) in New York.
The NYAG filed suit against the NRA, former CEO and Executive Vice President Wayne LaPierre, former CFO Wilson Phillips, General Counsel John Frazer, and former Chief of Staff Joshua Powell in August 2020, alleging defendants misspent millions of dollars and that the NRA and executives steered vendor contracts to insiders. The Brewer firm represents the NRA in the case.
The report noted that the NRA said its board was a victim of improper spending by executives and that the Association instituted compliance reforms once that alleged misconduct came to light.
"The essence of fraud is that it's a lie. The victim doesn't know about it," Brewer Partner Sarah Rogers told the jury. "What the NRA did when it discovered the fraud was, it dug in. ... The NRA left no stone unturned."
Rogers added that the NYAG sued the NRA because she "despised" the group, and that she tried "to impose the death penalty on it and take all its money" – through a corporate dissolution claim that was dismissed in March 2022.
Read more here.
New York Law Journal, The New York Times, AP, and Others Report on NRA Trial Proceedings
January 9, 2024 – Trial proceedings for the New York Attorney General's (NYAG) case against the National Rifle Association of America (NRA) began this week in New York. As reported, in opening arguments for the NRA, Brewer partner Sarah B. Rogers told jurors that the NRA is a victim in the civil fraud lawsuit.
“This is an unusual lawsuit,” Rogers said. “Any damages you award in this case will be paid to the NRA. The government acknowledges that my client is the victim.”
NYAG Letitia James filed suit against the NRA, former CEO and Executive Vice President Wayne LaPierre, former CFO Wilson Phillips, and General Counsel John Frazer in August 2020, "alleging the improper use of tens of millions of dollars of charitable funds and breach of fiduciary duty," the New York Law Journal (NYLJ) reported. Former NRA Chief of Staff Josh Powell reached a settlement with the NYAG's office prior to trial.
As noted in media reports, Rogers said there was no question that some individuals, some executives, an ad agency, a travel agent "betrayed" the nonprofit’s mission. But, she said, “The only question is why the NRA, the victim...is a defendant in this case."
Rogers noted that Mr. LaPierre has been a valuable and visionary leader for the NRA and its mission.
The NYLJ reported that Rogers personally requested to deliver the NRA's opening statement, as someone who grew up in New York City and considered the need for a gun only after being attacked by two men.
"The decision to own a firearm does not just belong to the king, or the militia, or the cops. In America, it's yours," Rogers said.
Trial is expected to last six weeks.
To read more about the NRA's opening arguments, click the following links: