NRA Foundation Dodges a Legal Bullet in Washington, DC Legal Battle

Opinion

A settlement has been reached in the case of Washington, DC v. NRA Foundation. The case was set to go to trial on April 29 but was settled on April 17th, 2024.

The settlement agreement is very modest (embedded below), requiring the Foundation to create an Audit Committee to keep an eye on the organization’s books. Do annual training for directors and officers regarding their legal responsibilities to the Foundation, and institute stricter policies regarding conflicts of interest and any payments, grants, or loans to the NRA. It also requires some reporting to the court for a couple of years.

In the original complaint, filed back in August of 2020, at the same time New York Attorney General Letitia James filed her lawsuit against the NRA and several of its top executives, the DC AG summarized his accusations as follows:

“In recent years, the NRA has experienced financial problems related, in large part, to low membership and the NRA’s decision to continue to waste funds on improper, lavish spending. To plug financial holes caused by its own poor management, the NRA turned to the Foundation’s funds. Because the Foundation’s Board of Trustees and executives are dominated by the NRA, and the NRA had subverted the Foundation’s independence, the Foundation has allowed itself to be financially exploited through, among other things, unfair loans and management fee payments to the NRA. In allowing its funds to be diverted from charitable purposes and wasted to prop up the NRA in impermissible ways, the Foundation Board of Trustees has failed to provide meaningful oversight and failed in its fiduciary duties. Through this enforcement action, the District seeks injunctive relief sufficient to reform the Foundation’s lack of proper independent governance and a constructive trust over Foundation funds improperly wasted on the NRA.”

In his request for relief, the DC AG asked the court to impose a constructive trust over funds improperly diverted from the Foundation’s charitable purposes, modify the Foundation’s governance policies to ensure independence from the NRA, appoint an independent receiver to oversee Foundation operations, order mandatory training for Foundation board members and officers, and other remedies as the court sees fit.

The settlement agreement grants only a portion of these requests.

The request for the formation of a trust to oversee improperly diverted funds was probably the biggest potential threat, as such a trust could have compelled the Foundation to seek restitution for those diverted funds, which could have resulted in the Foundation being required to sue the NRA for millions of dollars. The agreement also side-stepped the request for a receiver to oversee the Foundation’s activities, opting instead to have the Foundation report certain activities to the court for the next two years. The settlement agreement does include a provision for mandatory annual training for directors and officers, but it does not address the issue of governance policies to ensure the independence of the Foundation Board from the NRA. Going forward, the Foundation Board will continue to be appointed by the NRA Board and be predominantly made up of members of the NRA Board.

All in all, the settlement agreement is almost completely toothless, and all of the provisions agreed to will be easily adopted.

In fact, it’s very likely that almost all of the provisions of this settlement agreement were agreed to or enacted shortly after the suit was filed back in 2020. That raises the question of why it took four years for the settlement to be reached. The District of Columbia elected a new AG in 2022 who seemed less interested in prosecuting this suit to the extent his predecessor had, so that might have played a role in the final settlement, though it still doesn’t explain why the settlement wasn’t reached until the eleventh hour.

A cynical person might think the NRA attorneys were creating delays and avoiding settlement talks until the last minute in order to maximize their billable hours. Surely that couldn’t have been a factor.

The settlement in DC does serve to clear the table some, leaving the NRA with only two major lawsuits to contend with.

Both suits involve the state of New York. It’s important not to conflate these two lawsuits, though. The first suit is a First Amendment suit filed by the NRA against a New York bureaucrat who threatened banks and insurance companies with increased regulatory scrutiny if they chose to do business with the NRA. A portion of this case was recently before the Supreme Court of the US. Now it goes back to the lower courts to be litigated further. The other case, and most pressing issue for the future of the NRA is, of course, New York’s suit against the Association. The first phase of that suit was concluded last month with broad findings of corruption, mismanagement, and failure to fulfill fiduciary obligations to protect NRA members’ assets. These findings applied to current and former executives and the NRA Board of Directors. The second phase of this suit is scheduled to begin in mid-July and will focus on questions of what the court should do to remediate the situation for the benefit of NRA members.

The NRA is obviously planning to argue – as they did in their statement in response to the New York jury verdicts against them – that they were the victims of “unscrupulous vendors and insiders” and that the “course corrections” they made in 2018, along with the hiring of a well-qualified Chief Compliance Officer, addresses all of the concerns raised in the first phase of the trial, negating any need for the court to take further action. I expect they’ve already begun working on some sort of settlement agreement to pitch in an effort to avoid going to trial again.

That argument would have been a reasonable approach four or five years ago (when I suggested it), but the events of the intervening years clearly demonstrate that the problems are still persistent.

While the primary culprits are no longer employed by the NRA, and the Board has severed ties with most of the offending vendors, the clean-up is woefully incomplete. Too many members of the Board were culpable in the corruption, and those who currently hold the reins of power within the Board are among the most complicit and culpable. There are also several executives still employed by the Association, pulling down big paychecks, who were up to their ears in the corruption. The members, potential members, former supporters, politicians, and the public will not be convinced to trust the NRA again until there are clear, major changes and everyone with any hint of complicity in the corruption is gone.

The judge could order the dissolution of the entire Board if he thinks that’s the best course, but that seems unlikely. It also looks unlikely that he will appoint a receiver or special master to oversee the Association while they get their ducks in a row. There’s a good chance that he will require some sort of regular reporting from the Association to ensure that they stay on the straight and narrow, but many members worried about true reform hope he’ll go much farther, insisting on a major overhaul of the Association, and removal of Directors, officers, and staff who failed in their fiduciary obligations.

What he’ll actually order or agree to in a settlement is anyone’s guess, but he’s expressed interest in hearing from NRA members, so perhaps a letter-writing campaign calling for him to remove the enablers and miscreants, and order a thorough reorganization of the Association, starting with a much smaller Board of Directors, would be in order.

Did You Bullet Vote?

Results of the latest Board of Directors election will be announced soon. Balloting closes on April 28, so if you received a ballot in your March magazine, be sure to vote and return it before the deadline. I’m on the ballot along with my friends and fellow reformers, Phil Journey, Rocky Marshall, and Dennis Fusaro. We’re asking NRA members to “bullet vote” only for the four of us, to give us better odds of winning seats. We’ll only be four votes on a board of 76, but at least we’ll have a better idea of what the Board and staff are doing, and we might get the chance to give our two cents to the judge.

Whether we win seats or not, we’ll be in Dallas for the NRA Annual Meetings and Exhibits May 16–19th 2024. I particularly look forward to the Members’ Meeting on May 18, where members will have a chance to have their voices heard. I hope to see you there.

Settlement Agreement DISTRICT OF COLUMBIA, Plaintiff, v. NRA FOUNDATION, INC., et al.,

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About Jeff Knox:

Jeff Knox is a second-generation political activist and director of The Firearms Coalition. His father Neal Knox led many of the early gun rights battles for your right to keep and bear arms. Read Neal Knox – The Gun Rights War.

The Firearms Coalition is a loose-knit coalition of individual Second Amendment activists, clubs and civil rights organizations. Founded by Neal Knox in 1984, the organization provides support to grassroots activists in the form of education, analysis of current issues, and with a historical perspective of the gun rights movement. The Firearms Coalition has offices in Buckeye, Arizona, and Manassas, VA. Visit: www.FirearmsCoalition.org.