Following a recent court ruling, the National Rifle Association (NRA) must now adopt significant operational changes to comply with New York’s not-for-profit regulations.
The same ruling also requires two former executives to reimburse the organization a total of $6.35 million in damages along with accrued interest.
Ongoing Legal Battle
This decision marks the latest chapter in the ongoing legal battle between the NRA and New York Attorney General Letitia James, with both sides expressing satisfaction with the outcome.
The court’s ruling follows a mixed verdict from a jury in February that identified mismanagement of charitable funds and breaches of state law by the NRA.
The jury singled out former Executive Vice President Wayne LaPierre and former Chief Financial Officer Wilson “Woody” Phillips for financial misconduct, ordering them to repay the organization for misallocated funds.
Governance Reforms and Financial Accountability
The Attorney General aimed not only to hold the former executives accountable but also to push for substantial changes in the NRA’s governance structure.
On December 11, Justice Joel Cohen from the New York Supreme Court declined to accept seven of the governance proposals put forth by the Attorney General’s Office.
However, he did mandate the adoption of 13 essential governance reforms designed to prevent future violations of the law.
As part of the ruling, LaPierre was instructed to pay $4.35 million, while Phillips must pay $2 million, with both amounts plus a nine percent annual interest rate.
The governance reforms focus on how the NRA conducts its board elections and include the requirement of hiring an independent consultant to ensure adherence to the court’s orders.
Additionally, the court has prioritized improved transparency and communication between the NRA’s leadership and its board members.
It also decreed that anyone who served on the NRA’s audit committee between 2014 and 2022 will be permanently barred from rejoining that committee.
Furthermore, future committee members must now be elected by the entire board rather than being chosen by the president alone.
Background and Future Implications
The Attorney General pointed out that for years, the NRA allowed individuals with conflicts of interest to operate without adhering to legal standards, highlighting the ruling’s significance as a warning to all not-for-profit organizations and their leaders about potential legal repercussions.
In a statement, the NRA framed the judgment as a positive resolution to a protracted dispute with the Attorney General.
They underscored that they successfully resisted efforts to dissolve the organization or impose external oversight.
Notably, the ruling does not impose any fines or penalties on the NRA itself and facilitates financial recovery from the executives found to have engaged in misconduct.
Following the February 2024 jury verdict against the NRA and its former leaders, Attorney General James initially sought to dissolve the organization, but a judge rejected this request.
Both LaPierre and Phillips have agreed to a ten-year ban on holding fiduciary roles in not-for-profit organizations in New York, with LaPierre’s ban extending to executive positions within the NRA and its affiliates.
This legal saga began when James filed a lawsuit in August 2020, accusing the NRA and its top brass of misusing funds through lavish spending and improper gifting practices, which she claimed contributed to the organization’s financial woes.
In January 2021, the NRA attempted to file for bankruptcy, but a Texas federal court dismissed the case the following May, asserting it was not filed in good faith.
Wayne LaPierre announced his retirement from the NRA in January 2024, marking the conclusion of a notable career that had lasted over three decades.
Source: Insurancejournal.com
