by Judge Joel Cohen’s Final Judgment has been released. Realistically, I think both sides can claim victory as it grants measures to both the New York Attorney General’s Office and to the NRA. On my initial reading of the document, I wish Judge Cohen had gone a bit further. It does emphasize just how important the 2025 Board of Directors election will be for the future of the NRA.
The Final Judgment does follow much of what was said in court in the last hearing. For example, Judge Cohen was critical of the petition process calling it “antiquated” and thought it could be done electronically. That is in the Final Judgment. Another example is that Judge Cohen was leery of having the recommendations from the Committee on Organization on board size die “a quiet death in committee. The Final Judgment mandates the committee have its proposals ready for the April 2025 board meeting.
The Final Judgment itself covers seven pages and the remainder of the 25 page document is composed of exhibits. The Final Judgment starts with the Stipulations agreed to by defendants Joshua Powell and Wilson “Woody” Phillips. It then goes on to dismiss the 5th, 6th, 7th, 8th, 9th, 10th, and 11th causes of action in the NYAG’s Second Amendment Complaint. These dealt primarily with permanent bars on the named defendants along with items covered in the stipulations. The Final Judgment then moves to the remedial actions that the NRA shall implement.
Item One
Starting with the 2026 Members Meeting and continuing for the next five years, the NRA must release an Annual Compliance Report to Members. This would include details on first class travel expenses, charter travel, the number of exceptions to travel policy, and the “top five” persons granted exceptions. The compliance report would follow the outline provided in Exhibit 1. Thus, contract negotiations, whistleblower reports, and related party transactions would also be reported to members. A preliminary report must be released in advance of the 2025 Members Meeting with as many of these items included as possible.
Items Two and Three
The EVP and the Treasurer would be required to certify that both the IRS Form 990 and New York’s CHAR500 contain no “material misstatement or omission” based upon their knowledge. This would be in a form consistent with Section 302 of the Sarbanes-Oxley Act. There is no time limitation for this certification on the Form 990 while the NRA only is required to do this for the next five years with regard to the CHAR500. The Board can continue the practice in perpetuity.
Item Four
The Office of the Secretary has until March 1, 2025 to implement a secure portal to enable encrypted dissemination of Board, committee, and corporate documents to Board members. This portal would also allow encrypted communication between Board members. Item Four also requires that the draft 2023 Form 990 be made available to Board members at least three weeks in advance of the filing date. There is also a required briefing on the Form 990 open to all Board members. This can be either in-person or digital. There is a laundry list of items that are required to posted in this portal ranging from all versions of the bylaws for the last five years to reports and minutes of all committees for the last three years prior to today.
Personally, I am disappointed that Judge Cohen didn’t go further and mandate the publication of the bylaws, financial statements, and Form 990 on the NRA website open to ALL NRA members. There is no excuse for not publishing the bylaws electronically. As to the financial statements and Form 990, members shouldn’t have to go to certain state Secretary of State websites (see North Carolina) or to websites like Guidestar.
Item Five
Judge Cohen had expressed a desire to open up the nominations for the Board and he does it with this item. First, he says that the Nominating Committee shall work to identify up to 20 candidates whose required qualifications meets the standards the NRA set forth in their filing and did not serve more than one term on the Board prior to 2022. The required qualifications include sufficient time to carry out the duties of Board service, a commitment to the fiduciary duties of good faith and care, will abide by the bylaws, is free from potential conflicts, and expresses “integrity, professionalism, and clear support” for the interests of the NRA. This last requirement acknowledges differences of opinion on how to best achieve the interests of the NRA.
The Personal Factsheet and Biographical Questionnaire must be amended to include questions on financial conflicts, a consent to abide by legal duties and Board policy, and a consent for a background check.
As noted earlier, Judge Cohen considered the existing paper petition nomination process to be “antiquated”. While not doing away with the hard copy paper petition, the NRA must provide an online alternative so that the whole petition process can be done electronically including the signatures.
Item Six
For the next three election cycles, the NRA shall publish on its website a statement from each candidate, written by each candidate, at the time of the mailing of the ballots to voting members. Currently, only a 150 word bio of each candidate is published in the Official Journal. This bio does not allow any “campaigning” verbiage.
Item Seven
The NRA’s bylaws must be amended to make the Audit Committee an “elected committee of the board”. This would make it consistent with the requirements of New York non-profit corporation law. Judge Cohen goes on to write that the amendment shall be structured such that the Audit Committee will not be a “committee of the Board” until such time as each of its members have been voted on by the Board. The NRA President will put forward his or her nominations for the Audit Committee and then the Board shall vote on each individual. If a candidate is rejected by the Board vote, then replacement nominations will be taken from the floor.
Item Eight
Judge Cohen does not mess around on this item. No person who served on the Audit Committee during the period between 2014 and 2022 shall be elected to the committee again. Thus, someone like current chair Curtis Jenkins would not be eligible to serve on the elected Audit Committee. I’m not sure of the status of existing members Ron Schmeits or Eb Wilkinson. However, current members Rocky Marshall and Charlie Beers would be eligible to serve on the reconstituted Audit Committee when it becomes a committee of the board.
Item Nine
Within the next 30 days, the NRA and the Chief Compliance Officer shall execute a severance agreement providing for two years salary if terminated without cause or resignation for “Good Reason”. The term of the contract is for three years. This item had already been agreed upon by both the NRA and the NYAG’s office as a workable alternative to provide protection to the CCO.
Item Ten
The NRA is required to update its Conflict of Interest and Related Party Transaction policy to make it consistent with the items in Exhibit 4. These include any exception to the policy must be approved in advance by the Audit Committee and such exception shall be in the best interest of the NRA, that the entire Board must then approve this exception by majority vote, and that no Related Party transaction shall be approved if it wasn’t properly disclosed and approved in advance. Judge Cohen will allow the NRA to set a de minimis threshold amount where full Board approval is not required. The NRA has 30 days to make this amendment and it must make it available electronically to all NRA employees and members of the Board.
Item Eleven
The NRA shall hire a consultant to work with the CCO and staff so as to advise the Board on implementing the directives from the court and to advise on best governance practices. This consultant must be court approved and cannot have appeared as a witness for the NRA in this case. The NRA will submit the name of the consultant to the court and to the NYAG. The NYAG has 14 days with which to comment and then the court will decide to approve the consultant or require the NRA to submit another name.
Item Twelve
The Committee on Organization is required to study the board composition, standardized protocols, and committee scope. In doing so, they must consider input from the members and the compliance office and consultant, look at best practices for non-profit organizations, examine current and future needs, and comply legal and regulatory requirements. Judge Cohen goes on to say that he wants any recommendations of this committee to reflect a diversity of ideas so as to “secure the freedom of association of all NRA members”. These recommendations must be ready to present to the Board at its April 2025 meeting. Note that the composition of the Board at this meeting will include everyone elected in the 2025 Board election.
Item Thirteen
The NRA shall retain its current independent auditor Aprio to conduct special procedures for at least the next three years. Aprio’s independent audit shall be published and made available to the NRA membership. If the NRA seeks to replace Aprio with another independent auditor, it must get court approval.
The Final Judgment concludes with a number of items relating to the amounts owed by Wayne LaPierre and Woody Phillips, the barring of LaPierre from any fiduciary position with the NRA for the next 10 years, and denying the AG’s requests for relief with regard to John Frazer. LaPierre is adjudged to owe the NRA $4,351,230.02 with 9% interest starting on February 23, 2024. No compromise or settlement on this amount will be effective unless approved by the court. LaPierre’s attorney had danced around this in the last hearing hinting that LaPierre might drag out the proceeding (and payment) unless a settlement of a lesser amount could be reached. Judge Cohen just nixed that.
As I stated at the beginning, both sides got some of what they wanted and neither side got everything they wanted. If the NRA appeals this Final Judgment, it would only be because the Special Litigation Committee is enthralled with the advice from Brewer, Attorneys and Counselors. After dissolution was taken off the table, everything in this Final Judgment realistically could have been negotiated many months ago with millions and millions of legal fees saved. That it wasn’t, well, you know my opinion on that.
Good analysis, John. Thank you.