by The NRA Board of Directors has long relied upon the word of EVP Wayne LaPierre for virtually everything. If a disturbing matter was brought up to them, they, for the most part, would say something like, “Well, I talked to Wayne and he said blah, blah, blah.” They considered this as doing their duty of care as a Board member.
As I pointed out in my post on fiduciary duties, duty of care means to give “reasonable attention and care to providing oversight.” Under New York public charities law, that includes knowledge of the organization’s finances.
Over the last few days, I have listened intermittently to the hearings held on the NRA’s Chapter 11 bankruptcy. I have also read synopses of these hearings on other sites. Some of the things I heard had me shaking my head while shouting at the computer, “How could you not know?”
For example, Wayne LaPierre testified before the court that he had no knowledge of the consulting contract awarded to former CFO Woody Phillips and that he had only recently learned of it. The contract in question was for $30,000 monthly to run for four full years. The total value of the contract would then be worth $1,440,00. How can a CEO not know that his recently retired CFO just got a contract worth over $1.4 million?
The one thing I do believe that came out of Wayne’s rambling testimony is his acknowledgement that he didn’t inform the Board of his intention to seek bankruptcy before filing it. If he had, I believe more Board members would have reacted at the time like Judge Phil Journey saying “we didn’t authorize that.” Their ex post facto motion saying they authorized filing bankruptcy then and now is frankly nothing more than a cover garment.
On Friday I listened to live testimony from Wayne’s former BFF Tony Makris as well as AckMac CFO Bill Winkler. A deposition of former NRA CFO Woody Phillips was also read into the record with one NYAG attorney reading the questions and another reading Phillips’ response. The key thing that was continually pointed out by Makris and Winkler is that the vague invoices sent by AckMac were at the direct request of Wayne. This continued even after a new agreement was reached that stated the only deviations had to be in writing from Wayne as EVP. Wayne, of course, still continued with his way of not putting his wishes in writing. Greg Garman, one of the NRA’s attorney, pounded on AckMac’s Bill Winkler about ignoring the letter of the contract and going along with how things had been done in the past. I think this was a strategic mistake on his part as it opens the door to questioning similar vague invoices from Brewer, Attorneys and Counselors.
I should note here that Woody Phillips’ testimony primarily consisted of him saying, “I decline to answer based on the privilege accorded me by 5thamendment of the US Constitution.” The one thing I can say about that is that you can’t be accused of perjury if you always take the Fifth.
As I said in the headline, the NRA Board of Directors cannot claim ignorance any longer. The beauty of WebEx is that it does a good job of capturing who is participating or listening in to an event. In this case, I saw reporters such as Danny Hakim of the NY Times, Mark Maremont of the Wall Street Journal, and Stephen Gutowski of the Free Beacon. I also counted at least six Board members listening in. They included Carrie Lightfoot, Anthony Colandro, Joel Friedman, Linda Walker, Howard “Walt” Walters, and Judge Phil Journey (who I expected to listen in). There may have been more as there were people who logged on by phone and not by computer.
My point is that after multiple days of testimony and over 600 documents, pleadings, exhibits, motions, and replies, it is impossible for anyone on the Board to say they don’t know what is going on. If they do, then they need to resign.
While you can’t be accused of perjury if you take the 5th in a bankruptcy case, it’s worse than taking the 5th in a criminal case. Bankruptcy is civil, not criminal. The court can make adverse inferences if a witness takes the 5th. It’s particularly bad for the NRA as the witness taking the 5th was its former treasurer.
There is no way that WLP didn’t know about a $1.44M contract. Given the problems with Phillips, I strongly suspect they were paying him to go away. Contracts like this would normally be negotiated by lawyers (Brewer?) but then approved by the CEO and brought to the board. I have been the CFO of larger organizations than the NRA and this is the way that they operate. Given the organizational dysfunction of the NRA, I can believe that the board didn’t know but it strains credulity that the CEO didn’t know. If the CEO didn’t approve this, who did. I know of no financial type that would make such payments on the unsupported assertion of a lawyer.
So I suspect that we are in perjury territory here. I feel reasonably certain that the AG of NY is thinking the same and will go after it. The board should have cut its losses long ago but this is another inflection point.
Additional thoughts after reading hearing notes on NRA in danger. There seems to have been a “trust” fund held by Brewer so I suppose that Philipps could have been paid from that on Brewer’s say so alone. On the other hand, the testimony about WLP’s micromanaging leads me back to my original conclusion.