NRA Special Meeting (Update)

Rumors started on Sunday with a report by Dan Zimmerman of TTAG about Wayne LaPierre’s speech to CPAC. After saying that Wayne’s speech was old and stale, he concluded with this teaser, “The good news is, we happen to know that the NRA is actively seeking his replacement.”

Then yesterday, John Crump who writes for Ammoland.com had a tweet saying to “prepare for some big NRA news on or around March 14.”

The March 14th date was interesting because there was no hearing set on that date in either the NY Attorney General’s dissolution case nor in the NRA’s bankruptcy case.

It turns out that NRA President Carolyn Meadows has called for a special meeting of the Board of Directors to be held in Dallas on March 14th.

March 2, 2021

                                                                  OFFICIAL NOTICE

                                SPECIAL MEETING OF THE BOARD OF DIRECTORS

TO:      Board of Directors and Executive Council

            The NRA President has called for a special meeting of the Board of Directors to take place on Sunday, March 14, 2021, at 10:00 a.m. in Dallas, Texas.  The sole purpose of the meeting is to provide a briefing to the Board regarding the NRA’s reorganization plan and the legal matters overseen by the Special Litigation Committee, and to take any necessary action directly related to those matters.

   The NRA Board of Directors and Executive Council and will meet at the Omni Dallas Hotel, 555 South Lamar Street, Dallas, Texas 75202, (214) 744-6664.  The date, time and location of all meetings are on the attached schedule of meetings and meals.  [Special Note:  The special meeting of the Board of Directors will start at 10:00 a.m. Daylight Savings Time on Sunday, March 14. Daylight Savings Time begins at 2:00 a.m. on Sunday, March 14.  On Saturday night, remember to set your clocks forward one hour (i.e., losing one hour) to “spring ahead.”]

Members in attendance are authorized reimbursement for ordinary and necessary expenses actually incurred on the following basis:

If I had to speculate – and that is always a dangerous thing – I would say that it is a move to get the Board of Directors to explicitly approve the filing for bankruptcy. You may remember that Judge Phillip Journey made the point in his motion for a court-appointed examiner that the directors’ never voted to file bankruptcy. Further, bankruptcy law expert Prof. Adam Levitin wondered if the Board had shirked its fiduciary duties by not explicitly approving a bankruptcy filing.

As the after the fact approval of many expenditures by the Board’s Audit Committee makes clear, the NRA Board has a history of approving things after the fact that should have had explicit pre-approval. This could be one of those ex post facto approvals. I would be the most surprised person in the room if it was actually to announce a replacement to Wayne LaPierre. I just don’t see a Board packed with Wayne loyalists doing that.

UDPATE: A friend who knows the NRA bylaws far better than me just pointed out something about this special meeting. According to Article IV, Section 3 (b), while the President, the Executive Committee, or the majority of the Board can call a special meeting, it has a notification requirement.

From the NRA Bylaws:

Notice of the time, place, and object of such special meetings shall be mailed to each Director at least 30 days before the date of holding such meetings.

Now I know that the NRA Bylaws don’t mean much to Wayne and company but you would think that given both the dissolution lawsuit and the bankruptcy proceedings that dotting the I’s and crossing the T’s just might be the smart way to go. I don’t know if the Board is getting their advice from William Brewer III, NRA General Counsel John Frazer, or the Board’s attorney Wit Davis but whomever said it was OK to ignore the bylaws either doesn’t give a big rat’s ass or is an idiot.

Either way, anything voted on and decided in this Special Meeting of the Board could be challenged in court as being invalid due to violating the bylaws.

The Lawsuit That Keeps On Giving

The lawsuit and counter-lawsuit between the NRA and Ackerman McQueen is the lawsuit that keeps on giving. Reading the amended complaint filed yesterday by Ackerman McQueen is like reading about one of those Hollywood celebrity divorce cases but only better.

I give you the first three sections of AckMac’s “SECOND AMENDED THIRD-PARTY COMPLAINT AGAINST WAYNE LAPIERRE & THE NRA FOUNDATION, INC.” The Complementary Spouse said to me when I started snorting that it must have been funny.

This Third-Party Complaint arises from a series of ethically questionable
undertakings by the NRA through its longtime leader Executive Vice President and CEO, Wayne LaPierre (“LaPierre”). As a result of his authoritarian management style, love of money and power, and deep personal paranoia, today, LaPierre has reduced the NRA to a cult of personality as he continues to waste membership funds on media stunts and serial litigation with only one purpose: to save his own skin.

Through the intricate financial arrangements he constructed over decades with very little oversight from the NRA Board of Directors or other executives, LaPierre was able to obtain millions of dollars in personal benefits by keeping vendors and the NRA’s own accounting
department in the dark about his personal spending. As the gathering storm clouds of a possible investigation by the New York Attorney General (“NYAG”) started to form in 2018, LaPierre became concerned the details of his financial adventurism may come to light.

LaPierre sought assistance from lawyer/media-darling, William A. Brewer III (“Brewer”), and his law firm/public-relations firm, Brewer Attorneys & Counselors (the “Brewer Firm”), who together with LaPierre’s Chief of Staff, Joshua Powell (“Powell”), formulated a plan
to pin all liability on a convenient scapegoat, deflect media attention from LaPierre’s malfeasance and failed NRA programs, and maintain LaPierre’s domination of the NRA. Many of the resulting actions were made possible by LaPierre’s paranoia and guilty conscience, as he repeatedly proclaimed that Brewer was the only one who “could keep him out of jail.” By fantastic coincidence, Brewer determined that it was AMc—a company owned by his own father-in-law— who could be blamed for all of the NRA’s malfeasance and financial woes. In return for deflecting the spotlight from LaPierre, Brewer was given free rein to reap a financial windfall in exorbitant attorney fees, displace his father-in-law’s company as the public-relations firm for the NRA, and set up AMc as the perfect “fall guy.

It was the “lawyer/media-darling” characterization of William Brewer III that had me in stitches.

While all of this is somewhat humorous to read, the sad thing is that from everything I’ve heard that Wayne LaPierre is paranoid and let Brewer be his “Rasputin” in an effort to save his own skin.

The ones to suffer from all of this will not be Wayne, Bill Brewer, or AckMac. It will be the ordinary NRA members who gave their hard-earned monies to the organization in order to protect their God-given right to self-defense as enshrined in the Second Amendment. Just when it is needed most, the NRA’s attention is on its series of lawsuits against AckMac and its bankruptcy stunt.

You can read the whole complaint here.

“She Works Hard For The Money”

The latest filings in the NRA’s bankruptcy case contain a treasure trove of information. This is especially true for the NRA’s statement of financial affairs. It goes well beyond a mere balance sheet and includes a complete list of payments and distributions to insiders. Insiders would be the officers of the NRA as well as all members of the Board of Directors.

Reading through the list, most of the payments are recruiter payments. While I might quibble on whether or not directors or their organizations should be compensated for bringing in new members, it is a relatively minor thing and the amount of money was not material (using an accounting term).

Bearing in mind that 2020 was a horrible year, financially and otherwise, for many people, there is one person who did rather well in 2020.

Marion Hammer.

Ms. Hammer received $246,500 in direct payments for “consulting services”. In addition, she received another $183,600 in indirect payments made to United Sportsmen of Florida for a “consulting agreement.” (See pages 53 and 54 of the NRA’s filing.)

As Donna Summer sang, “She works hard for the money.
So you better treat her right.”

Being Wayne LaPierre’s No. 1 defender and attack cat (she is a cat person) is hard work. He must have thought so which is why she got $430,100 of member’s money in an effort to treat her right.

“A Personal Agenda”?

Judge Phillip Journey hit a nerve with his motion for appointment of an examiner in the NRA’s Chapter 11 bankruptcy filing. So much so that the powers that be felt compelled to send an email to all members of the Board of Directors after 9pm Monday night.

The email was by NRA President Carolyn Meadows. Let me correct that last statement. The email was from Carolyn Meadows but it was so lawyerly crafted that I have immense doubts that she herself composed it.

She starts off by mentioning the court filing and then asserts the Judge Journey misunderstands the NRA’s bylaws. She says he is mistaken in his belief that the formation of the Sea Girt LLC vehicle and the Chapter 11 bankruptcy filing required special board approval. She asserts that the revised employment contract of Wayne LaPierre which was approved by the entire board provided that authority.

I am not a lawyer nor am I an expert in bankruptcy law. However, from everything I’ve read elsewhere from real experts in bankruptcy law, the formation of special entities and especially the filing of a bankruptcy requires an expressed approval from a board. In other words, it is not a power that can be delegated to the hired staff like Wayne.

The Complementary Spouse read over the email as well. Her take was that this email actually, for the most part, did not dispute Judge Journey’s motion so much as dance around it.

Then there was this line: “I find it disgraceful anyone would suggest otherwise to advance a personal agenda.” That was in reference to the line in the motion of how at least one board member was told to sit down and shut up. The Complementary Spouse noted the irony of accusing a board member of having a personal agenda when no one has a bigger personal agenda than Wayne LaPierre.

The email ends by saying if any board members have questions to please direct them to the board’s attorney Wit Davis. I should point out that he was hired by Wayne LaPierre to replace Steve Hart who LaPierre fired.

NRA Board Member Asks For Examiner

Attorneys for Phil Journey, a state judge in Kansas and a NRA Director, filed a motion in the NRA’s bankruptcy cased today. The motion asked the court to appoint an examiner (or independent investigator) to examine claims against the NRA made by the NY Attorney General Letitia James. These claims were made in the suit seeking the NRA’s dissolution.

Journey says he fully supports the NRA’s mission of protecting the Second Amendment through “education, training, and sport.” He then says:

Accordingly, Movant (Journey) seeks the appointment of an examiner to bring to light the veracity of the alleged fraud, dishonesty, incompetence, and gross mismanagement that has plagued the NRA’s reputation, caused significant alienation of the Association’s members and supporters, and hampered its ability to fulfill its core organizational purpose.

He then lays out the areas which he wants the examiner to investigate:

The best path to ensure that the NRA seizes upon the opportunity before it to recommit to its most historical ideals is to appoint an independent examiner to add transparency and confidence to the bankruptcy process. To that end, Movant requests the appointment of an examiner to examine and investigate: (i) the actions of Debtors’ pre- and post-petition management; (ii) the management practices being employed in the operation of the non-profit organization; (iii) the compensation of management; (iv) the benefits and perks being provided to the Debtors’ management team; and (v) the propriety of arrangements with certain vendors.

Journey goes on to accuse the NRA’s management of using Ackerman McQueen and other vendors as conduits to hide personal expenses and perks. He then says the Board has become a figurehead while “management” aka Wayne LaPierre actually steered the direction of the NRA.

He alleges the bylaws were violated by not having the Board of Directors to vote on the bankruptcy filing nor was the intent to seek Chapter 11 even disclosed to the Board. He goes on to note that the NRA’s management routinely ignored the bylaws, the laws of New York, and Robert’s Rules of Orders which led to Craig Spray resigning and the designated head of reorganization deciding not to take the job. Furthermore, the formation of Sea Girt LLC was not approved by the Board. Journey says information was withheld by management and the Board’s attorney which made it impossible for them to do their fiduciary duty.

The legal rationale along with case law is then presented in the argument as to why an examiner is needed.

I will be blunt. I always thought Phil Journey was a Wayne LaPierre loyalist which is why he got nominated and elected to the Board of Directors. This is either a measure of his disgust with Wayne, Brewer, and their cronies or the ultimate sleight of hand to divert attention elsewhere. Given what is in the motion, I’ll go with the former for now.

I fully expect Brewer and company fight tooth and nail against this. He did issue this statement to Bloomberg News on Journey’s motion.

The NRA disputed the claim that it didn’t follow its own rules when it filed bankruptcy. It didn’t directly address the question of whether an examiner should be appointed.

“This plan was undertaken in full compliance with NRA policy,” NRA lawyer William A. Brewer III said in an email to Bloomberg. “The plan has been widely endorsed by NRA board members, NRA members, elected officials, and other key stakeholders.”

I think this motion will get very serious consideration from Judge Harlin Hale for two reasons. First and foremost, Phil Journey is a sitting judge in a state court in Kansas. That alone elevates his concerns above that of a mere bystander. Second, he is now and has been in the past a director of the NRA. I think that would give him standing as he has a fiduciary duty.

For now, it will be very (very!) interesting to see what comes of this motion. I hope it succeeds and I hope the creditor’s committee is successful in getting a trustee appointed.

I have embedded the full brief below. Read it for yourself and tell me what you think.

Motion To Appoint Examiner In NRA Bankruptcy Filing by jpr9954 on Scribd

Yeah, It’s The Trace But…

It sucks but sometimes you can get more timely and accurate information on what is happening with the NRA from Bloomberg’s The Trace than from the NRA itself.

I had noticed yesterday that Judge Phillip Journey of Kansas, a NRA Director since 2020, had secured representation before the bankruptcy court as a “creditor”. I thought it kind of strange but then there was this in today’s The Trace.

Grumblings from the NRA board?: Phillip Journey, a judge in Kansas who won his seat as an NRA director in 2020 and also served on the group’s board in the 1990s, notified the Texas court hearing the gun group’s bankruptcy case that he’s secured representation in the case. My colleague Will Van Sant notes: “I’d heard recently that Journey and a handful of other board members have concerns about actions taken by the NRA’s current leadership.” Journey has indicated he may take further action in the case, but offered no details.

It could be that Journey and some others are seeking to be a “white knight” and save the NRA leadership from itself and the ambitions of William Brewer III. I guess we will know soon enough.

In other NRA news from The Trace, I learned that the US Judicial Panel on Multidistrict Litigation had turned down the NRA’s request to consolidate all their cases into US District Court for the Northern District of Texas. That includes the Dell’Aquila class action suit in Tennessee, the NRA’s suit against Letitia James in New York, and two AckMac related suits in Texas.

The panel said that despite the NRA’s assertion of factual overlap they just didn’t find enough to warrant moving the cases to Texas. Lest you think the panel was filled with anti-2A judges, Judge Roger T. Benitez whose rulings in California have been fantastic is a member of the panel.

The full decision can be found here.

NRA Bankruptcy Updates

In the last week and half there have been a number of updates in the NRA’s Chapter 11 bankruptcy case. I will take them in order.

First, there was a debtor’s motion (the NRA) to allow Brewer, Attorneys and Counselors, to serve as special debtor’s counsel in the case. While the entire filing is 53 pages long, here are some excerpts. It should be kept in mind that the NRA has retained Patrick Neligan of Neligan LLP as its bankruptcy specialist attorney. Mr. Neligan has been practicing high-level bankruptcy law for over 35 years.

BAC and its attorneys are well-positioned to handle these matters for the Debtors because BAC has accumulated a reservoir of knowledge that could not be efficiently offloaded to, or replicated by, substitute counsel.

One way of looking at Brewer’s statement is that they know where the bodies are buried. I don’t think that is their intention but it could be read that way and they are needed to keep them buried.

In 2020 and in 2021, BAC’s standard hourly rates were as follows:
Professionals 2020 Hourly Rates
Founding Partner, William A. Brewer III $1,400
Partner $700-$900
Associate $275-$600
Consultant/Analyst $250-$725
Investigator $250-$350
Public Affairs $375-$800

Are their fees capped?

Did you agree to any variations, or alternatives to, your standard or customary billing arrangements for this engagement?
Response:
Yes. For one of the matters, BAC agreed not to seek fees for its professionals’ time inexcess of $100,000.10 In addition, BAC represents the NRA in another matter pro bono. Otherwise, BAC has not agreed to any variations or alternatives to BAC’s standard or customary billing arrangements. BAC’s engagement by the Debtors in connection with the Debtors’ bankruptcy cases is to serve as special counsel to the Debtors in the litigation that began PrePetition and other related matters BAC has been handling for the Debtors, as well as to assist Neligan LLP (lead counsel to the Debtors) during a transition period after the filing of the chapter 11 cases in order to facilitate the quick, efficient handling of matters drawing on BAC’s institutional knowledge.

In other words, with regard to one aspect of the case they will limit their fees as per agreement to $100,000 but after that the sky is the limit.

Remember that the bankruptcy filing has put many of the NRA’s other cases on hold so Brewer, Attorneys and Counselors has got to make their money somehow.

The Special Litigation Committee of Carolyn Meadows, Charles Cotton, and Willes Lee think having Bill Brewer involved is just dandy and they are all for it. Then again, they pretty much do as they are told by Wayne LaPierre.

Moving on, a mailing list of all additional creditors of the NRA was filed with the court on Monday, February 1st. Included in that 247-page list was the NRA Foundation. It should be remembered that most of the firearms in the National Firearms Museum and the National Sporting Arms Museum are not property of the NRA. Rather, they are on loan from primarily the NRA Foundation as that was to whom they were gifted by donors.

In a February 2nd report by Reuters on the latest hearing in the case before Bankruptcy Judge Harlin D. Hale, attorney Patrick Neligan denied the Chapter 11 filing was in bad faith.

“This is not a bad faith filing and we look forward to using Chapter 11
to resolve litigation and to move forward to emerge out of this
bankruptcy as a company domiciled here in Texas,” Neligan said
during Wednesday’s hearing.


The question of whether the NRA filed the bankruptcy in good faith could arise if the judge is asked to dismiss the case.

Judge Hale did ask both the NRA and the NY Attorney General’s Office to scale back the rhetoric and treat this as “a regular bankruptcy case.”

The US Trustee in the case appointed an Official Unsecured Creditors Committee consisting of five members. The Pension Benefit Guaranty Corp. was appointed the interim chair of the committee. As seen in the screen shot below, two of the committee appointees will probably cause a bit of consternation in Fairfax as well as in the offices of Bill Brewer.

I sincerely doubt that either AckMac or David Dell’Aquila are going to roll over and play dead for Wayne and the NRA.

Finally, in an interview posted today in FreeBeacon.com by Stephen Gutowski, Mr. Dell’Aquila says he will be pushing for a court-appointed trustee to oversee the NRA’s operations.

“We’re going to definitely do a motion for a trustee,” Dell’Aquila said. “I would not be surprised if the majority of the other creditors don’t join or do a similar thing.”

The article goes on to note that the court could appoint a trustee and that such a trustee would have broad powers. That trustee could “displace” the current leadership and the board. Moreover, the trustee would have the fiduciary duty to act in the best interests of the creditors and could go after Wayne and others for misuse of the NRA’s money for personal expenses.

“It’s in everybody’s best interest to get a trustee in there, certainly from the creditors’ point of view, and, I would argue, even for the five million members because every dime that they waste in frivolous litigation is a dime less that could go to the core mission,” Dell’Aquila said.   

As might be expected, attorney Bill Brewer who had previously dismissed the idea of a trustee back in January expressed his disappointment that Dell’Aquila was on the committee.

“The NRA is disappointed that a disgruntled individual who has filed frivolous claims against the Association is appointed to the committee,” Brewer told the Free Beacon.

Dell’Aquila’s attorney Elliott Schuchardt said that even with some of the defendants dismissed in Dell’Aquila’s class-action suit, the remaining claim against the NRA is worth $64 million potentially making it the largest creditor.

“We think there’s enough evidence of fraud here that we can make a good faith argument to the bankruptcy court judge that somebody else should be running the NRA,” Schuchardt said. 

I have always held that this bankruptcy filing was a gamble. Wayne and Brewer are too clever by half and I think the result will not be to their liking.

There is another hearing scheduled in the case for Wednesday, February 10th by WebEx. I’m sure we will hear something more then.

NRA CFO Resigns

Craig Spray, CFO and Treasurer of the National Rifle Association, has resigned. I found out the news on late Friday afternoon. Spray had been CFO since 2018 when Wilson “Woody” Phillips retired. He had previously been the CFO of furniture maker Knoll, Inc.

I have not seen any official announcement of it but I have gotten it from multiple sources including from a Director.

The official story as far as I can tell is that Spray resigned for health reasons. He had a heart attack sometime in the past. If you remember, back in 2018 Spray had to step aside for a few weeks due to health issues and the infamous Josh Powell was named acting CFO.

Rumor also has it that Spray learned of the NRA’s bankruptcy filing in the Texas at the same time as the Board of Directors were notified. That is, after the fact. Chief financial officers are usually the key individuals involved when an organization declares Chapter 11 bankruptcy. If that is indeed the case, it is enough to cause one to ask WTF?

More On The NRA’s Bankruptcy Filing

There was a very interesting and informative blog post regarding the NRA’s bankruptcy filing on CreditSlips.org on Friday. The post was by Georgetown law professor Adam Levitin. Levitin is an expert on bankruptcy and business restructuring. His list of publications regarding bankruptcy includes both law books and multiple law review articles.

The post says there are many issues with the filing:

This is going to be one heck of an interesting case. There are already so many glaring issues (or should I say “targets”?): venue, good faith filing, disclosures, the automatic stay, the trustee question, fiduciary duties to pursue claims against insiders, executory employment contracts, the fate of Wayne LaPierre, and the generally overlooked governance provisions of the Bankruptcy Code.

Read the whole post. The gist of it is that by filing for bankruptcy, the NRA has opened a can of worms and there could be a lot of unintended consequences. For example, if as the NY Attorney General alleges, Wayne LaPierre has a contract that guarantees his salary for life even if removed, bankruptcy law limits that to one year’s salary.

I hope this is the last post I have to do on the NRA filing for bankruptcy for the time being. There are other important matters to write about such as the virtual Shot Show that starts today.