NRA Board of Directors

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Is Wayne LaPierre A Peril Or A Hazard?

July 2, 2021 by 5 Comments

While I had heard rumors of Lloyd’s of London refusing to renew the NRA’s Directors and Officers insurance, Stephen Gutowski of The Reload confirmed it yesterday morning. He noted that in this past weekend’s Board of Directors meeting, they voted to create a $5 million fund to cover the board and executives as they search for a new policy.

NRA board member Phillip Journey told The Reload the fund was announced during the closed executive session of the gun group’s Saturday board meeting. He said board members were authorized to talk about it after the session ended, though. He believes the fund was created to alleviate concerns about liability raised by a number of board members.

“It was apparent from the comments that there are several board members that have expressed concerns,” Journey said. “This was their attempt to address the concern, knowing that the policy expires in, golly, less than 40 days.”

Lloyd’s did not respond to a request for comment. The elite business group has a reputation for insuring high-risk clients, and Journey said its decision not to renew the NRA’s policy is bad news.

“I mean, if Lloyd’s won’t insure you, who the hell will?” he said.

Judge Journey is correct. Lloyd’s of London will insure and reinsure risks that traditional insurance companies will refuse to cover. It should be noted that Lloyd’s is not a company but a marketplace that brings together investors, underwriters, brokers, and insurance companies.

I taught insurance and financial planning at Western Carolina University as an adjunct instructor for a decade. One of the topics we covered was risk management and ways to mitigate it. Insurance is the proper tool to use when the severity of the loss is high and the likelihood of an occurrence is low. It is properly termed “risk transfer”.

Without getting too deep into the weeds, there are a few definitions that need to be clarified when speaking of insurance. First, risk is the probability or chance of a loss. In the NRA’s case, I am speculating the underwriters calculated that the probability of a loss or claim against the directors and officers for failing to do their fiduciary duty was rather high.

Going further, peril is the direct cause of a loss while a hazard is something that either causes or increases the likelihood of a loss. If you have a homeowner’s policy you will see these terms on it. Looking at the recent condo collapse in Dade County, the collapse was the peril while the deteriorating concrete was the hazard. In terms of the NRA, you could say that Wayne LaPierre’s grifting behavior is the peril and that the Board of Directors acquiescence in letting Wayne do anything he wants is the hazard.

A couple of the major considerations in underwriting D&O insurance are recent legal actions alleging violation of federal or state law and involvement in bankruptcy proceedings. The NY Attorney General’s lawsuit to dissolve the NRA and hold Wayne and others personally responsible fits that bill as does the abortive attempt to use bankruptcy to evade New York’s enforcement authority. When you add that to the Board’s seeming unwillingness to do its fiduciary duty, it is no wonder that the underwriters at Lloyd’s said nope.

As a result, the NRA will self-insure as noted in the article from The Reload. Frank Tait, who is running for the Board, has an excellent look at what self-insuring or setting up a captive insurance company would mean for the NRA.

A more humorous look at this whole debacle comes from Bitter at Shall Not Be Questioned. She notes that Wayne is a bigger risk than fire and brimstone. Lloyd’s is willing to insure the Hawaii neighborhood that sits on top of an active volcano but is not willing to insure the NRA’s directors and officers. At least with the volcano you know the extent of the losses.

So to answer the question posed in the headline, I think you could say that Wayne is the peril and his continuing presence at the top of the NRA is the hazard. Dumping the Gang of Four of Wayne, Carolyn, Charles, and Willes won’t cure the NRA’s problems but it would be a step in the right direction.

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A Modest Proposal By Jeff Knox

May 25, 2021 by 3 Comments

I have long thought that the NRA’s Board of Directors is too large and too unwieldy to be effective. Given how they have kowtowed to hired staff like Wayne LaPierre and their hired gun William Brewer III, I think this ineffectiveness is pretty obvious.

I’ve long held that it would be more effective to set up the board(s) similar to colleges and universities where they have a large Board of Visitors whose job it is to fundraise and gather support for the school with a small Board of Trustees whose job it is to actually manage the school in conjunction with administrators.

Jeff Knox of the Firearm Coalition has been a life-long observer of the NRA from both the inside and outside. Jeff’s proposal is similar but goes further than mine. He envisions three separate boards with varying levels of authority.

From his proposal:

The Honorary Board would be composed of celebrities, politicians, and high-dollar donors. As the name suggests, membership on the Honorary Board would be honorary, with members responsible for being goodwill ambassadors and fundraisers for the Association. They would have no role in the governance of the Association and would be elected or removed by the Advisory Board, with no limits on the number of members serving on it. They would not get travel reimbursement.

The Advisory Board would be a representative board of about 52 to 55 members, each elected by, and representing the NRA members of their home state or US territory. The term of service for Advisory Board members would be 2 years, with approximately half of the seats up for election each year. This board would be responsible for doing most of what the current Board of Directors does now, forming committees and subcommittees to hash out details and formulate policy and position proposals. The key difference between this board and the current board would be that the Advisory Board would not be making the final decisions, instead advising the Managing Board.

The Managing Board would be composed of 9 members, each serving a 3-year term, with one-third of the seats up for election every year. The members of the Managing Board would be nominated by the Advisory Board’s Nominating Committee or by petition of the members, and elected by the Advisory Board. The Managing Board would be responsible for electing the Executive Vice President, and for setting policy for the Association, as well as overseeing all aspects of Association business.

Jeff is explicit that his proposal is a basis for discussion and is meant to generate ideas. He doesn’t see it as a be-all and end-all proposal.

He goes on to add about the composition of the Advisory and Managing Boards:

The Advisory Board would be comprised primarily of people with strong ties and experience in the shooting sports and firearms politics, and the Managing Board would be comprised of people with solid firearms backgrounds and credentials, and equally solid business and government experience.

I think Jeff’s tripartite approach is a good start.

I do have reservations about two things. With the exception of just a few state affiliates like those in California, New York, Illinois, and Massachusetts, most NRA state affiliates are next to useless when it comes to actually fighting for gun rights. They tend to leave the fight for gun rights to the NRA-ILA representative serving multiple states and maybe a paid lobbyist. The fight for gun rights in many states is actually being done by non-NRA affiliates like Grass Roots North Carolina, AZ Citizens Defense League, and the Virginia Citizen Defense League

Most NRA state affiliates’ forte is competition and maybe training. I don’t want to call them “fudds” but many are still stuck in a 1950s mindset. They are totally ignorant of Gun Culture v2.0 and the millions of new gun owners who bought their first firearm in 2020-21.

My second reservation is an extremely strong objection to having the Managing Board elected by the Advisory Board. Never, ever should the voting members of the NRA not have the final say on the election of the Board that actually manages the NRA. I do like the idea that people can be nominated by petition for the Managing Board and I would make it a reasonable number that is obtainable.

As Jeff said, this is only a start. Unfortunately, it might take a court-order reorganization to make any of it happen.

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For Your Weekend Reading

May 1, 2021 by 5 Comments

The NRA Board of Directors is having a special meeting today in Dallas along with a regular meeting tomorrow on Sunday. The special meeting is to approve the reorganization plan and the Chief Restructuring Officer. This comes on the heels of the last day of testimony in the US Bankruptcy Court hearings.

Day 10, as reported by the blog NRA In Danger, had testimony from the NRA’s outside auditor and the proposed Chief Restructuring Officer as well as cross-examination of Wayne LaPierre. While there is a lot there and you should read it in its entirety, three things captured my attention.

This witness did not do well under cross examination. He argued he’d reformed everything, then was faced with improper events that occurred after his alleged reforms. His choices were to appear corrupt or to appear incompetent and out of control, and he went with the second choice.

That to me provides even more evidence to Judge Harlin Hale that perhaps a trustee is called for. As those who are no fans of Wayne but are really worried about the future of the NRA have observed, a trustee would have the power to convert the Chapter 11 into a Chapter 7 and dissolve the NRA.

The second thing that captured my attention was Wayne’s response to the NRA’s attorney Greg Garman when asked about his background and history.

Background. MA from Boston College in politics, VA legislature. Got Phd. Over at DNC, knew NRA people, NRA right across street. Went into NRA building, they offered me job, late 1977. State liaison for year, then director state local. 1 year, then head govt affairs, in 1980. Membership now 4.9 million. Tried convert NRA into freedom organization. Outreach to celebrities. Celebrity shoots in Hollywood, dinners, etc.

Wayne does not have a PhD. He may have been in a PhD program in political science at BC but he never earned a PhD. I was admitted to the PhD program in political science at UNC-Chapel Hill. However, I left with a wife and no degree. I would never, ever, claim to hold a PhD if I hadn’t earned it. It just isn’t done and is consummately tacky.

Finally, there is Judge Hale’s question that he ordered the attorneys for both sides to answer on Monday. Judge Hale may be nicknamed “Cooter” but he is no fool.

Judge asks question, to be answered in arguments Monday (no court Friday)—chapter 11 purpose is to save company from liquidation bankruptcy. Does court have jurisdiction where sole purpose is to save company from dissolution under state law, which dissolution will only occur if the state court concludes dissolution is in best interests of public?

The blog NRA In Danger examines Judge Hale’s question in more detail. It is the critical question: does the court have jurisdiction? If not, then the case must be dismissed and the NYAG is free to continue in her attempt to dissolve the NRA.

Her dissolution suit has been strengthened by the bankruptcy court revelations. Just the lad day of testimony saw Wayne LaPierre claiming that he’d begun cleaning everything up in 2017, but forced to admit that he’d been given an incredibly lucrative “golden parachute” agreement in mid-2018 (it would have given him many millions had the board ever stopped electing him) that was signed by an outgoing president and Carolyn Meadows, now NRA president and head of the board’s Special Litigation Committee. The signing of the contract implicates NRA’s current board leadership, and also LaPierre himself, and shows his supposed 2017 reforms are. sham. He himself is free to loot despite them. On the same day those board officers signed another golden parachute for Woody Phillips, the NRA treasurer who had to “take the Fifth” dozens of times in his testimony. Others who got such agreements, LaPierre testified he had no idea of the contracts, showing that even if he were honest, in practice others are free to loot NRA at will without his being able to discover it.

Read the whole thing.

Moving on, a column by Stephen Gutowski on his new platform The Reload examines what he calls the membership program. In 2013, Wayne promised to double the membership after it had just hit five million members. Membership now stands at 4.89 million members. Not only has membership not doubled under Wayne’s most recent watch but it has regressed.

If the NRA’s membership has hit a ceiling, that’s significant, and it’s a bad sign for the most influential gun-rights group on the planet. It’s also a bad sign for NRA leadership’s argument in their current argument in the bankruptcy case. NRA leadership has repeatedly argued the LaPierre is the driving force behind fundraising at the organization, and it could not operate anywhere as effectively without him. But LaPierre has not only failed to meet his self-set 2013 goal of doubling NRA membership; membership has actually receded by his own account.

There are millions of new gun owners out there. I imagine some may have joined the NRA this year but the majority have not. Moreover, if what I’m reading across the Internet in forums on hunting, on the Second Amendment, and the like is correct, then there are a lot of people refusing to renew memberships or to make donations so long as Wayne and his grifter cronies remain in power. I am hearing this from both Gun Culture v1.0 and 2.0. I know my own wallet will remain closed to the NRA so long as Wayne is there.

Finally, my friend Kevin Creighton has an excellent post about the NRA’s fund raising approach. He notes Stephen Gutowski’s column on the NRA’s negative growth and relates it to their fund raising approach.

However, let’s face facts. For over 10 years now, the NRA’s primary messaging has been “Give us money, they’re a-comin’ for yer guns.” Okay, fine, let’s say they actually ARE coming for our guns. What have you, the NRA, done to prevent that from happening? What value am I getting for my donation? Why should I give to you right now, except out of habit?

Kevin relates his success fund raising for a faith-based organization using a positive approach. He urges the NRA to get away from the negative approach and return to the more positive approach of the past. Then, both money and membership might grow.

If you are a NRA member or were at one time, you really need to read all these blog posts and articles. Those of us who want a reformed NRA may be voices crying in the wilderness like the Old Testament prophets but the fight for the Second Amendment depends upon it.

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Another NRA Board Special Meeting

April 19, 2021 by 2 Comments

Stephen Gutowski of The Reload is reporting that a special meeting of the Board of Directors has been called for May 1st in Dallas. The purpose of this meeting is to approve a reorganization plan that the NRA plans to present to the US Bankruptcy Court.

They plan to have a regular Board meeting on Sunday, May 2nd.

This meeting comes after two weeks of testimony before Judge Hale in the US Bankruptcy Court. As Gutowski, myself, and others have noted, this testimony has brought out many questionable financial practices involving Wayne LaPierre, his executive assistant Millie Hallow, and former CFO Woody Phillips.

As Gutowski notes regarding the meeting:

The NRA did not respond to a request for comment on the special board meeting, but there is a possibility the meeting won’t even take place. The current portion of the bankruptcy trial is set to end on April 23, and the judge is supposed to issue an order in the case by April 30. If the judge decides to appoint a trustee or dismiss the case, it is possible the group won’t have an opportunity to present the restructuring plan the board is set to review on May 1. A trustee could also fire current leadership and the board of directors before the meeting occurs.

The US Trustee has objected to the appointment of a Chief Restructuring Officer as proposed by the NRA. The US Trustee noted that the CRO would report to Wayne and the Special Litigation Committee composed of Meadows, Cotton, and Lee. Thus, the CRO would not be independent and could not be independent without bylaw changes by the NRA.

As the blog NRA In Danger points out:

The US Trustee did a better job of reading NRA’s Bylaws than did NRA’s attorneys. He points out that the CRO might be an NRA officer and the Bylaws say only the members can create a new NRA officer,

“It is not clear whether the NRA’s bylaws permit the creation of a chief restructuring officer position. The NRA’s most recent Bylaws incorporate input from the NRA’s membership and confer limited authority to officers and committees. The NRA’s Bylaws state that certain “AMENDMENTS IN BOLD FACE ITALICS SHALL NOT BE REPEALED OR AMENDED BY THE BOARD OF DIRECTORS.” Instead, Article XV, Section 4, reserves authority to amend bylaws in bold and italics to the NRA’s membership. Article V, Section 1(b), describes the specific officer positions, and in bold italics, states “The Board may not abolish said offices nor create any other offices.” 

There is another hearing scheduled before Judge Hale this afternoon at 4pm CDT. It will be interesting to hear what comes out of that meeting.

You will note that I did not say that Stephen Gutowski is with the Free Beacon. He left them on Friday and is now out on his own with The Reload. I would urge you to check it out and subscribe if you think it worthwhile. I did and I’m looking forward to his continued reporting on all things gun-related.

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They Can’t Claim Ignorance Any More

April 18, 2021 by 3 Comments

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.

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NRA Bankruptcy Hearing

April 8, 2021 by 1 Comment

The US Bankruptcy Court for the Northern Texas District is holding a live hearing on the NRA’s bankruptcy petition today. You can watch it live using this link: https://us-courts.webex.com/webappng/sites/us-courts/dashboard/pmr/hale

I believe this is the third day of the hearing and the witness is NRA EVP Wayne LaPierre.

Wayne does not make a good witness. The judge has had to admonish him a dozen times or more to limit his answer to the question asked. His own attorney has instructed him to just answer “yes or no” when asked that kind of question. On virtually every other answer, the attorney asking him the question has to ask the judge to strike part or all of the answer as being non-responsive and Judge Hale is sustaining that objection.

I believe every NRA Board member needs to be watching Wayne’s testimony. There are a few that I’ve noticed listed in the WebEx as being online. Given what I’ve seen so far, board members need to be asking themselves this question: Is it or is it not time for Wayne to retire?

I know what my answer is.

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New NRA Special Meeting Scheduled

March 18, 2021 by 5 Comments

A Special Meeting of the NRA Board of Directors has been scheduled for Dallas, TX for March 28th. As the Complementary Spouse pointed out to me, it is exactly 14 days after the previously scheduled meeting and is the length of time that the CDC formerly recommended for quarantine after COVID exposure. While I doubt that was the actual reason for the original cancellation, they are sticking with appearances.

March 18, 2021

                               OFFICIAL NOTICE: SPECIAL MEETING OF THE BOARD OF DIRECTORS

TO: Board of Directors and Executive Council

The NRA President has requested a special meeting of the Board of Directors to take place on Sunday, March 28, 2021, at 10:00 a.m. in Dallas, Texas. The  purpose of the meeting is to provide a legal briefing to the Board regarding the NRA’s plan of reorganization and other pending matters.

The NRA Board of Directors and Executive Council will meet at the Sheraton Dallas Hotel, 400 North Olive Street, Dallas, Texas 75201, (214) 922-8000. The date, time and location of all meetings are on the attached schedule of meetings and meals.

Please notice the change in wording from the first Special Meeting notice:

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.

Any mention of the Special Litigation Committee is deleted. Moreover, it does not have a mention of “any necessary action.”

Speculation is that an 1129 Reorganization Plan will be presented to the Board. These reorganization plans be presented by the debtor (NRA), the unsecured creditors committee, or a trustee if one is appointed. However, the bankruptcy judge, as I understand it, cannot present a reorganization plan and must only rule on the merits of those presented.

By presenting an 1129 reorganization plan, it is speculated that Brewer, Attorneys and Counselors, will have their fingers all over it and will use it to keep themselves attached to the NRA like barnacles on a rock. A friend pointed out to me today that in the course of proceedings that the bankruptcy judge could not only disallow Brewer to serve as a special counsel but cut off all payments to him given his role in draining the NRA’s finances through legal billings. We can only hope!

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NRA Special Meeting…Canceled

March 13, 2021 by 1 Comment

Stephen Gutowski of the Washington Free Beacon is reporting on Twitter that the NRA Special Board Meeting scheduled for Sunday has been canceled.

While airlines and hotels have been pretty fair about cancellations due to COVID, there are undoubtedly some board members who had already left for Texas and those expenses will need to be reimbursed.

It would be cynical to think the meeting cancellation had anything to do with the attempt by the NY Attorney General’s Office to depose Judge Phillip Journey. A hearing on that is set for Monday in US Bankruptcy Court. However, it will be by WebEx.

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Fiduciary Duties And The NRA Board

March 9, 2021 by 3 Comments

The term “fiduciary” is bandied about without much explanation or definition. That said, it is a critically important to understand what it means when it comes to an organization.

Investopedia defines it this way:

A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interest ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests.

While they are talking about a person who handles your finances, it is equally applicable to anyone who serves on the board of a non-profit like the National Rifle Association.

The website Charity Lawyer puts it this way when talking about the fiduciary responsibilities of a board member of a non-profit organization.

The board collectively, and directors/trustees individually, owe fiduciary duties to the nonprofit organization they serve. In essence, exercising fiduciary duties means that board members have a duty to act with care and in the best interest of the organization and remain loyal to its mission, as opposed to acting in their own interest or the interest of the CEO/Executive Director they supervise. (emphasis added)

So what are the fiduciary duties of a board member?

Under New York law a board member has three fiduciary duties: the duty of care, the duty of loyalty, and the duty of obedience. To assist new or potential nonprofit board members, the Charities Bureau publishes a booklet outlining what these mean. Using their words plus others let’s take them in order.

Duty of Care

The duty of care mean that board members should give give reasonable attention and care to providing organizational oversight. There is no precise definition of what is meant by reasonable but it should include, at the minimum, that members attend board meetings, they read the reports, and that they have knowledge of the organization’s finances. New York says that “directors must act in “good faith” using the “degree of diligence, care and skill” which prudent people would use in similar positions and under similar circumstances. (Remember the NRA still operates under NY law because the Board in 1992 ignored the warnings of Director and law professor Joe Olson.)

Among the item mentioned by the Charities Bureau on duty of care include a whistleblower policy, that the minutes reflect dissenting votes, that there is a clear process for major obligations, and that monthly financial reports are reviewed by board members.

I would say that Oliver North and Richard Childress were exercising the duty of care when they expressed concerns about the enormous legal billings from William Brewer III.

Duty of Loyalty

The duty of loyalty is owed to the organization meaning that directors are mandated to work in the interests of the organization and not their own self-interest. While the NRA does have a conflict of interest policy and disclosures are made, I have to wonder if it is anything more than lip service when someone like a Marion Hammer receives hundreds of thousands of dollars annually.

Charity Lawyer notes:

The fiduciary duty of loyalty of board members is the responsibility to act in the interests of the non-profit, those it serves, and those donating funds for operations, as opposed to their own self-interest…

It can also be said that board members have a duty not to act in the personal best interest of the non-profit CEO (lead staff member) where that interest conflicts with the nonprofit’s best interest. Hiring the CEO, setting the salary, and providing oversight and accountability of such CEO, is among the most important responsibilities of a non-profit board.

The duties of care and loyalty are the basics of all fiduciary responsibilities. The law recognizes what is called the “business judgment rule”. This protects board members if they exercise these two duties with diligence and prudence as courts have held.

I came across this from the major law firm IceMiller LLP with regard to the fiduciary duties when dealing with an insolvent or near insolvent corporation. While the NRA asserts it is far from insolvent, they are, however, in Chapter 11 bankruptcy proceedings.

Applying the business judgment rule, courts will ordinarily not scrutinize corporate decision-making if the decision was made through a valid exercise of the board’s business judgment. Essentially, corporate fiduciaries who act in good faith, make informed decisions, and do not personally benefit from their corporate actions can rest easier knowing their actions will not be scrutinized after-the-fact with the benefit of hindsight. The business judgment rule facilitates prudent risk-taking and forgives reasonable mistakes in judgment.

A recent interview that Michael Bane had with MidwayUSA’s Larry Potterfield brought something to mind. When Michael asked him about the NRA’s turmoil, Mr. Potterfield insisted that it was in fine shape and there wasn’t really any turmoil because that is what Wayne LaPierre assured him personally.

Think about that if you are a director and not merely a contributor like Mr. Potterfield. Would a court hold that the business judgment rule applied and that you fulfilled your fiduciary duties to make an informed decision if you merely relied on the assurances of Wayne LaPierre in the face of all the other contradictory information out there? I will get into more specifics in a moment.

Duty of Obedience

The duty of obedience means that the board has a fiduciary responsibility to ensure that the organization is abiding by its stated mission and is complying with all state and federal laws. New York goes further and includes abiding by its internal governance documents and policies. In this case, that would mean the NRA bylaws and its internal governance documents requiring board approval for major contracts such as that with Brewer, Attorneys and Counselors.

The NRA’s stated mission on its IRS Form 990 says:

Firearms safety, education, and training, and advocacy on behalf of safe and responsible gun owners.

You may remember that US District Court Judge William Campbell, Jr. allowed David Dell’Aquila’s class action lawsuit against the NRA over misuse of donor fund to continue. He did dismiss it against Wayne LaPierre and the NRA Foundation but found that the expenditures of the NRA for Wayne’s clothing and trips and Brewer’s legal fees may not have been in furtherance of the NRA’s mission. That suit is on administrative hold while the bankruptcy is still ongoing.

NRA Bankruptcy and Special Meeting

The Board of Directors is holding a called Special Meeting this coming Sunday, March 14th, in Dallas, Texas. It is widely assumed that one of the action items will be an explicit ex post facto approval of the bankruptcy filing.

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.

Judge Phillip Journey, a Kansas state judge and NRA Director, has asserted, correctly in my opinion, that the Board was kept in the dark about the plan to declare bankruptcy. The formation of the Special Litigation Committee never mentioned a planned bankruptcy as he told Stephen Gutowski of the Free Beacon.

Journey said he had voted to support the committee, but had no idea the group’s leadership and legal advisers had planned to go into bankruptcy. He disputed NRA filings that claimed board members were properly informed. Those filings were signed by embattled executive vice president Wayne LaPierre, who was not present at the meeting when the committee was discussed, according to Journey. The Kansas jurist believes the law has been violated and he has a duty to report it to the court.

“It certainly was a fraud perpetrated on the court,” Journey said. “I told them all when I got on the board, ‘Look, I’m a judge. I’m a mandatory reporter. Whatever we do, we got to be on the up and up.'” 

I believe Judge Journey not only recognized his fiduciary duty of care but his duty as a officer of the court when he filed his Motion for an Examiner. He followed President Ronald Reagan’s dictum – “trust, but verify” – when it came to assurances from LaPierre and William Brewer. He looked at the New York Attorney General’s dissolution suit and recognized that there was too much there to just pass it off as a vendetta against the NRA.

The leads me to the the US Trustee’s filing in the bankruptcy case objecting to the appointment of William Brewer and his firm as “special counsel”. For those that don’t know, the US Trustee is an officer of the court whose primary rationale is to “promote the integrity and efficiency of the bankruptcy system for the benefit of all stakeholders–debtors, creditors, and the public.” In other words, their job is to protect the process so it isn’t abused.

The US Trustee strongly objected to the appointment of Brewer, Attorneys and Counselors, as a special counsel to the NRA in the Chapter 11 bankruptcy proceedings. They assert that the services provided by Brewer do not fall within the constraints of bankruptcy law and that it has “divided loyalties and conflicts of interest.”

They go on to add:

These disqualifying conflicts are compounded by BAC’s failure to disclose them in the Application and by BAC’s failure to disclose all of its pre-petition compensation

Among the things the US Trustee asserts that Brewer did not disclose were the family relationship between Brewer and the McQueens, the allegations against the firm’s billing in two cases in which he was counsel (NYAG and Oliver North), and failure to disclose that Brewer himself was precluded from participating in any of the AckMac cases by the US District Court for Northern District of Texas. The Trustee said it shouldn’t be their responsibility to “ferret out” complete disclosures. This failure to make disclosures were grounds enough to prevent Brewer and his firm from serving as special counsel.

They detail what they call “adverse interests” against the estate. In other words, work that Brewer is doing that is not in the interest of the creditors nor in the real interests of the NRA as an organization. This is really the meat of their objection:

These adverse interests include:
a. potential claims by the Debtors’ estates against BAC for fraudulent conveyance based on allegations of billing improprieties raised by a former NRA president, a First VP, four members of the NRA’s Board of Directors, and the NYAG Action;
b. conflicted loyalties BAC may have between its own interests and those of the NRA in the NYAG Action, as well as in an action the NRA brought against its former president, Oliver North, in which Mr. North alleges he suffered retaliation from the NRA leadership when he raised concerns over BAC’s legal fees (the “Oliver North Action”);
c. conflicted loyalties BAC may have in the NYAG Action and generally between the interests of the NRA and those of Mr. LaPierre, based on BAC’s prior representations of Mr. LaPierre, and the steps Mr. LaPierre is alleged to have taken to stonewall internal inquiries regarding BAC’s fees; and
d. conflicted loyalties BAC may have because Ackerman McQueen is adverse to the Debtors in at least three lawsuits for which BAC is sought to be retained to represent the Debtors, when BAC’s named partner is married to the sister of Ackerman McQueen’s CEO.

The Board of Directors need to bear in mind that the US Trustee, despite wild accusations by Brewer and others with sweetheart deals, is independent and does not have an axe to grind. The US Trustee is neither anti-NRA nor pro-NRA but rather is pro-process and keeping it equitable for all involved.

So when doing their fiduciary duties of care, loyalty, and obedience, the Board of Directors should be asking themselves these questions.

Have I done my duty of care if all I’ve done is accept the assertions of Wayne LaPierre, William Brewer, and the Special Litigation Committee?

Am I performing my duty of loyalty to the members, the donors, the Second Amendment, and to the core values of the NRA?

Have I as a board member really overseen the actions of the CEO in the name of the organization or did I just go along?

Did I confuse my duty of obedience to the NRA with obedience and loyalty to certain individuals?

Will I be protected by the “business judgment rule” if I merely accepted the word of LaPierre and Brewer without going any further?

Finally, am I liable for a breach of fiduciary duties and what happens if I am?

Uncategorized

A Correction On NRA Bylaws

March 6, 2021 by 2 Comments

Sometime since 2019, the NRA bylaws as they relate to called Special Meetings was changed and the time for notice considerably shortened.

From Article IV, Sec. 3 (b):

Special Meetings. A special meeting of the Board of Directors may be held at any time on the call of The President, or by action of the Executive Committee, or upon demand in writing stating the object of the proposed meeting and signed by not less than a majority of the Board. Notice of the time, place and object of such special meetings shall be transmitted to each Director at least seven days before the date of holding such a meeting in person, or 72 hours before any special meeting held by means of a conference telephone or similar communications technology pursuant to subsection (f) of this section.

Thus, I stand corrected on my comments on the update to the post on NRA Special Meetings that referenced the former 30-day notice requirement. The Special Meeting being held on March 14th would be valid under the bylaws as amended. Lest you think I was informed of this by a “friend of Wayne”, it came from Rob Pincus who is not.

I do wonder when this bylaw was changed and why. I do know that it was not voted on at either of the last two Meeting of Members as I attended both of those from start to finish.

I still anticipate that the Board of Directors will be asked to approve the bankruptcy filing ex post facto as seems to be the norm when called out on something.