Special Litigation Committee

Before dawn this morning an email went out to the NRA Board of Directors from NRA President Bob Barr on behalf of the Special Litigation Committee. It dealt with the six areas that Judge Cohen delineated in his interim decision.

Before getting into what was sent out, two realities need to be mentioned. First, the only reason this was sent out to the Board is because Buz Mills and Rocky Marshall submitted a letter to Judge Cohen on Friday, August 15th, that noted the leaders of the NRA who have “not accepted responsibility” for the problems, i.e., Bob Barr, Charles Cotton, and David Coy, do not speak for the rest of the NRA and especially the remaining elected leadership. Second, these three comprise the bulk of the Special Litigation Committee. The SLC has outlived its purpose as the conflict of interest has been resolved. That is Wayne has resigned and John Frazer is no longer the General Counsel. As such, the SLC needs to be dissolved and that was actually called for by Buz and Rocky.

The email from the Special Litigation Committee is below. Beyond the fact that these guys cannot count, I would wager house money that the bulk of the document was written by someone with Brewer, Attorneys and Counselors, and not Messrs Barr, Cotton, and Coy.

—– Forwarded Message —–

From: Daniels, Stephanie <sdaniels@nrahq.org>

To: Daniels, Stephanie <sdaniels@nrahq.org>

Sent: Monday, August 19, 2024 at 04:53:05 AM EDT

Subject: Special Litigation Committee Update on NYAG Consent-Judgment Negotiations

TO:        NRA Board of Directors and Executive Council

Please see the following message from NRA President Bob Barr.

Stephanie

Stephanie Daniels

Assistant NRA Secretary

Office of the Secretary

National Rifle Association of America

Phone: 703-267-1052

Fax: 703-267-3909

E-mail: sdaniels@nrahq.org

____________________________________________________________________________________________________________________________________- 

Fellow Board and Executive Council Members:

As you know, when New York Judge Cohen denied the NYAG’s request for a compliance monitor on July 29^th, he directed the parties to confer on a consent judgment (a settlement to which the parties have reached agreement and is then adopted and ordered by the court). In his oral ruling from the bench on July 29^th,  Judge Cohen requested that the parties address six areas of concern.  This has been the task on which the Special Litigation Committee (SLC) has been fully and constantly engaged, in conjunction with our outside counsel and with input from numerous NRA stakeholders, including other officers.

The SLC considers it is in the NRA’s best interest to act quickly on Judge Cohen’s recommendations, but not without essential and timely input from key NRA stakeholders regarding reforms the NRA should consider and ultimately adopt.  As noted in my most recent update last Friday, our Legal Affairs Committee convened at NRA headquarters on August 10^th in a meeting open to all Board members and that included a lengthy discussion of settlement options. Our outside counsel met with the NYAG’s lawyers on August 12, 2024, to get their feedback.

These settlement discussions, and the options included therein are extremely important, and all Board members should have opportunity to provide input. Changes to the governance of the Association should be “owned ” by the entire Board. 

The SLC will submit proposed settlement documents to the NYAG this week that reflect input from the Officers, various stakeholders, and the NYAG.   However, in accord with the importance of having full NRA Board input, we will make clear to attorneys for the Attorney General that our proposals are provisional, and that each item is conditioned on sign-off from a majority of the Board. 

It therefore is our intention that at our September meeting, the Board will vote for each item in the settlement package.  In the meantime, every reform the SLC proposes (with input as noted above) will be one we believe to be (i) in line with specific guidance from the Court, and (ii) in the best interests of the NRA.

Here is a summary of what we plan to propose (in line with the court’s expressed interests) :

1. Implement the Compliance Commitments.  Most of these measures can be ordered by the Court.  One of the Compliance Commitments, which would make the Audit Committee an elected “committee of the Board” under N-PCL 712 and 712-a, has generated controversy and will benefit from robust discussion at the Board meeting next month.  The NYAG takes the position that the Audit Committee and other key committees must be “committees of the Board.”

1. Expand the Board Candidacy Path.  The Court suggested that the NRA “expand, for at least three years, the path to candidacy for board elections; specifically, limiting the hegemony of the Nominating Committee for enough board cycles to cover all 76 members . . .  one option would be to mandate that, for the next three elections, at least, any proposed candidate who meets certain minimum qualifications would be on the ballot, full stop, without no need to rally for hundreds or thousands of signatures.” 

Because the NRA cannot alter the petition-signature requirements without revising bold, italicized, member-adopted Bylaw provisions, the SLC will propose to the NYAG that the Nominating Committee adopt a Director Nomination Policy, resembling those in use by major public companies, that sets forth transparent, merit-based qualifications for recruiting directors (emphasis mine).  The policy will also place an emphasis on finding “new” directors, possessing baseline objective qualifications, who did not serve on the Board between 2014-2022.   The Nominating Committee will aim to place as many new, qualified directors on the ballot each year as the available ballot slots feasibly allow.

3.    Compliance Consultant.  The Court suggests “Retaining a compliance consultant for three years to work with the NRA’s in-house Compliance Officer and staff to make recommendations to the board. The consultant would be advisory only and would provide an independent perspective to the board for implementing the Court’s directives as well as best practices.” 

The SLC will propose hiring a consultant on  a reasonable, fixed retainer to serve in an advisory role as the Court suggests.

4.    Altering Committee Leadership.  The Court suggested “changing the Audit so that it would not include people . . . at the very least not as chair or co-chair, that served on the committee during the violations found in this action,” adding that “similar decisions could be made with respect to other key committees, as well.”

President Barr is scheduled to meet Monday with the Vice Presidents to confer further on committee composition.

5.    Security for Chief Compliance Officer.  The Court suggested “creating more protections for the Compliance Officer position,” noting that “one option would be to provide that the position be for a term of three years.”

Because a three-year term for the CCO would require amending our Bylaws, and because we believe a severance agreement better protects and advances the needs of the NRA, the SLC will propose a market-standard executive severance agreement to protect Chief Compliance Officer Bob Mensinger.  The NYAG has indicated agreement with this approach.

6.    Member Referendum on Reorganizing Board.  The Court suggested “a bylaw referendum for members to consider at the next annual meeting on whether to reduce the size of the board or reorganize it to create a smaller, more focused group to oversee the key operations and finances of the organization,” noting that certain other nonprofits “have a very large advisory section and then a much smaller, tighter group that focuses on the core operational and financial aspects of the company.”

In the course of eliciting feedback for settlement discussions, the SLC heard many different ideas in this vein – a Board of Ambassadors, a Select Committee on Operations Oversight, and a smaller empowered Executive Committee.  Rather than rush into a wholesale change in the size and composition of our Board, we intend to propose that NRA members be polled on a menu of options, including those that would reduce the Board of Directors and create a non-voting Board of Advisors.

At the September Board meeting, the entire Board can vote on the  proposals made by the SLC.

It is time for our Association to heal and put the hostilities launched by and surrounding the New York litigation behind us.  That means settling with the enemy outside our gates, and coming together within. 

Thank you all for your continued service and support.

NRA-SLC

Bob Barr, President and Committee Chair

Charles Cotton, Past President and Committee Member

David Coy, Committee Member

The first item deals with the Audit Committee. What needs to be explained is the difference between a “committee of the board” and a “committee of the corporation”. A committee of the board as defined by Section 712(a) of New York Not-for-Profit Law says it “shall have the power of the board” and can bind the board by its decisions with some exceptions. The other limitation upon such a committee is its charter which in this case needs to be carefully drafted. By contrast, a committee of the corporation or standing committee as defined by Section 712(e) of New York Not-for-Profit Law does not allow it to bind the Board by its decisions. In other words, they may make a recommendation to the Board and it is up to the Board to act on it.

A current example of a committee of the board is the Executive Committee. Interestingly, the law notes that members of such a committee must be “made by at least three-quarters of the directors present at the time of the vote” provided there is a quorum. I do wonder if every member of the Executive Committee received a 75% affirmative vote at the May Board meeting.

The other “number one” or the actual second item deals with the dicta from Judge Cohen regarding the path for candidacy to the Board. He wants it relaxed for at least the next three years and had suggested candidacy should be open to anyone who met the minimum qualifications for election to the Board. The SLC is balking at this proposal and blaming the bylaws as not allowing something like this. Frankly, I think this is a specious argument as I do believe Judge Cohen has the power to force the issue. Moreover, I think a strong argument can be made that the Cabal uses the bylaws when it is to their advantage and ignores them otherwise.

The suggestion from the SLC is that the Nominating Committee adopt a policy that provides for specifying a transparent, merit-based qualifications for recruiting directors. How any such qualifications are specified is the critical issue. I am reminded of what Todd Vandermyde told me once when he was negotiating with the anti-gun Democrats in Illinois. They could write the law any which way they desired but so long as he could write the definitions he would win every time. It is the same thing here. The Cabal could draft so-called merit-based qualifications that would serve to eliminate candidates they find would challenge their status quo. If I may be blunt, I don’t trust them. Yes, as I am running for the Board, I do have a vested interest, but it is open to abuse.

The third item is not a problem and it appears the committee will go along with the judge on this.

The fourth item deals with the composition of not only the Audit Committee but other important committees of the Board. Judge Cohen was specific about the Audit Committee but went on to indicate those Board members on other important committees who allowed the problems to flourish ought to be removed from them. Obviously, this means Charles Cotton, David Coy, and others including Barr. I would hope that Bill Bachenberg and Mark Vaughn are able to make Barr see the light. If they can’t, then Judge Cohen’s hand will be forced.

If the NYAG is agreeable to a strong severance agreement in place of a three-year term for the Chief Compliance Officer, then that would be workable.

Finally, on item six, I can agree with a poll of the NRA members. However, in my opinion, an “empowered Executive Committee” as the new Board of Directors should be a non-starter. The current composition of this committee is loaded with the Old Guard, the Cabal, those who are most at fault. I have long held that a reduced Board of Directors with a Board of Advisors similar to what exists at most universities is the way to go.

I look at the last paragraph of the email and just shake my head. Of course it is time to heal the wounds to the organization caused in large part by grifting executives allowed to get away with it by directors who looked the other way and ignored their fiduciary duties. Referring to the NYAG’s Office as the “enemy outside our gates” is really trite. They seemed to be the only ones actually fighting for the rank and file membership of the NRA by forcing its cleanup. Moreover, to say the Board needs to be “coming together within” ignores the fact that it would have happened if Mr. Barr had not essentially spit on the reformers by appointing all the old Cabal members to the leadership and majority membership on the major committees. He needs to look in the mirror and look at his own culpability for divisiveness between those who want needed reform and those who are resisting reform like the segregationists of the 1950s and 60s.

If what I said above is harsh, it needed to be said. If it torpedoes any chance for the Nominating Committee to put me on the ballot, so be it. I’m running for the Board by petition regardless.