LEGAL FACTS

Dear Fellow Board Members: 

  

Following the recent jury verdict in New York – and in anticipation of the all-important conclusion of the proceedings in July – we write to thank each of you for your past support and to preview what comes next. As discussed below, all Board members should take solace in what we have achieved thus far in the defense of our Association. 

  

The New York Trial: The Origins and Outcomes of NYAG's Attempt to “Dissolve" the NRA. 

  

Since 2018, government officials in New York, including those at the highest levels, engaged in a direct, public, and multi-faceted attack on the NRA. This strategy included a financial blacklisting campaign against the Association, coercing banks and insurers to refuse business with the NRA.  

  

Then, during her 2018 campaign seeking to become New York Attorney General, Letitia James publicly vowed to target the NRA and its donors as criminals if elected. When James took office in 2019, she launched an “investigation” which led to the civil lawsuit wherein she sought to dissolve the Association and seize our assets for redistribution to organizations of her choice.  

  

Filed in August 2020, that lawsuit made sweeping corruption allegations which accused the NRA of persistent and ongoing “illegal activities.” It accused this Board of negligence .  .  .  and worse. Even though the NYAG acknowledged in its complaint that much of the misconduct alleged – for example, improper expenses passed through already-terminated vendors, like Ackerman McQueen and Associated Television (ATI) – had been hidden from the NRA and its Board, but James sought to punish the NRA regardless. 

  

Over the course of three years of discovery and motion practice, the NYAG’s case slowly but significantly wilted.  

  

For example, and in a major early victory for us, the trial judge dismissed the dissolution claim (“corporate death penalty”), finding that it was unsupported and unconstitutional. Whistleblowers on the NRA accounting staff gave testimony in support of the Association. And documents produced by the NRA provided compelling proof that beginning in August 2018, your Audit Committee acted promptly and properly in favor of enhanced compliance with Board policies, best practices, and the best interests of the association. 

  

Despite such setbacks for the NYAG, on the eve of trial, the NYAG doggedly insisted it would prove 16 whistleblower violations and dozens of “improper related-party” and conflict of interest transactions. In fact, during the course of the lengthy trial, James and her team of lawyers mustered evidence for fewer than half of these claims, and allegations that accounting-staff whistleblowers were mistreated vanished completely by the time the NYAG concluded its case-in-chief.   

  

The scope of the NYAG’s case was so significantly scaled back, that by the time the case went to the jury, not a single question was put to the jury regarding the how the NRA operates and manages its affairs today. Instead, the jury was asked if the individual defendants violated their obligations to the Association (they did), and whether any risks or violations occurred during a period of time that ended two years ago. Except in one area, the jury was not asked about the Board’s performance, nor asked to distinguish between conduct by executives and the NRA.   

 

To put all this in perspective and to present an accurate assessment of the case brought against the NRA, the following points are important:  

  

• The jury phase was about the past, not the present. The jury charge and verdict sheet instructed the jury to look at the period of time “between March 20, 2014, and May 2, 2022.” The jury was specifically instructed not to consider after-the-fact corrective measures by the NRA (other than in narrow situations with only retrospective relevance). When the jury was asked about the NRA’s whistleblower policy, it was instructed to look at the policy in place before January 2020 – because the NYAG agreed that its whistleblower policy from January 2020 complied with New York law. 
   

• The jury phase involved misconduct against the NRA: When the parties argued about the content of the verdict form, the NYAG emphasized that it was not seeking to hold individual directors liable and that its claims against the NRA (as opposed to the individual defendants) were remedial – not punitive. Therefore, the NYAG emphasized – and the court appeared to agree – that a jury finding should “not [be] dependent on whether or not certain acts were intentional or authorized by the NRA’s Board.”  As a result, the jury was not asked whether the Board knew about the misconduct of the individual defendants or those in league with them. The verdict sheet looked very different from ones in traditional corporate-governance disputes where directors are charged with breaching their fiduciary duties.  
    

• The jury was asked to judge the Board’s performance in one area: related-party transactions: The jury found that eight out of 10 were properly considered and ratified by the Audit Committee during the NRA’s course correction. (The remaining two are the subject of post-verdict briefing). In other words, when the jury was asked directly and specifically about whether the Board (here, the Audit Committee) did its job, the jury said yes.  
   

Ultimately, the jury concluded that there were deficiencies in how the NRA “administered” its assets under New York law (deficiencies now remedied by the NRA’s self-administered “course correction”), that there were breaches of duty by the individual defendants which included significant sums that should be repaid to the NRA by individual Defendants LaPierre and Phillips (and former employee Josh Powell who cut a deal with the NYAG before the trial commenced), and that certain forms filed by the NRA with the state of New York had been (but are not now) deficient (See Appendix A).  

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What's Next – Phase Two 

  

The jury trial in New York represented the first phase of a bifurcated proceeding that is still ongoing. Although some remedies have been adjudicated with regard to the individual defendants, no relief was sought or awarded against the NRA in the jury phase.  

 

Now, the judge (not a jury) will focus on post-trial motions (the NRA will ask the judge to set aside certain findings by the jury as a matter of law) and complete the fact finding with respect to whether any assets of the Association remain at risk (they are not).  

  

The judge set aside two weeks beginning July 15th  to hear arguments and evidence on what, if any, remedies to impose with regard to the NRA. Contrary to rumors already circulating, sanctions, fines, and penalties against the NRA are not on the table. In fact, all monetary remedies were assessed during the jury phase (and none were assessed against the NRA).  

  

Instead, the judge emphasized at a post-jury hearing held March 6, 2024, that any potential remedies are “discretionary” and that a “private remedy” might make more sense than government intervention in the NRA’s affairs. The court further indicated that the focus of the next phase is “compliance, not punishment." The judge also invited input from NRA constituents, members, and directors on what should come next. 

  

We extend the same invitation to each of you – come, hear further details, ask questions, and provide input at a meeting of the Legal Affairs Committee on March 23, 2024. This meeting will feature a briefing and Q&A with the NRA’s lead trial counsel, Bill Brewer, on this and other important related matters. Insofar as we will be discussing ongoing court cases, the conversation will be privileged and confidential.  

  

The Bottom Line 

 

From our perspective as officers, the conclusion of the jury phase of this case brings cause for renewed confidence and solidarity, not finger-pointing or recrimination. The NYAG's effort to eliminate our Association failed. The hundreds of millions of dollars in alleged corruption, which the NYAG blustered about for years and insisted went ignored by your Board, was never proved, and the NYAG’s gambit to seize control of the NRA failed.  

 

Although this has been a costly and time-consuming legal battle, given the stakes – the Attorney General for the State of New York, the state in which we still are incorporated, attempting to put us out of business -- the results are in many respects welcome and consistent with best practices. We are extremely grateful for the support of those of you who attended the trial, offered to testify, or testified. As the New York Sun editorial board wrote just last Friday, "...despite the best efforts of the Empire State to close the doors of the NRA, the verdict left the organization unscathed." 

  

Finally, we thank the Audit Committee, whose years-long corrective review and ratification efforts were directly examined and found sound by the jury. The committee members knew that their decisions would become the subject of a political prosecution by a hostile Attorney General. Rather than run for cover, they “leaned in” and acted. Even more importantly, they kept their focus on the principled path. 

  

We look forward to seeing you soon. Please call any of us anytime with questions or input. 

  

Charles Cotton 

Bob Barr 

David Coy