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Posted

This is NOT the thread to discuss the Second Amendment.

This is NOT the thread to discuss the organization's ties to any particular politician or political party.

If you wish to discuss either of the above, there's a thread for that over in the Cloak Room.

This IS the thread for discussing the case and specific allegations in a factual manner against a high profile and influential non-profit organization, as well as those individuals who are accused of fraud.

This thread is worthy on its own, because it is a major news event worthy of discussion among a group of highly regarded (yet highly educated) surly assholes.

 

New York Attorney General Moves To Dissolve The NRA After Fraud Investigation

The Attorney General of New York took action today to dissolve the National Rifle Association, following an 18-month investigation that found evidence the powerful gun rights group is "fraught with fraud and abuse."

Attorney General Letitia James claims in a lawsuit filed Thursday that she found financial misconduct in the millions of dollars, and that it contributed to a loss of more than $64 million over a three year period.

The suit alleges that top NRA executives misused charitable funds for personal gain, awarded contracts to friends and family members, and provided contracts to former employees to ensure loyalty.

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Posted
  On 8/6/2020 at 4:47 PM, tx 3 putt said:

LaPierre and his wife need to be in prison 

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I've never worked in the non-profit world and, therefore, don't entirely understand how contracts are approved. The story says there was a "post-employment contract" with him that was not approved by the Board. How exactly does that type of thing happen? Are non-profit boards typically that lax and hands off? Aren't they supposed to review contracts as part of their obligation?

  Quote

 

"LaPierre, who also serves as CEO, has held the top position at the organization for nearly 30 years. In the Attorney General's lawsuit he is accused of using charitable funds for personal gain, including a post-employment contract valued at more than $17 million that was not approved by the NRA's board of directors.

The lawsuit also claims that LaPierre received more than $1.2 million in expense reimbursements over four years, including gifts for friends, travel expenses and memberships at golf clubs and hotels.

And it alleges that he spent hundreds of thousands of dollars on private plane trips, including for extended family when he was not present; traveled to Africa with his wife on a safari gifted by an NRA vendor, and spent more than $3.6 million on luxury black car services and travel consultants in the last two years.

Those that attempted to blow the whistle on this behavior, the suit claims, were retaliated against by LaPierre."

 

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Posted

It seems that this firm could also end up in hot water.

  Quote

The New York Attorney General said that Powell approved of a $5 million consulting contract with the firm McKenna & Associates. That firm, in turn, hired Powell's wife and passed her $30,000 monthly consulting fee through the NRA.

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Posted

A year-old story:

An Internal Memo Raises New Questions About Self-Dealing at the N.R.A.
By Mike Spies

May 7, 2019

In July of 2018, as the National Rifle Association was in the throes of a financial crisis, a half-dozen of the organization’s accountants produced a document detailing what they believed to be the most egregious issues that needed to be addressed by its audit committee—a small group of N.R.A. board members tasked with conducting fiscal oversight.

The accountants’ one-and-a-half-page memo, titled “List of Top Concerns for the Audit Committee,” details a range of questionable transactions and business arrangements involving several top N.R.A. venders and executives. It offers new details on the financial mismanagement occurring inside the organization, which had been laid out in an earlier, handwritten memo, dated to July 12th and compiled by Emily Cummins, who was then the N.R.A.’s managing director of tax and risk management.

Last month, The Trace and The New Yorker reported on the July 12th memo’s damaging contents, along with a broad array of other revelations culled from public and internal records. Since then, Letitia James, the attorney general of New York, where the N.R.A. is chartered, has opened an investigation into the organization’s tax-exempt status.

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Posted (edited)
  On 8/6/2020 at 4:57 PM, bolverk said:

I've never worked in the non-profit world and, therefore, don't entirely understand how contracts are approved. The story says there was a "post-employment contract" with him that was not approved by the Board. How exactly does that type of thing happen? Are non-profit boards typically that lax and hands off? Aren't they supposed to review contracts as part of their obligation?

 

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As a general matter of corporate governance (not non-profit-specific), the Board of Directors is the real governing body of the corporation.  Some of its powers it delegates to officers, such as the CEO, that it appoints.  For example, it might grant the CEO power to enter into transactions with a value under X in the ordinary course of business, or similar.

Ordinarily, every aspect of CEO compensation is handled by the Board of Directors.  I suppose they could delegate CEO compensation to the CFO, or to the CEO him/herself, but that would likely be a breach of fiduciary duty all by itself.

tl;dr hell no it's not normal for any corporation to give the CEO power to fix his own compensation.

Edited by TwiceHorn
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Posted
  On 8/6/2020 at 5:04 PM, Pato del Muerto said:

Why go after the entire organization instead of just the individuals who committed fraud?  Or is my answer in the other thread?

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I think it's symbolic only.  Which basically means theatrical, ie grandstanding.

NRA can just incorporate somewhere else.

Pursuing the individuals and the tax exemption (at least for NY state purposes) is far more meaningful.

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Posted
  On 8/6/2020 at 5:14 PM, TwiceHorn said:

As a general matter of corporate governance (not non-profit-specific), the Board of Directors is the real governing body of the corporation.  Some of its powers it delegates to officers, such as the CEO, that it appoints.  For example, it might grant the CEO power to enter into transactions with a value under X in the ordinary course of business, or similar.

Ordinarily, every aspect of CEO compensation is handled by the Board of Directors.  I suppose they could delegate CEO compensation to the CFO, or to the CEO him/herself, but that would likely be a breach of fiduciary duty all by itself.

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Thanks. When I first read the article, the statement about a "post-employment contract" with La Pierre made me think he was retired. But there's also the issue of him still being CEO. What's up with that?

Posted

Taking the politics and this particular org out of the equation it does seem like it would be more appropriate to pursue individuals rather than an org.  That said if you are going to pursue ending an org with some deeper motive to rid it of its power you better be pretty mindful of the notion of "better the devil you know"

Posted

https://washingtonbabylon.com/exclusive-did-the-head-of-the-nra-have-an-intimate-relationship-with-a-russian-spy-and-have-his-group-pay-her-apartment-rent/

 

 “Megan is a 21 year old from Berryville, VA. She is a senior at Radford University and is studying communications with a concentration in public relations, a minor in psychology and a second minor in political science. She is also a member of the Delta Zeta sorority, Public Relations Student Society of America (PRSSA), and the 1902 Society. While home from school she works at Costco Wholesale and interns for the gun lobby.”

Posted
  On 8/6/2020 at 5:18 PM, Surly Bevo said:

Taking the politics and this particular org out of the equation it does seem like it would be more appropriate to pursue individuals rather than an org.  That said if you are going to pursue ending an org with some deeper motive to rid it of its power you better be pretty mindful of the notion of "better the devil you know"

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I'm almost wholly ignorant on the matter of dissolving entire non-profits in cases of fraudulent activity, so I don't know how common that is. But it obviously jumps out to me, which was the primary purpose of creating this thread.

Posted
  On 8/6/2020 at 5:22 PM, bolverk said:

I'm almost wholly ignorant on the matter of dissolving entire non-profits in cases of fraudulent activity, so I don't know how common that is. But it obviously jumps out to me, which was the primary purpose of creating this thread.

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Should probably separate the corporate entity from the tax exemption, as they are legally separate.

Any corporation (or other similar legal entity such as a limited liability company/LLC) first obtains a charter from the state in which it wishes to incorporate.  Then it independently seeks tax exempt status from the IRS and any state tax entities where it is subject to taxation.

The corporation can be dissolved independently of the tax exemption and the tax exemption can be revoked independently of the corporation's existence.

It is the tax exemption that makes it a "non-profit," nothing in particular about the state of or form of corporation.  Tax exempt status does require that the corporation operate in certain ways not applicable to "for profit" corporations. https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations

Posted
  On 8/6/2020 at 5:28 PM, TwiceHorn said:

Should probably separate the corporate entity from the tax exemption, as they are legally separate.

Any corporation (or other similar legal entity such as a limited liability company/LLC) first obtains a charter from the state in which it wishes to incorporate.  Then it independently seeks tax exempt status from the IRS and any state tax entities where it is subject to taxation.

The corporation can be dissolved independently of the tax exemption and the tax exemption can be revoked independently of the corporation's existence.

It is the tax exemption that makes it a "non-profit," nothing in particular about the state of or form of corporation.  Tax exempt status does require that the corporation operate in certain ways not applicable to "for profit" corporations. https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations

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Does the NRA being a 501(c)4 instead of a (c)3 change any of that? Or does that not matter in terms of internal operations?

Posted (edited)

Also, I suppose we should make a distinction between "corporate dissolution" and "revocation of a charter."

A dissolution is usually (at least in Texas and most places) a voluntary ending of the corporation.  The debts of the corporation must be satisfied and the remaining assets distributed among the shareholders and proof of same delivered to the Secretary of State or equivalent, at which time the charter is revoked by dissolution.

The charter of a corporation can be revoked by the state (Secretary of State) involuntarily for a number of reasons, most notably failure to pay "franchise taxes."  When that happens, the debts of the corporation become personal debts of the directors and the shareholders pound sand, but have a lawsuit against the directors.

I assume that the NY AG is attempting to revoke the charter of the NRA, with whatever effects NY law specifies for that, as opposed to seeking some kind of compelled dissolution.

Edited by TwiceHorn
Posted
  On 8/6/2020 at 5:34 PM, bolverk said:

Does the NRA being a 501(c)4 instead of a (c)3 change any of that? Or does that not matter in terms of internal operations?

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I believe 501(c)(4) is a "special case" of (c)(3) that applies to organizations heavily involved in politics.  Has different rules, but the corporation and its tax exemption are still separate matters.

Posted
  On 8/6/2020 at 5:36 PM, TwiceHorn said:

Also, I suppose we should make a distinction between "corporate dissolution" and "revocation of a charter."

A dissolution is usually (at least in Texas and most places) a voluntary ending of the corporation.  The debts of the corporation must be satisfied and the remaining assets distributed among the shareholders and proof of same delivered to the Secretary of State or equivalent, at which time the charter is revoked by dissolution.

The charter of a corporation can be revoked by the state (Secretary of State) involuntarily for a number of reasons, most notably failure to pay "franchise taxes."  When that happens, the debts of the corporation become personal debts of the directors and the shareholders pound sand, but have a lawsuit against the directors.

I assume that the NY AG is attempting to revoke the charter of the NRA, with whatever effects NY law specifies for that, as opposed to seeking some kind of compelled dissolution.

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Further to this, NY state calls both voluntary and involuntary procedures to end a corporation "dissolution."  This appears to be the relevant provision for the AG. https://www.nysenate.gov/legislation/laws/BSC/1101

Texas calls voluntary ending "winding up," and involuntary ending "termination."

Posted
  On 8/6/2020 at 4:58 PM, crash_davis said:

And here i was thinking LaPierre was an idiot. From the pic of his sidepiece, seems like he has his priorities straight.

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Yeah, I'm happy to have him work for my non-profit. He seems like a real go-getter with upper management written all over him.

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Posted

Non-profits that exist mainly to enrich their leaders should lose their non-profit status.  The NRA is hemorrhaging money and in the red, but it was still going to give LaPierre 17 million dollars as a retirement gift.  That's well beyond "a few bad apples".

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Posted
  On 8/6/2020 at 8:05 PM, kevwun said:

Non-profits that exist mainly to enrich their leaders should lose their non-profit status.  The NRA is hemorrhaging money and in the red, but it was still going to give LaPierre 17 million dollars as a retirement gift.  That's well beyond "a few bad apples".

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And they most likely will (misleading headline is misleading).  They would just strip them of their 501c(3) status. The irony here is getting rid of the extravagant fools that are using people's  money to enrich themselves rather than stay on mission may actually end up making the NRA stronger as a lobbying force than it is now.

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Posted
  On 8/6/2020 at 8:08 PM, BabaYaga said:

And they most likely will (misleading headline is misleading).  They would just strip them of their 501c(3) status. The irony here is getting rid of the extravagant fools that are using people's  money to enrich themselves rather than stay on mission may actually end up making the NRA stronger as a lobbying force than it is now.

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What's misleading about the headline?

Direct quote:

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"The NRA's influence has been so powerful that the organization went unchecked for decades while top executives funneled millions into their own pockets," James said in a statement. "The NRA is fraught with fraud and abuse, which is why, today, we seek to dissolve the NRA, because no organization is above the law."

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Posted
  On 8/6/2020 at 5:16 PM, TwiceHorn said:

I think it's symbolic only.  Which basically means theatrical, ie grandstanding.

NRA can just incorporate somewhere else.

Pursuing the individuals and the tax exemption (at least for NY state purposes) is far more meaningful.

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Posted (edited)
  On 8/6/2020 at 10:11 PM, DanRydell said:

 

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No doubt "winding up" the NRA as a NY corporation is going to be a pain in the ass for the NRA.  And probably harmful to some of its creditors and some innocent people.  The dissolution process is going to force the winding up of the operations of the NY corporation, assuming that remedy is granted.

But, don't kid yourself.  The NRA can form another corporation wherever (outside NY anyway) it wants, whenever it wants.  Assuming that it can survive the ignominy here and get capitalized again.

They won't immediately "disappear" as a NY corporation, but they can most certainly re-charter in another state and commence operations otherwise unrelated to the dissolving NY corporation.

Edited by TwiceHorn
Posted

If this starts the move to dissolve any organization ripe with corruption, then fucking great!!!

Don't stop there.

Posted
  On 8/6/2020 at 10:21 PM, slorch said:

If this starts the move to dissolve any organization ripe with corruption, then fucking great!!!

Don't stop there.

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Most corporations laws in most states have some sort of provision for this, but it's un- or under-used.  Probably because it's ultimately kind of a clumsy, and possibly extremely unfair to innocent parties, way of punishing wrongdoers.

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