From: "Daniels, Stephanie" <
[email protected]>
Date: February 23, 2024 at 7:01:54 PM MST
To: "Daniels, Stephanie" <
[email protected]>
Subject: A Message from Charles Cotton Regarding New York Verdict
Dear Board of Directors,
A jury verdict was rendered in the NYAG’s lawsuit against the NRA and individual defendants: former EVP Wayne LaPierre; General Counsel and Secretary John Frazer; and former CFO Wilson Phillips.
The verdict confirms what the NRA has contended all along – that it was victimized by certain former vendors and “insiders” who abused the trust placed in them by the Association. And although the jury found inaccuracies in the NRA’s past government filings, Mr. Frazer (who signed many of the documents in question) was not deemed to have damaged the NRA, nor were the errors in question significant enough to merit his removal from the Association.
The NRA’s case focused on our compliance efforts, and the organization’s commitment to good governance following summer 2018 whistleblower complaints. The allegations by the NYAG that survived to the jury-verdict stage were starkly diminished relative to their complaint: as jury deliberations approached, the government was forced to drop half of its whistleblower allegations for lack of evidence, along with a number of conflict-of-interest claims.
As we know, the NRA Board led an investigation into spending allegations and determined that certain individuals participated in transactions that ran afoul of NRA policies and procedures. Trial testimony confirmed the NRA Board was unaware of the arrangements in question. The board moved quickly to implement a “course correction” and terminated several vendors who abused the Association. The NRA cancelled consulting arrangements with certain board members, adopted a new whistleblower policy in 2020, and recently hired a new compliance manager.
During a 24-day jury trial, the NRA established the NYAG cannot prove self-dealing or bad faith by the NRA Board of Directors. As importantly, the NRA established that it adopted new policies and accounting controls, displaced vendors and insiders who abused the Association, and accepted reparations for costs determined to be excess benefits. Most of these corrective measures – part of an internal investigation ignited by the NRA Board – were adopted before the NYAG filed her lawsuit.
The NRA’s commitment to good governance today was on full display during the trial proceedings.
Of particular importance, the six-person jury found that of 16 related-party transactions of which the NRA was accused, the NRA Audit Committee was found to have properly reviewed and ratified 14 of them. However, the jury rendered a verdict that found the NRA failed to properly administer the organization and its assets, and that it violated whistleblower protections.
With respect to other individual defendants, the jury found Mr. LaPierre and Mr. Phillips violated their statutory obligations to discharge the duties of their position in good faith and with care. The jury found the monetary harm suffered by the NRA for each individual was $5.4 million and $2 million, respectively. (Defendant Powell reached a settlement with the NYAG prior to the start of the jury proceedings.)
The jury decision paves the way for the second phase of the proceedings – a bench trial before Justice Joel M. Cohen where the judge is expected to rule on any final remedies against defendants.
In the final analysis, individual defendants could face financial awards payable to the NRA. No money damages will be awarded against the Association.
Although it was not a matter before the jury, the NRA effectively demonstrated that the NYAG’s lawsuit was motivated by political animus. As a candidate for NYAG in summer 2018, Letitia James called the NRA a “terrorist organization” and “criminal enterprise.” She vowed to pursue the NRA if elected, and quickly did so upon taking office in 2019.
Our fight is not over. Against the backdrop of the NYAG trial, the NRA is preparing for another case involving New York government officials. On March 18, 2024, the U.S. Supreme Court will hear arguments in the NRA’s First Amendment case against former financial regulator Maria T. Vullo.
I am extremely optimistic about that case and the next phase of the NYAG proceedings. Let’s not forget that when the NYAG began this pursuit, the goal was to shut us down forever. We have emerged through phase one with limited findings against the Association for long past events, and a [highlight=yellow]demonstrated record of good governance[/highlight].
We will keep fighting for our members – and defending the freedoms to which they are entitled. Thank you in advance for your support.
Charles
