New York Attorney General Letitia James filed a lawsuit in New York state court against the National Rifle Association and four top executives. The complaint charges the executives with diversion of millions of dollars away from the charitable mission of the organization for personal use by senior leadership, awarding contracts to the financial gain of close associates and family, and appearing to dole out lucrative no-show contracts to former employees in order to buy their silence and continued loyalty. Because of the pervasive nature of the corruption of the organization, the complaint seeks to dissolve the National Rifle Association entirely for abusing its status as a non-profit entity. Free Speech For People applauds the New York Attorney General for taking this important action.

Factual background

The National Rifle Association of America was founded in 1871. On November 20, 1871, the state of New York issued the NRA a corporate charter as a domestic not-for-profit corporation, which it retains today.

The complaint alleges that, rather than using its charitable assets in a way that serves the interests of NRA membership and that advance the organization’s charitable mission, the NRA instead fostered a culture of non-compliance and disregard for internal controls that led to the waste and loss of millions in assets and contributed to the NRA reaching its current deteriorated financial state. As the Attorney General summarizes:

The NRA’s internal policies were repeatedly not followed and were even blatantly ignored by senior leaders. Furthermore, the NRA board’s audit committee was negligent in its duty to ensure appropriate, competent, and judicious stewardship of assets by NRA leadership. Specifically, the committee failed to assure standard fiscal controls, failed to respond adequately to whistleblowers, affirmatively took steps to conceal the nature and scope of whistleblower concerns from external auditors, and failed to review potential conflicts of interest for employees.

The Attorney General also specifically names four top executives who “instituted a culture of self-dealing, mismanagement, and negligent oversight at the NRA that was illegal, oppressive, and fraudulent . . . [and] overrode and evaded internal controls to allow themselves, their families, favored board members, employees, and vendors to benefit through reimbursed expenses, related party transactions, excess compensation, side deals, and waste of charitable assets without regard to the NRA’s best interests.”

Legal analysis

The complaint claims that the four executives committed breach of fiduciary duty and violated the duties of charitable trustees. But more than that, it seeks to dissolve the NRA itself.

The attorney general’s authority to seek revocation of a nonprofit corporation’s charter is a civil remedy that traces back to English common law. In New York state, this power has been assigned to the attorney general by statute. The attorney general may sue “to annul the corporate existence or dissolve a corporation that has acted beyond its capacity or power.” In particular, she may do this when the nonprofit corporation “has exceeded the authority conferred upon it by law, or has violated any provision of law whereby it has forfeited its charter, or carried on, conducted or transacted its business in a persistently fraudulent or illegal manner, or by the abuse of its powers contrary to public policy of the state has become liable to be dissolved,” or if “[t]he directors or members in control of the corporation have looted or wasted the corporate assets, have perpetuated the corporation solely for their personal benefit, or have otherwise acted in an illegal, oppressive or fraudulent manner.”

This remedy is used sparingly, but it hardly unusual; the previous Attorney General successfully resolved dissolution proceedings against The Donald J. Trump Foundation for transacting business illegally for years, including the extensive misuse of charitable assets and self-dealing. Other, lesser-known non-profit corporations have repeatedly been dissolved under this provision over the past few decades.

Next steps

The case has been filed in state trial court in Manhattan. The NRA and the individual defendants will have an opportunity to respond.

If you stand with the New York Attorney General on this critical matter, sign our petition here.