Turmoil In The NRA

BattleSwarmBlog has a fairly detailed review of the issues. An audit should bring out the story.


A great deal of institutional turmoil has been roiling the National Rifle Association as of late:

A long-simmering dispute between NRA executive vice president Wayne LaPierre and now-departing NRA president Oliver North exploded into the open Friday night, as the NRA’s Board of Directors suddenly forced to confront public accusations and counter-accusations of financial mismanagement, attempts at extortion, and unjustifiable expenditures by their primary public relations firm. By Saturday morning, it was clear who won.

This morning, at the NRA’s public meeting of members, member Richard Childress read a letter from North announcing he would not seek another term as the NRA’s president. His term ends Monday.

The NRA is currently suing their public relations firm, Ackerman McQueen, over access to documents detailing how the firm spent the NRA’s money. In recent years, NRA board members grew increasingly concerned about whether they were getting their money’s worth from their long time advertising and PR firm; according to financial documents cited in The New Yorker, the NRA paid Ackerman McQueen just under $41 million in 2017.

Further complicating the matter is that North has a contract with Ackerman McQueen to produce a television series “Oliver North’s American Heroes.” LaPierre accuses North of attempting to oust him in order to protect Ackerman McQueen.

The New Yorker piece displays an obvious disdain for gun owners and the NRA, but that doesn’t mean their central details about the nature of the relationship between the NRA and Ackerman McQueen are wrong. After noting that it is actually Ackerman McQueen that pays the salaries of high profile spokesmen Dana Loesch and Colion Noir, it goes on:

The N.R.A. and Ackerman have become so intertwined that it is difficult to tell where one ends and the other begins. Top officials and staff move freely between the two organizations; Oliver North, the former Iran-Contra operative, who now serves as the N.R.A.’s president, is paid roughly a million dollars a year through Ackerman, according to two N.R.A. sources. But this relationship, which in many ways has built the contemporary N.R.A., seems also to be largely responsible for the N.R.A.’s dire financial state. According to interviews and to documents that I obtained—federal tax forms, charity records, contracts, corporate filings, and internal communications—a small group of N.R.A. executives, contractors, and venders has extracted hundreds of millions of dollars from the nonprofit’s budget, through gratuitous payments, sweetheart deals, and opaque financial arrangements. Memos created by a senior N.R.A. employee describe a workplace distinguished by secrecy, self-dealing, and greed, whose leaders have encouraged disastrous business ventures and questionable partnerships, and have marginalized those who object. “Management has subordinated its judgment to the vendors,” the documents allege. “Trust in the top has eroded.”

One prominent longtime NRA member told me “If keeping Wayne on for another few years is the price we have to pay to get rid of Ack-Mac, it’s worth it. Wayne can be a problem, but Ack-Mac is unsurvivable. They’ve very nearly killed their host organism. Go to their homepage and look at their client list and ask yourself where this podunk ad agency gets off billing the NRA $40M/yr.”

Similar thoughts from Shall Not Be Questioned:

Wayne’s extravagance is the new story in the media after the Board members who had dealings with the PR firm were ousted. I don’t feel sorry for Wayne. He invited this on himself by doing stuff like this in the first place. Why were expenses being funneled through Ack-Mac? I can’t see any legit reason for that other than keeping them off NRA’s books. Lie with dogs and don’t be surprised when you get fleas.

But my overriding goal is getting through New York State’s assault on the NRA and excising the parasite PR firm. Everything else is small potatoes. If Wayne wants to say ten Hail Marys and agree to sin no more that’s fine.

The New Yorker piece also mentions the controversy over Carry Guard:

In 2017, visitors to the N.R.A.’s annual meeting, at a convention center in Atlanta, noted a huge banner that ran nearly the full length of the building. It was there to promote a newly launched program called Carry Guard, for members who wanted to protect themselves with firearms. The program offered military-style training, overseen by former Special Forces members, and liability insurance to cover policyholders who had shot people in self-defense. The banner featured an image of Dana Loesch, holding an insurance card and announcing, “I will never carry a gun without carrying this.” On the showroom floor was a Carry Guard virtual-reality exhibit, where participants, equipped with electronic handguns and V.R. goggles, were encouraged to fire away at an armed robber.

Ackerman had been deeply involved in developing Carry Guard, and it marketed the insurance aggressively, through e-mail campaigns and an NRATV program called “Carry Guard Daily.” The promotional literature included a guide called “Surviving the Aftermath of a Self-Defense Shooting,” which advised prospective buyers that it was important to “establish for police that you were in fear for your life and did what you felt was necessary.”

According to sources familiar with the N.R.A.’s business decisions, Carry Guard was intended to secure the organization’s long-term prosperity. The N.R.A. had spent more than fifty million dollars on the 2016 elections, mostly in support of Donald Trump, and it badly needed revenue. Brian Mittendorf, the chair of the accounting department at Ohio State University’s Fisher College of Business, has analyzed eleven years’ worth of the organization’s public financial statements, starting in 2007. In seven of those years, he told me, “the N.R.A. owed more money to others than it had at its discretion to spend.” A financial audit from 2017 revealed that it had nearly reached the limit of a twenty-five-million-dollar line of credit. Additionally, it had been forced to liquidate more than two million dollars from an investment fund, borrow almost four million from its officers’ life-insurance policies, and tap another five million from its affiliated charitable foundation.

Carry Guard pissed off a lot of longtime NRA trainers, who had gone through all the NRA teaching and certification courses, only to have Carry Guard instituted from outside as a high profile alternate program they had no input into, and which cut them out in favor of newcomers without their experience training civilians in proper gun use techniques. Ordinary members were also miffed that 1911s and revolvers were not allowed in the new Carry Guard classes. In addition, the consensus seems to be that USCCA insurance is better than Carry Guard’s insurance (plus many people were pissed off that, after Carry Guard was introduced, USCCA was disinvited from the annual NRA meeting). (There are also other programs out there; John Daub had insurance through Armed Citizens Legal Defense Network when he had his home invasion.)

Carry Guard was supposed to be a source of revenue for the NRA, but it’s turned into a black hole, and no one if sure if it’s even continuing at this point.

The New Yorker published a new piece on the NRA yesterday:

The N.R.A.’s relationship with Ackerman seems to be the most prominent example of an organizational culture that is marked by secrecy, self-dealing, and greed, and has cost the N.R.A. hundreds of millions of dollars through bloated payments, lavish deals, and opaque financial arrangements. The memo to the audit committee appears to show that the N.R.A.’s troubles stretch beyond its dealings with Ackerman. It suggests new examples of unexplained spending, weak oversight, mismanagement, and conflicts of interest among members of the N.R.A.’s senior management.

Snip.

One of the senior N.R.A. executives mentioned in the audit-committee memo is Woody Phillips, who served as the organization’s treasurer and chief financial officer for twenty-six years before retiring, in 2018. The document states, without explanation, that the N.R.A. had made “payments” to Phillips’s “significant other.” Brewer challenged the accuracy of the assertion. “Payments were not made to any ‘significant other’ of the N.R.A.’s former C.F.O.,” Brewer wrote. “The N.R.A. hired an I.T. consulting firm with links to a social friend of Mr. Phillips. That firm was interviewed and vetted by the N.R. A.’s I.T. department, and its engagement was reviewed and approved by the audit committee.”

The accountants described invoices submitted by several venders [sic] and paid by the N.R.A. as “vague and deceptive.” One questionable arrangement involved Associated Television International, a television-production company. From 1998 to 2014, A.T.I. produced a crime-reënactment [sic] show called “Crime Strike,” which featured the N.R.A.’s executive vice-president and C.E.O., Wayne LaPierre. According to the accountants, the N.R.A. paid A.T.I. “$1.8M for rental of a house” belonging to David McKenzie, A.T.I.’s president. The accountants do not say who rented the home, why the N.R.A. covered the rental at such an enormous cost, nor what, if anything, was “deceptive” about the bill.

Michael Donaldson, A.T.I.’s outside counsel, confirmed that the company sent the N.R.A. “seven invoices” concerning the house, which added up to “almost $1.8 million.” He went on, “The invoices in question were all for refurbishing episodes after completion of the original episodes of ‘Crime Strike,’ ” adding, “the invoiced amounts include not only the house but also various production-related items such as lights, props, and some crew.” Donaldson told me that A.T.I. has “stopped rendering services for the N.R.A. for some time.”

There’s more in that vein, including the people at the center of the controversies:

In addition, the memo drew attention to “senior management override of internal controls,” which led to violations of “accounts payable procedures” and “HR policy,” including “hiring of staff without HR knowledge.” It names four executives who, at the time, were receiving “reimbursement of expenses relating to apartments and living expenses beyond HR Policy Manual stipulations and on a permanent basis.” The N.R.A.’s accountants added that there was “no contract to support the reimbursement request,” which the four individuals continued to claim as a “relocation expense.” The executives named include Doug Hamlin, the N.R.A.’s executive director of publications; Eric Frohardt, the director of education and training; Joe DeBergalis, the executive director of general operations; and Josh Powell, LaPierre’s chief of staff.

Says John Richardson at No Lawyers – Only Guns and Money:

Powell is the person responsible for bringing in CarryGuard while Eric Frohardt is the former Navy SEAL whom Powell installed as director of education and training and director of training for CarryGuard. Frohardt still lives in Colorado where he owns a range and other businesses according to his LinkedIn page. It is my understanding from those who would know that Frohardt is flown in at the NRA’s expense to work 3-7 days a month. While I have the utmost respect for Frohardt’s service to the nation, 12 years as a Navy SEAL does not make one an expert in training civilians in the legal use of a firearm.

As to Josh Powell, the memo to the Audit Committee mentions his multiple conflicts of interest including the hiring of his dad to do photography for the NRA and his wife, Colleen Gallagher, was hired by a top NRA fund-raising vendor McKenna and Associates. It gets worse.

The N.R.A.’s accountants completed their memo in mid-July. Around this period, the N.R.A.’s new C.F.O., Craig Spray, had to temporarily step away from his role at the organization to deal with a health matter. Someone would need to take his place as the organization’s chief manager of financial activities. According to an internal N.R.A. communication, in July, 2018, Powell was appointed acting C.F.O. for about three weeks, placing him in charge of the accountants who documented his conflicts of interest.

I won’t get into the other issues with regard to Powell other than to say his departure from the NRA would help the organization. Placing him as the senior strategist to work with outside counsel William Brewer on New York litigation is a disaster in the making.

The fact that the New Yorker is hostile to gun rights and the NRA shouldn’t blind us to the fact that there are very real financial oversight issues that need to be addressed, and the NRA audit committee isn’t far enough away from those problems to address them. The NRA board should bring an outside audit team from one of the big five accounting forms with expertise in nonprofits to do a full, forensic audit of NRA finances going back at least five years.

There are some that claim cleaning up the NRA would offer too much succor to the gun-grabbers. But the organizational dysfunction and self-dealing is already out in the open, and is already hurting the NRA’s effectiveness (and has been for several years). If not now, when? Better to do it now, the year before a Presidential election, with Republicans holding the White House and the Senate able to block gun-grabbing initiatives, than during it.

Other than being a member, I am very far indeed from the center of NRA power. For all the grumbling over the NRA caving over bump-stocks, there’s no other organization with the size, scope and political power of the NRA to protect Second Amendment rights in America. But to do that, the NRA has to be on solid organizational and financial footing, and right now it does not appear to be on either. The NRA has to get its own house in order, this year, or expect forces hostile to it and its goals to do it for them.

Similar thoughts from Richardson:

One way or another the NRA will get its house in order. It can be done either by the Board of Directors or it will be done for them by the State of New York, the Internal Revenue Service, and other outside agencies. Far better that the changes come from within than from without. It can be controlled and managed to make the organization stronger, bigger, and more diverse.

My fear is that new officers of the NRA – Carolyn Meadows, Charles Cotton, and Willes Lee – and much of the Board are such stalwart Wayne LaPierre supporters that they will go along with the status quo (ante bellum) to the NRA’s detriment. Ignoring it is not going to make it go away and will only make matters worse. That, however, is the most probable outcome as things stand now.

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