Tim Dickinson and Andy Kroll at Rolling Stone have done a deep dive into the infighting within the NRA that resulted in the ouster of Oliver North as president and the multiple investigations and lawsuits now underway. At bottom is the familiar story of top executives (such as CEO Wayne LaPierre), contractors (such as its public relations firm Ackerman McQueen and outside counsel William Brewer), and board members (such as president Oliver North) of a big tax-exempt organization abusing their tax-exempt status by living high off the hog at the expense of their members and taxpayers.
Here is just a glimpse of the complex mess.
The Wall Street Journal reports that North had previously blown the whistle to the NRA board, alleging that LaPierre purchased more than $200,000 in clothing he’d billed to “a vendor.” (“Many of the issues raised by Col. North have been the subject of review and investigation by the NRA since early last year,” NRA lawyer Brewer said in a statement. “In our view, the items involving Mr. LaPierre may reflect a misinformed view of his and the NRA’s commitment to good governance.”) In addition, the Journal has reported allegations that LaPierre billed more than $240,000 in travel, to places like Italy and the Bahamas, to an Ackerman McQueen credit card.
But LaPierre’s natty suits and luxury travel habits may be just the tip of a much larger iceberg. A recent joint investigation published by the New Yorker and The Trace, drawing on internal documents, tax records and interviews, reported that “a small group of NRA executives, contractors and vendors has extracted hundreds of millions of dollars from the nonprofit’s budget, through gratuitous payments, sweetheart deals, and opaque financial arrangements.” The exposé quotes former IRS director Marc Owens saying, “The litany of red flags is just extraordinary.”
Even as executives have gotten rich, the NRA’s finances have descended into a precarious state. An analysis of the group’s financial records for the last 11 years by Ohio State professor Brian Mittendorf found that the NRA owed more money than it had available to spend in seven of those years. The Trace reported that the group had nearly exhausted a $25-million credit line, according to a 2017 audit. Last year, NRA leadership froze its employees’ pensions.
There has been a flurry of lawsuits and countersuits and allegations of threats and extortions.
A bitter feud between the NRA and its PR firm burst into public view in mid-April, when the NRA sued Ackerman McQueen (AMc) in state court in Virginia for having “flagrantly disregarded its contractual obligations.”
The lawsuit came after years of growing tension inside the NRA about its dependence on AMc, a conflict that came to a head after AMc refused to cooperate in the audit the NRA launched to get ahead of a potential Letitia James investigation.
The suit alleges that AMc’s opaque billing practices bled millions from the NRA without proper documentation. The NRA hits AMc for a “lack of transparency” in annual budgets and raises “concerns that AMc was invoicing the NRA for the entire salaries” of personnel who worked for “non-NRA clients.”
The fight between the NRA and Ackerman McQueen has spilled over into a proxy battle between LaPierre and North.
Chief among the NRA’s complaints is that North has been paid millions by Ackerman McQueen for an NRATV documentary series American Heroes that North has largely failed to deliver on. North, who was previously paid by Fox News, was pulled away from that gig with the promise of a rich payday at Ackerman McQueen. But AMc — in an odd fit of opacity — refused to reveal to the NRA exactly what North’s financial relationship was with the firm, according the the NRA’s lawsuit, despite the NRA ultimately footing the bill.
Long story short: The NRA didn’t know how much it was paying its own president.
This dispute over North’s pay presaged the power struggle last week at the NRA convention. On April 25th, LaPierre wrote a letter to the NRA’s board warning that North and Ackerman McQueen were trying to oust him. LaPierre wrote that Ackerman was threatening to reveal “a devastating account of our financial status” as well as a litany of misbehavior by NRA officials. According to LaPierre, North used “extortionist” tactics, offering to keep those explosive claims under wraps if LaPierre stepped down and accepted a plush retirement package. (Messages left for North seeking his side of the story have not been returned.)
The biggest threat to the NRA is that New York attorney general Letitia James has launched an investigation into whether its practices justify revoking its nonprofit status, a move that would pose an existential threat to the organization. Tax-exempt provisions in the tax code fall under various categories and can be confusing to lay people. Philip Hackney, an attorney who has worked with the IRS on tax-exemption issues, explains what loss of nonprofit status would mean for the organization like the NRA which is chartered under the 501(c)(4) provision.
There is no charitable contribution deduction for paying NRA membership dues or donating to the social welfare organization.
What does tax-exemption do for the NRA then? Just like a charity, it generally doesn’t pay taxes on the money it raises or earns.
In exchange for that special status, the NRA must benefit the public according to a very broad definition. Advocacy and education, including about gun safety and gun ownership qualifies. The NRA must also submit mandatory paperwork to the IRS every year.
There are a few things the NRA can’t do as a nonprofit, too. It can’t primarily benefit private individuals through excessive compensation or companies rather than the public. It can’t make engaging in politics its main purpose. And it can’t break laws, including campaign finance laws.
North’s vague allegations could point to two primary matters that could run afoul of federal tax law.
First, instead of being run to advance NRA missions like to “defend and foster the Second Amendment rights of all law-abiding Americans,” he asserts that the group mainly enriches NRA executives and boosts the bottom line of Ackerman McQueen, an advertising company that runs the NRA TV video channel. The second is admittedly odd given that North was paid by Ackerman McQueen through a contractual relationship.
Second, perhaps North is raising concerns related to media reports of allegations that the NRA illegally funneled millions of dollars in Russian money to Donald Trump’s 2016 presidential campaign.
Even when nonprofit regulatory authorities detect improprieties, they try to avoid shuttering tax-exempt organizations. They recognize that most people who belong to and support those groups had nothing to do with the wrongdoing. Where possible, they punish wrongdoers without jeopardizing a nonprofit’s viability.
As they say, grifters gotta grift.
This is a good example of what happens when thieves fall out.