District of Columbia Attorney General Karl Racine sued the NRA Foundation on Thursday, alleging that its higher-profile sister organization would loot the charity for funds.
Racine filed the suit against the NRA Foundation, a 501(c)3 charity group, the same day that New York Attorney General Letitia James sought to dissolve the NRA, a non-profit.
“The Foundation has allowed itself to be run in a manner that best suits the NRA’s financial interests rather than the Foundation’s charitable purposes,” Racine wrote in the lawsuit.
When the NRA’s well-documented and extravagant spending on its executives, including Ermenegildo Zegna suits and private jet travel, caught up with it, the gun group’s executives began to “raid” the NRA Foundation to keep the money flowing, Racine alleged.
“In recent years, the NRA began to experience cash flow problems,” the lawsuit reads. “In order to address its cash flow problems and maintain the lavish expenses of its Executive Director, officers, and ‘consultants,’ the NRA used its control over the Foundation to raid the Foundation’s funds.”
Racine cites a $5 million loan that the Foundation gave the NRA in November 2017, after the gun lobby asked for the cash.
The Foundation stipulated repayment after three months, at an interest rate of seven percent.
But that didn’t happen, Racine alleged.
Instead, the Foundation agreed to double the repayment term of the loan, with the proviso that the NRA only had to service the interest payments, not the underlying loan amount.
Overseeing all this was the Foundation’s investment committee. But, Racine alleged, many of the people on the investment committee were the same as those managing — and profiting off of — the NRA itself.
“Notwithstanding the stated purpose, the funds were intermingled into the NRA’s general financial accounts and neither the NRA nor the Foundation tracked how the funds were used,” the lawsuit reads. “The Foundation Investment Committee did not establish oversight of the funds nor ensure they were being used for their stated purpose.”
The NRA paid back the first $5 million loan in March 2018, but, three months later, asked for another on the same terms, Racine alleged.
The Foundation agreed, but, Racine said, soon learned that an unnamed, “large national bank” was holding the NRA in default on an unrelated loan.
To solve this budding Gordian knot of lending, the NRA purportedly demanded that the Foundation give it another year to repay the loan, and also agree that the bank loan should take precedence in repayment.
That decision, Racine argued, “greatly benefitted the NRA, with no ascertainable benefit to the Foundation.”
Racine also alleged that its management structure effectively allowed the NRA to loot the Foundation.
The NRA provided services to run the Foundation’s day-to-day affairs, receiving a fee from the Foundation as compensation.
The lawsuit claims that in 2018, the NRA nearly doubled the fee it charged the Foundation, demanding an immediate “catch-up fee” of $4 million on top of an increase of $5.8 million.
When part of the Foundation’s investment committee began to ask questions like “how the fees were determined, including who the employees were that supposedly worked for the Foundation and what benefit they added to the Foundation,” NRA Executive Vice President Wayne LaPierre showed up at the next scheduled committee meeting, in January 2019.
“[LaPierre] and other NRA members told the Investment Committee that it was not a good time to hire any sort of outside auditor or conduct any of the requested research,” Racine alleged. “After that meeting, the Foundation Board took no formal action to investigate the management fees.”
Read the filing: