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Nonprofit Law Prof Blog

NRA Chief Executive Admits Private Inurement, Agrees to Testify Against LaPierre

By nonprofitlawprof

I swear there is more seniority amongst lieutenants than honor among thieves.  And everybody knows what they say about  seniority amongst lieutenants.  Joshua Powell, former National Rifle Association (NRA) Executive Director of Operations and Chief of Staff to recently resigned NRA Director Wayne LaPierre, entered a settlement agreement last Friday admitting to private inurement and excess benefit transactions.  He also agreed to make a $100,000 restitution payment.  The trial against Wayne and others starts today despite Wayne’s resignation.  From the AG’s press release:

New York Attorney General Letitia James today announced that Joshua Powell, former National Rifle Association (NRA) Executive Director of Operations and Chief of Staff to recently resigned NRA Executive Vice President Wayne LaPierre, has reached a $100,000 agreement with her office. Powell was one of five defendants in the lawsuit brought by the Office of the Attorney General (OAG) against the NRA and senior management in August 2020. As part of the agreement, Powell has admitted to OAG’s claims of wrongdoing in its lawsuit. The trial of the claims against the NRA and the remaining defendants will begin on Monday, January 8. 

“Joshua Powell’s admission of wrongdoing and Wayne LaPierre’s resignation confirm what we have alleged for years: the NRA and its senior leaders are financially corrupt,” said Attorney General James. “More than three years ago, my office sued the NRA and its senior management for financial abuse and mismanagement. These are important victories in our case, and we look forward to ensuring the NRA and the defendants face justice for their actions.”

In paragraphs 6 and 10, once loyal Josh promised never to dispute his stipulated guilt — and by strong implication the guilt of those around him — and to testify at the still ongoing trial.  Against Wayne, no doubt, who resigned on the same day Joshua rolled.  Rats don’t start jumping until the ship’s bow is nearly perpendicular to the ocean, is all I can say.  Anyway, the $100,000 is to be held in trust by the AG for the benefit of NRA according to the agreement.  Here are the essential provisions of the settlement agreement:

            Stipulated Legal Conclusions

  1. Powell, in his capacity as an officer, director and senior employee of the NRA, owed the NRA fiduciary duties of care, loyalty, and obedience. In addition, as a trustee pursuant to EPTL Section 8-1.4 because he administered property for charitable purposes in the State of New York, Powell had a duty to administer the charitable assets entrusted to his care properly.
  2. Powell admits that he breached his fiduciary duties of care, loyalty and obedience by, inter alia, using the NRA’s charitable assets for his own benefit and the benefit of his family
  3. Powell further admits that he failed to administer the charitable assets entrusted to his care properly.
  4. Powell further admits that the conduct referred to in paragraphs 2 and 3 of this section violated Sections 71S and 717 of the N-PCL and Section 8-1.4 of the EPTL and that, as, a result of such violations, he must pay restitution in the amount of $100,000to remediate the harm to the NRA.

            Stipulated Relief

  1. Pursuant to EPTL § 8-1.4(m) and N-PCL § 714, Powell hereby accepts a permanent bar from service as an officer, director or trustee or in any position where he has any fiduciary responsibilities for any not-for-profit or charitable organization incorporated, registered, operating or soliciting contributions in New York, or for any other individual or entity that holds charitable assets or solicits charitable contributions in the State of New York, including, but not limited to, responsibility for financial and/or management oversight of any New York charitable entity.
  2. Powell hereby agrees to pay restitution in the amount ofSl00,000 (the “Settlement Amount”). The Settlement Amount shall be paid to Plaintiff, who shall hold the funds in escrow for the benefit of the NRA’s charitable beneficiaries. Powell further agrees that full payment of the Settlement Amount shall be made on the date that this Stipulation is fully executed by the Settling Parties (the “Stipulation Date”), provided, however, that Plaintiff shall return the Settlement Amount to Powell in the event that this Stipulation is not so ordered by the Court. Plaintiff shall release the full amount of the Settlement Amount from escrow and transfer the funds to the NRA within 45 days of the entry of the final judgment in the above-captioned Action, unless an appeal has been filed, in which case the funds shall be released and paid to the NRA within 45 days after the exhaustion of all appeals, or as otherwise ordered by the Court.

I wonder what the effect of the settlement is on the 4958 tax liabilities.  Is Joshua precluded from disputing excise taxes by virtue of his promise to never deny or dispute his guilt?  IRC 4958 imposes a 25 and then 200% excise tax on transactions described in the stipulation.  The 200% tax can be avoided or abated by correcting the transaction within a certain period of time.  I wonder if a coerced correction qualifies.  I suppose it should if the goal is to make the charity whole again.  And does the stipulation make it almost certain that the excise tax on managers applies?  Are they practically precluded from denying their liability once it is shown they “participated?”  

darryll k. jones