N.R.A. to Overhaul Charity It’s Accused of Using as a ‘Piggy Bank’

The National Rifle Association reached a settlement on Wednesday with the District of Columbia’s attorney general, agreeing to make governance changes that would curtail its use of millions of dollars raised by an affiliated charity accused of mishandling tax-deductible donations.

For years, the N.R.A. made liberal use of the foundation’s coffers to prop up its own dwindling fortunes. The attorney general’s office said the practice illegally drew on charitable donations, which are not supposed to be used for political activity.

The N.R.A., in a statement, portrayed the settlement as a victory, saying it had “proved that all funds” taken from its foundation “were applied exclusively in furtherance of its charitable programs and that there was no misuse” of resources.

Charles Cotton, the N.R.A.’s president, called the lawsuit a “political attack” and said his group had been vindicated, while the group’s lead outside lawyer, William A. Brewer III, called it a “politically motivated action.”

But Brian L. Schwalb, the attorney general, characterized the settlement much differently.

“Caving to pressure from the N.R.A., the foundation diverted millions of dollars to the N.R.A. in grants and risky loans,” he said in his own statement, adding that the N.R.A. had used its foundation “as an unchecked piggy bank.”

The settlement is one more legal shoe to drop for the embattled gun rights group. In February, a Manhattan jury found Wayne LaPierre, the longtime leader of the N.R.A., liable for misspending $5.4 million of the organization’s money. Mr. LaPierre announced his resignation on the eve of the six-week corruption trial, which detailed his lavish personal expenses, including chartered flights for his relatives, excursions on luxury yachts and nearly $275,000 in Zegna suits.

That case was brought by Letitia James, the attorney general of New York. The N.R.A. is chartered there, while its foundation is based in Washington. A judge will weigh further action during a second phase of the Manhattan proceeding.

The N.R.A. has also brought its own litigation in federal court against New York State. Last month, the U.S. Supreme Court appeared sympathetic to the group’s arguments that a state official had violated its rights by trying to encourage an N.R.A. boycott after a school shooting.

But dissent has been rising within the N.R.A.’s own ranks about its management and spending practices in recent years as scandals have proliferated. Fierce critics have included Oliver North, its former president, and a few of its former board members.

Mr. Schwalb is only the second elected attorney general of the District of Columbia; the N.R.A. case was brought by his predecessor, Karl Racine, who filed a lawsuit in 2020. The office lacks the authority to impose financial penalties, so the terms of the settlement agreement are limited.

The N.R.A. said in the language of the agreement that it was entering into it “solely for the purpose of settlement,” admitting “no liability” and denying “the district’s allegations.”

But the sides agreed to a number of steps that would create paper trails tracking how money is spent within the organizations. The N.R.A. Foundation will require the N.R.A. to submit grant applications before it receives charitable funds and create a reporting process for how the funds are used. There are new rules for loans as well as sharing resources: After originally promising to provide its foundation with free office space and staff when it was created in 1991, the N.R.A. eventually began charging it more than $6 million a year. A written lease agreement is now required.

The foundation will conduct nonprofit training for board members and officers, create an audit committee and establish new policies on conflicts of interest. The N.R.A. also agreed to report any changes to the attorney general’s office during the duration of the settlement, which runs through 2026.

The development comes as the N.R.A. faces an array of financial challenges. The group has been hobbled by a half-decade of corruption allegations and soaring legal fees. Dues-paying members plummeted to 4.2 million from nearly six million around five years ago, and revenue is down 44 percent since 2016, according to internal audits.

In 2019, The New York Times reported that the N.R.A. had drawn more than $200 million out of its foundation over a decade. But after the Washington lawsuit was filed the next year, the group appeared to start changing its practices as part of broader efforts to clean up its governance in the wake of regulatory scrutiny. In 2022, $16 million flowed to the N.R.A. from its foundation, roughly half of what it had taken out three years earlier, according to tax filings.

No detailed accounting has been made public of how this money is being spent, though some of the N.R.A.’s work qualifies as charitable. In addition to being a political advocacy group, the N.R.A. undertakes activities related to gun safety training and marksmanship that would be considered a legitimate use of foundation funds.

“Donors are entitled to know that their charitable contributions will be used in furtherance of a nonprofit organization’s stated charitable mission,” Mr. Schwalb said, adding that his office had a “longstanding commitment to safeguarding donors’ money.”