NRA legal troubles, Trump support drain finances

Used to making news on Capitol Hill as one of the most powerful lobbying groups, the National Rifle Association is instead making waves in courtrooms, where its troubled finances and a lengthening list of legal entanglements are taking center stage.

Heading into its annual meetings this week in Indianapolis, the NRA has just sued its longtime public relations agency and finds itself snared in a legal fight with New York’s vehemently anti-gun Democrat-led government.

The gun group’s finances are also under scrutiny in the press, with hefty expenditures and softening revenue leaving the NRA running deficits for the past two years of public numbers and prompting gun control activists to anticipate a loss of clout for their nemesis.

Add the battle with New York and the money the NRA is preparing to spend to fight the state, and observers say the group is in nothing less than an existential conflict.

“They can look and say the NRA can be beaten, but it sure helps when the state of New York sucks away $30 million, doesn’t it?” said Don McDougall, an NRA instructor from California. “The NRA had no choice but to fight the state of New York, or they would have been out of business.”

The NRA said it collected $366.9 million but spent $412.8 million in 2016 as it worked hard to elect Donald Trump, showing a year-end deficit of $45.8 million.

A year later, the group reported collecting $312 million and spending $329.8 million, showing a smaller deficit of $17.8 million.

Brian Mittendorf, chairman of the Department of Accounting at Ohio State University’s Fisher College of Business, said the group hasn’t been spending like it is in turmoil.

He pointed out that the group’s financials have fluctuated in the past and both spending and revenue were up quite a bit in 2015 and 2016.

“They have been on the edge for a while,” said Mr. Mittendorf, who has closely tracked the group’s financial statements in recent years. “And by the edge, I don’t mean the edge of complete collapse. … They don’t have a huge financial cushion — they haven’t for a long time. And they’ve managed to grow despite that.”

That growth shows up particularly in the NRA’s claims of membership. Wayne LaPierre, who as the group’s executive vice president and CEO has long served as the public face of the group, boasted this week that membership rolls have swelled to almost 5.5 million — the largest in its history.

Still, the group created shock waves when it filed a lawsuit this month against Ackerman McQueen, its longtime advertising firm, which the NRA accuses of withholding documents.

The lawsuit says the NRA’s aggregate payments to the firm and Mercury Group, a subsidiary, totaled nearly $40 million annually by 2017. Now the NRA says the firm is refusing to turn over financial documents that the group says it needs to comply with its legal obligations.

Ackerman McQueen disputed the charges and called the NRA’s action “frivolous, inaccurate and intended to cause harm to the reputation of our company and the future of [a] 38-year relationship.”

Ackerman was a major force behind the iconic “I’m the NRA” campaign from the early 1980s that helped bolster the group’s image as a major political and cultural force.

More recently, it has been involved with NRATV, a streaming channel that showcases personalities such as NRA spokeswoman Dana Loesch but has faced internal questions about its long-term value.

The firm has done some “great work” over the years and “no one’s suggesting otherwise,” said Richard Feldman, a former NRA regional political director who broke with the group’s leadership in the past but remains a longtime member.

“I think the problem is that when you have an ad agency in-house, you have an immediate and constant conflict of interest,” he said. “How can you be paying an ad agency $40 million and you’re going broke?”

A person familiar with the inner workings of the group said things aren’t that gloomy. The person said that with some cost-savings measures under its belt, the NRA is poised to meet its financial expectations for the first quarter of 2019.

“If we stay on track, we’ll be in good shape ­— we’ll recover,” the person said. “We’ve been through this kind of thing before, where we went into presidential election years, general election years where we have to spend an awful lot of money, and Wayne has worked tirelessly to recoup that money and he’s doing it again.”

The NRA also has been fending off congressional scrutiny from Democrats who have suggested links to Russia during the 2016 campaign.

That scrutiny was fueled by Maria Butina, a Russian who has pleaded guilty to conspiracy to influence U.S. politics. She has admitted to trying to gain a foothold within Republican circles by becoming friendly with NRA officials.

Prosecutors have asked for an 18-month prison sentence for Butina, and a sentencing hearing is scheduled for Friday.

Coincidentally, that is the same day Mr. Trump and Vice President Mike Pence, with top NRA officials such as Mr. LaPierre and NRA President Oliver North, are scheduled to address activists at the annual “leadership forum” in Indianapolis hosted by the NRA’s legislative lobbying arm.

Mr. Trump secured the NRA’s earliest-ever presidential endorsement in 2016, and his trip to Indianapolis this week will mark his third consecutive appearance as the sitting president at the group’s annual gathering.

Some gun rights advocates have protested the administration’s ban on bump-stock-type devices. But they generally have remained loyal to the president, citing Mr. Trump’s two Supreme Court picks and his outspoken advocacy for the Second Amendment dating to the 2016 campaign.

Though Mr. Trump will undoubtedly pump up the crowd, the NRA nevertheless will continue to face the brewing battle with New York as well as a new one with Los Angeles.

The NRA sued Gov. Andrew Cuomo and the State Department of Financial Services in May, saying New York was violating the NRA’s right to free speech by discouraging banks and insurance companies from doing business with the group.

“I have very little sympathy for them. They’ve been a longtime nemesis to me,” Mr. Cuomo said last year. “If the NRA goes away, I will remember the NRA in my thoughts and prayers.”

A federal judge in November allowed the case to proceed on First Amendment grounds, and the NRA has received support from the American Civil Liberties Union.

But the state’s new attorney general, Letitia James, also has vowed to investigate the NRA’s status as a nonprofit social welfare organization, which entitles it to significant tax benefits.

The person familiar with the inner workings of the group said the NRA cut a large sum of money out of its budget heading into 2019, with no major layoffs, to help pay for legal fees to fight New York, calling it a must-win situation.

“We’ll dig out of the debt incurred in the presidential and in the ’18 election,” they said. “But if we walk away from this lawsuit or if we try to switch horses in the middle of this, or we try to do this on the cheap, the results could be catastrophic … and that does not make sense.”

On Wednesday, the NRA filed a lawsuit in federal court in California, arguing that Los Angeles is running afoul of the group’s free speech rights with an ordinance that requires city contractors to disclose their ties to the NRA.

“This is modern-day McCarthyism, and my clients are confident no judge will let it stand,” said Chuck Michel, lead attorney for the NRA in the case.

A spokesman for the office of Los Angeles City Attorney Michael Feuer said the city will vigorously defend the ordinance, which took effect April 1 after the City Council approved it in February.