Trial Exhibit: 2003 Frenkel Report Re: Millie Hallow Expenditures
Filing Summary
In 2003, the NRA commissioned a report related to the use of an NRA credit card by Millie Hallow, an aide to then-NRA Executive Vice President Wayne LaPierre. During this current time of legal crisis for the NRA amid allegations of financial impropriety, the 2003 report, secret until now, is yet another catalog of potentially embarrassing managerial missteps by the NRA, this time dating back 20 years. The report, dated May 12, 2003, was completed by Jacob S. Frenkel of the law firm of Smith, Gambrell & Russell, hence its reference as “the Frenkel Report.”
The report, an outside audit addressed to the Audit Committee of the NRA Board of Directors, revealed that LaPierre’s “Special Assistant,” (p.7), Millie Hallow, had used her NRA-issued corporate credit card to spend at least $14,000 on personal expenses in 2001 and 2002. (p. 17) Those personal expenses included thousands in car repairs, purchases like a handbag and sleepwear at Nordstrom’s, and a plane trip to Puerto Rico for herself, her husband, her son, and her son’s girlfriend. (p. 18-20)
The NRA has long sought to keep the Frenkel Report from being disclosed to the public. The NRA was first ordered to produce the report in July 2022, and the court denied the NRA’s motion appealing this order. Thereafter, the NRA, “rather than complying with the order sought to re-litigate” and in November 2022, was again ordered to produce the Frenkel Report. In December 2022, the NRA sought appellate review of the court’s order, which was heard on October 19, 2023. Just prior to oral argument, on October 11, 2023, the NRA publicly filed an unredacted version of the report as an attachment to an unredacted memorandum of law which also discusses the content of the Frenkel Report in detail. After five days, the report was sealed on the docket. Despite being available to the public for several days, the NRA continued to assert the confidentiality of the document. In contrast, the NYAG argued that the disclosure constitutes a waiver as to the NRA’s claims of privilege and confidentiality.
The report states that Frenkel’s firm was contacted in March of 2003 by the NRA Audit Committee, and asked to conduct a “confidential limited investigation into certain transactions in travel and entertainment accounts for the years ended December 31, 2001 and 2002 in connection with the use of an NRA corporate American Express card” issued to Hallow. (p. 1) NRA Board Member David Coy, who served as vice chair of the Audit Committee 20 years later when the report was publicly released, served as Chair of the Audit Committee at the time it was written. (p. 1)
The report was based on documents related to these accounts, internal accounting procedures of the NRA, interviews, and a review of Hallow’s personal financial records. (p. 1) It concluded that while Hallow did not violate specific federal statutes related to mail fraud, wire fraud, theft, or credit card fraud, she had spent thousands of NRA funds on personal expenses. (p. 2, p. 17)
The report states that “there were, at most, inadequate, and arguably no, written and established governing policies and procedures” surrounding travel practices. (p.10) Further, that “throughout the period of Hallow’s use of the Amex card, NRA did not have in effect written and approved policies and procedures governing travel, use of the corporate American Express card, or submission of receipts related to travel.” (p.8) In other words, the report found that Hallow’s actions didn’t violate internal NRA policies because there wasn’t even an “adequate system of policies and controls” to be violated. (p. 4-5)
According to the report, the NRA Treasurer’s office did, on occasion, create draft policies related to travel, but NRA officers did not adopt these policies. (p. 3) The report found that “had the draft policies been in force and effect, the evidence is indisputable that Hallow would have violated those policies in connection with her use of the Amex Card and failure to submit timely receipts.” (p. 3)
The report does note that in the summer of 1970, the NRA adopted two separate travel and entertainment related policies, but “there is no evidence that NRA disseminated these policies in recent memory.” (p. 8) Further, in 1996, the Treasurer’s office drafted a 13-page policy related to travel and expense procedures. (p. 9) There were “two later iterations of draft Travel and Business Expense Reimbursement Guidelines,” in 1998 and 2002, “but, NRA never adopted or formally implemented any of these ‘draft’ policies and procedures.” (p. 10)
However, the report notes, from 1996 until 2001, Hallow received monthly reminders from then-NRA Treasurer Wilson “Woody” Phillips and Rick Tedrick, Managing Director of Finance, to review her “corporate credit card bill and annotate relevant charges with the business purpose, persons attending and cost center to charge.” (p. 10) Phillip’s executive assistant said in an interview that she did not recall receiving any information back from Hallow about her charges. (p. 11)
The investigation revealed that Hallow charged $563,065 to her corporate card in 2001, and $538,279 in 2002. Phillips provided information that reflects that of the 2001 figure, “approximately $76,000 may be taxable to Hallow and another $11,000 may represent entirely personal expenses.” (p.17) For 2002, “approximately $79,000 may be taxable to Hallow and another $3,000 may represent entirely personal expenses.” (p. 17) In terms of tax liability, the report found that “although Hallow used the Amex Card, in part, for expenses that, under current interpretations of federal tax law, may have federal or state income tax implications for her personally and/or for the NRA, the tax issues are beyond the scope of this inquiry and Report.” (p. 4)
The report reflected that “the principal component of the expenses taxable to Hallow [was] clothing.” (p. 17) The report also claimed that LaPierre believed that “Hallow’s clothing expenses are job-related, and that NRA Treasurer’s office would settle with her at some point.” (p. 17)
According to the report, Amex charges that may have been considered personal expenses in 2001 included:
- “seven charges for auto repair or service at County Chrysler-Jeep, Marlboro, Maryland totaling approximately $5,000” (p. 18)
- “one charge for down comforters (bath accessories) at Macy’s in Fairfield, California totaling $1,129.08” (p. 18)
- “multiple charges at area Nordstrom stores for such items as handbags, sleepwear”
- “in room movies at various hotels” (p. 18)
- “a charge at the Bose store for electronics in the amount of $1,172.73” (p. 18)
- “multiple charges for gasoline” (p. 18)
- “payment of a Comcast (cable television) bill in the amount of $271.28” (p. 18)
- “payment on a note to Meridian Financial in the amount of $11,255.02” (p. 18)
- “multiple charges to Giant Food for groceries” (p. 18)
- “charges at various local restaurants – local in relation to her principal residence – such as Jaspers in Crofton, Maryland, Outback Steakhouse in Bowie, Maryland, and Sakura in Bowie, Maryland” (p. 18)
- “a charge of $139.61 at the Andre Chreky Salon” (p. 18)
- “four airplane tickets, each costing $1,169.10, to Puerto Rico…for herself, her husband, her son, and her son’s girlfriend” (p. 19-20)
Moreover, in both 2001 and 2002, Hallow obtained cash advances from several hotels and charged them to her hotel bill, thus charging the cash advances to her Amex. (p. 19) Hallow, LaPierre, and Phillips each said that this cash was used to tip drivers and “other service providers.” (p. 19) Despite that claim, no records or receipts were provided, which the report said “suggests an opportunity for abuse, although no evidence of abuse arose.” (p. 19)
The report stated that Hallow’s explanation for the personal charges “was that she used the Amex Card as a card of convenience, rather than as a personal card,” and “believed that she would sit down with Phillips and settle any outstanding amounts, by paying outstanding sums due to the organization.” (p. 18) A footnote in the report explained that Hallow had once reconciled her personal expenses with Phillips. (p. 18)
The report stated that LaPierre “was effusive in his praise of Hallow’s work and accomplishments, attributing to her efforts, in large part, the movement in the perception of the NRA from an extremist organization to the mainstream and the significant in-roads that the organization has achieved in the past six to seven years with conservative organizations, high donor circles and African-American and Hispanic groups.” (p. 5) Further, LaPierre believed that in Washington, it could be expected that someone with Hallow’s access and effectiveness would earn an annual salary of $500,000. (p. 15) In 2002, Hallow was paid approximately $143,000. (p. 16)
Ultimately, the 2003 investigation’s findings’ “reflect an immediate need for the NRA to direct management to resolve expeditiously all outstanding issues with Hallow related to her use of the Amex Card, formally adopt and enforce travel and business expense policies and procedures, and, from a ‘good governance perspective,’ include recommendations related to corporate compliance and corporate governance.” (p. 5) Further, it found that “there was no evidence that Hallow sought to defraud NRA,” nor any “evidence of any intent to violate federal or state law or NRA policies.” (p. 18) Rather, the charges “reflected poor on-the-spot judgment.” (p. 18)
Docket number 3126.