A bankruptcy judge in Texas called the National Rifle Association’s bankruptcy filing disingenuous and “not having been filed in good faith” as he dismissed the petition Tuesday.
The gun rights organization filed for bankruptcy in January despite boasting five million members and 500 employees, and it brings in roughly $300 million in revenue each year, according to court documents.
The filing under Chapter 11 bankruptcy law would have allowed the NRA to relocate its financial assets from New York, where it faces a massive lawsuit from the state’s attorney general, to Texas by reincorporating in the Lone Star State. The group has been officially domiciled in New York since 1871, though its physical headquarters are in Fairfax, Virginia.
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Dallas Judge Harlin Hale wrote, “The Court finds there is cause to dismiss this bankruptcy case as not having been filed in good faith both because it was filed to gain an unfair litigation advantage and because it was filed to avoid a state regulatory scheme.”
He continued, “The NRA is a solvent and growing organization using this bankruptcy as a tool to win its dissolution lawsuit, and that is not an appropriate use of bankruptcy.”
The ruling does not prevent the organization from filing for bankruptcy again, though the judge said he would appoint a trustee who would take control of the group.
New York Attorney General Letitia James filed a lawsuit seeking the dissolution of the NRA nine months ago. It alleged that executives used the organization’s funds for lavish personal expenses worth millions, grossly mismanaged the NRA’s finances, and committed outright fraud. The NRA has countersued James. Washington, D.C. Attorney General Karl Racine has filed suit against the NRA’s charity arm, alleging it mishandled donations.
“Weeks of testimony have demonstrated that the NRA and Wayne LaPierre simply filed chapter 11 bankruptcy to avoid accountability... Today’s order reaffirms that the NRA does not get to dictate if and where it will answer for its actions,” James’ office said in a press release.
Tuesday’s dismissal may clear the route for James to continue with the litigation and break up the organization.
According to the motion to dismiss, disgraced former New York Attorney General Eric Schneiderman called NRA board member Tom King in 2017 to tip King off to impending investigations into the NRA, advising King to “prepare for the worst.”
The board member relayed the information to NRA CEO Wayne LaPierre, who later testified that the tip prompted an internal review at the NRA.
LaPierre said that in response to Schneiderman’s call, the “NRA ought to take a look at everything, a 360-degree look to make sure we were in total compliance with New York State not-for-profit law, and if we weren’t, we needed to fix things.”
LaPierre referred to the attempted move from New York to Texas a “restructuring plan” rather than a legal escape maneuver in a statement released in January. He said his group needed to remove itself from the “toxic political environment” of New York.
The outward calm masked inner turmoil, according to court documents: LaPierre had not informed the NRA’s board, its CFO, or its chief legal officer he was considering bankruptcy as of a January 7 board meeting, just eight days before the group’s lawyers filed their motion.
James called the move a ruse from the get-go, writing in January, “The NRA’s claimed financial status has finally met its moral status: bankrupt.”
Along with legal troubles, bitter infighting among the executive ranks of the NRA has weakened the powerful pro-gun group. Whistleblowers detailed in a 2018 memo how executives, including LaPierre, allegedly misappropriated funds, cultivated improper relationships with vendors, and overrode internal expense management procedures. The memo soured the NRA’s longtime marketing and public relations firm, Ackerman McQueen, which has since filed multiple suits against its former client.
