Bankruptcy judge weighs NRA case

Second Amendment

The National Rifle Association, long a feared power broker, will learn its fate this week in a court ruling that has the potential to hobble the gun-rights group and imperil the three-decade reign of its boss, Wayne LaPierre.

A judge is weighing several options. He could let the NRA’s bankruptcy case go forward, giving the group a measure of refuge from a New York lawsuit that threatens its assets and its existence. He could put the group under the control of a trustee, empowered to make decisions about its finances and its future. Or, in a highly unusual move, he could throw the NRA out of bankruptcy court altogether.

“There are land mines across the board here,” said Brian Mittendorf, an Ohio State University accounting professor who has looked closely at the NRA’s financial health.

For an organization that was until recently the most potent single-issue lobby in the U.S., none of the possible outcomes are great. The NRA has enjoyed enormous sway in Washington, beating back repeated attempts at stricter gun laws after mass shootings and building a fervent following closely tied to the Republican Party. It has spent millions of dollars to back candidates for president and Congress and on Supreme Court confirmation fights, and it was the largest financial backer of former President Donald Trump’s successful 2016 campaign.

Now LaPierre, 71, may be trying to use the bankruptcy process to escape what he claims is political persecution by New York’s elected leaders and reincorporate the group in gun-friendly Texas. In the New York lawsuit filed in August seeking to dissolve the NRA, Attorney General Letitia James alleged that LaPierre has spent hundreds of thousands of dollars of NRA funds for private plane trips for himself and his family, among many indulgences. If the bankruptcy case were dismissed, then James would have an easier time seizing the group’s assets should she win her lawsuit.

The NRA has called the suit a baseless attack on the Second Amendment, timed to have maximum impact during the election cycle.

For more than two weeks, U.S. Bankruptcy Judge Harlin Hale in Dallas listened to testimony about palace intrigues, shredded notes and excessive personal spending. The dispute pits several entities against the NRA. Allied with James is the gun group’s former ad agency, Ackerman McQueen Inc., which claims the bankruptcy filing was made in bad faith and should be dismissed. Even the U.S. office that monitors bankruptcies said at the end of the trial that the NRA doesn’t belong in Hale’s court.

Meanwhile, a rebel NRA director has asked the judge to let the bankruptcy continue but start a new investigation of the group’s management and board.

The NRA responded to a request for comment by referring to statements its attorney, Gregory Garman, made during the trial. In his closing arguments, Garman admitted that the testimony had included “cringe-worthy” evidence about the group, at one point saying, “Does anyone want to hear about your CFO taking the Fifth? Of course not.”

But he also asserted that there isn’t “a shred of evidence” to suggest the NRA’s leadership had failed to take its duties seriously. And he noted that in filing for bankruptcy protection, the organization hadn’t sought to freeze James’ lawsuit.

“We are a debtor who has reason to be here,” he told the court.

Hale has offered few clues as to how he is leaning. One came after testimony ended, when he posed a question: Can a financially healthy organization file for bankruptcy to protect itself from the risk that another court will find its dissolution “in the best interest of the public”?

That question suggests Hale is thinking seriously about whether the NRA should be allowed to shield itself against James’ fraud suit by remaining in bankruptcy proceedings, said David Skeel Jr., a University of Pennsylvania law professor.

“The question is consistent with the thought that he may be open to dismissing the case,” said Skeel, who wrote a book on the history of bankruptcy.

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