A federal judge on Tuesday dismissed the National Rifle Association’s bankruptcy case, leaving the powerful gun-rights group to face a New York state lawsuit that accuses it of financial abuses and aims to put it out of business.
The case was over whether the NRA should be allowed to incorporate in Texas instead of New York, where the state is suing in an effort to disband the group. Though headquartered in Virginia, the NRA was chartered as a nonprofit in New York in 1871 and is incorporated in the state.
Judge Harlin Hale said in a written order that he was dismissing the case because he found the bankruptcy was not filed in good faith.
"The Court believes the NRA’s purpose in filing bankruptcy is less like a traditional bankruptcy case in which a debtor is faced with financial difficulties or a judgment that it cannot satisfy and more like cases in which courts have found bankruptcy was filed to gain an unfair advantage in litigation or to avoid a regulatory scheme," Hale wrote.
His decision followed 11 days of testimony and arguments. Lawyers for New York and the NRA’s former advertising agency grilled the group’s embattled top executive, Wayne LaPierre, who acknowledged putting the NRA into Chapter 11 bankruptcy without the knowledge or assent of most of its board and other top officers.
"Excluding so many people from the process of deciding to file for bankruptcy, including the vast majority of the board of directors, the chief financial officer, and the general counsel, is nothing less than shocking," the judge added.
Phillip Journey, an NRA board member and Kansas judge who had sought to have an examiner appointed to investigate the group’s leadership, was concise about Hale's judgment: "1 word, disappointed," he wrote in a text message.
Lawyers for New York Attorney General Letitia James argued that the case was an attempt by NRA leadership to escape accountability for using the group’s coffers as their personal piggybank. But the NRA’s attorneys said it was a legitimate effort to avoid a political attack by James, who is a Democrat.
LaPierre testified that he kept the bankruptcy largely secret to prevent leaks from the group’s 76-member board, which is divided in its support for him.
The NRA declared bankruptcy in January, five months after James’ office sued seeking its dissolution following allegations that executives illegally diverted tens of millions of dollars for lavish personal trips, no-show contracts and other questionable expenditures.
"The NRA does not get to dictate if and where it will answer for its actions, and our case will continue in New York court," James tweeted after the ruing was made. "No one is above the law."
James is New York's chief law enforcement officer and has regulatory power over nonprofit organizations incorporated in the state. She sued the NRA last August, saying at the time that the "breadth and the depth of the corruption and the illegality" at the NRA justified its closure. James took similar action to force the closure of former President Donald Trump’s charitable foundation after alleging he used it to advance business and political interests.
Shannon Watts, who founded Moms Demand Action for Gun Sense in America, said in a serious of tweets that the bankruptcy dismissal "comes at the worst possible time for the NRA: right as background checks are being debated in the Senate."
"It will be onerous if not impossible for the NRA to effectively oppose gun safety and lobby lawmakers while simultaneously fighting court battles and mounting debt," said Watts, whose organization is part of the Michael Bloomberg-backed Everytown for Gun Safety.