NRA is ‘poster child of bankruptcy in bad faith,’ lawyer argues

A lawyer for New York Attorney General Letitia James argued a United States bankruptcy judge should reject the National Rifle Association’s Chapter 11 filing to ‘prevent bankruptcy from becoming a haven for wrongdoers’.

United States Bankruptcy Judge Harlin Hale is holding the Dallas trial on whether to dismiss the National Rifle Association's filing, appoint a trustee to run the group while it’s in bankruptcy or appoint an examiner to look into the New York attorney general's allegations of corruption and mismanagement in its top ranks [File: Daniel Acker/Bloomberg]

The National Rifle Association’s bankruptcy filing was part of a brazen attempt to escape legitimate oversight in the NRA’s home state of New York and should be dismissed, a lawyer for the state said during closing arguments in a trial on Monday.

The NRA’s Chapter 11 filing in January is a “poster child of bankruptcy filed in bad faith,” and the court should reject it to “prevent bankruptcy from becoming a haven for wrongdoers,” Gerrit Pronske, an attorney for New York Attorney General Letitia James, argued.

U.S. Bankruptcy Judge Harlin Hale is holding the Dallas trial on whether to dismiss the NRA’s filing, appoint a trustee to run the group while it’s in bankruptcy or appoint an examiner to look into James’s allegations of corruption and mismanagement in its top ranks.

New York says the bankruptcy filing is illegitimate on a number of grounds.

They include filing to gain advantage in a separate fraud lawsuit brought against the NRA in New York, a lack of financial duress to justify a Chapter 11 case, a bid to seek a sympathetic venue and an internal process in which NRA management violated its own governance requirements, “intentionally deceiving” its board by keeping it in the dark about its plans to file for bankruptcy.

‘DUMPING’ New York

The NRA never hid its desire to emerge from bankruptcy free of its New York home of 150 years and with a new charter in Texas, Pronske told the court.

On the day it filed for reorganization, it posted a letter on its website announcing that it was “DUMPING” the state. As further evidence, Pronske noted that the NRA set up a partnership called Sea Girt LLC as part of its efforts to reincorpoate in Texas, which he likened to “Decoy Duck LLC.”

He directed some of his harshest comments at Wayne LaPierre, the NRA’s longtime boss, saying he accepted lavish trips from an NRA vendor without properly disclosing them and retaliated against anyone who objected.

That included Craig Spray, then the chief financial officer, whose efforts to implement financial controls were overridden by a “Wayne says” rule, according to Pronske.

Brian Mason, a lawyer for the NRA’s former ad agency, Ackerman McQueen Inc., also argued for dismissal of the case.

Mason argued that there’s an “overwhelming amount of evidence” that the NRA is financially healthy, including that it had $72 million in cash available.

“It is an undisputed fact that the NRA’s financial situation had nothing to do with the filing of this bankruptcy,” Mason said.

Mason told the court that the bankruptcy was fraudulently filed, without approval of the full board as required by the NRA’s bylaws. He said the board had amended LaPierre’s employment agreement in early January just before the filing in an ambiguous way that allowed him to deceive it and claim he had the authority to initiate the proceeding.

He said LaPierre testified that the board should have figured out the meaning of his employment agreement, which gave him that authority.

The case is National Rifle Association of America, 21-bk-30085, U.S. Bankruptcy Court, Northern District of Texas (Dallas).

Source: Bloomberg

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