In a statement to CNN, the NRA said it will continue “to build business operations in Texas and the organization will continue to investigate the move of its headquarters from Virginia”.
The decision of Judge Harlin Hale of the northern district of Texas came after a month-long trial in which NRA lawyers and officials argued that their bankruptcy proceedings in Texas should proceed. James’ office intervened and asked that the petition be dismissed. The NRA’s decision to file for bankruptcy and seek reintegration in Texas is one way to “remove the NRA from oversight”.
Hale agreed with James’ office’s argument in Tuesday’s decision.
“The court finds that there is reason to reject this bankruptcy case as not being filed in good faith, both because it was filed to gain an unfair litigation advantage and because it was filed to avoid a government regulatory system,” wrote Hale in his decision.
Hale also declined to appoint a trustee or auditor to oversee the NRA’s finances.
“Today’s order reaffirms that the NRA cannot dictate whether and where to respond for its actions,” James said in a statement. “The rot is deep, so now we are going to focus again on the New York court case and continue it. Nobody is above the law, not even one of the most powerful lobby groups in the country.”
Hale declined to reject the case with bias, which meant the NRA could still decide to file for bankruptcy elsewhere. However, Hale cautioned that his court would address some of his concerns immediately if the NRA filed a new bankruptcy case “disclosure, transparency, secrecy, agent’s conflict of interest”, among other things, which could lead to the appointment of a trustee to oversee the affairs of the company Organization monitored. A spokesman for the NRA had no comment when asked by CNN if he intended to file for bankruptcy elsewhere.
“The NRA will continue to defend the association’s interests in New York,” William A. Brewer III, an NRA attorney, told CNN in a statement. “Our client trusts his leadership and his proven commitment to good governance.”
Brian Mittendorf, a professor of accounting at Ohio State University who has followed the NRA’s finances for several years, said the ruling had implications for the various legal disputes the NRA is facing as well as its financial future.
“In many ways it was a risky game to believe that a bankruptcy court would allow them to circumvent part of this litigation,” Mittendorf told CNN. “The ruling only clarifies the fact that this litigation continues and that there is no such thing as the means that has resulted in a third party effectively running the organization in the meantime.”
After the ruling was passed on Tuesday, James said that her office’s case against the NRA was never delayed by filing for bankruptcy and that a trial could take place in 2022.
“We are in the middle of the discovery and the discovery is continuing at this point,” said James.
Allegations of financial misconduct
The virtual trial in a bankruptcy court in North Texas included testimony from senior current and former NRA officials, including Chief Executive Officer Wayne LaPierre, who testified on April 7 that he had the news of the NRA from the NRA’s general counsel, the chief financial impending bankruptcy filed officer and other salaried NRA officials.
Hale called LaPierre’s decision to file for bankruptcy without notifying the NRA’s board of directors and others “worrying” in his decision.
“The court agrees with NYAG that the NRA is using this bankruptcy case to address a regulatory enforcement issue, not a financial one,” Hale wrote.
Texas attorney Gerrit Pronske, representing James’ office in court, argued during the closing arguments on May 3 that the bankruptcy filing should be dismissed for “bad faith”, referring to a public letter to NRA members on the day of Organization filed for bankruptcy, in which LaPierre wrote: “The NRA is not ‘bankrupt’ or ‘going out of business’.” “
“We are financially as strong as we have been for years,” says the letter signed by LaPierre.
Gregory Garman, an attorney for the NRA, argued last week that the organization had $ 40 million in “unfunded future litigation.” However, Pronske countered that the financial statements showed that the NRA “has sufficient cash”.
“I would suggest that as part of a bona fide submission, you have some problems with your financial situation and must have debt problems either now or for the foreseeable future,” said Pronske. “The NRA has no debt problem … it has a regulatory problem.”
Although the headquarters of the NRA is in Fairfax, Virginia, it was incorporated in New York State shortly after the Civil War.
The lawsuit alleges that the NRA’s leadership used millions from the group’s reserves to fund lavish private jet travel, meals and other personal expenses. The money was diverted in favor of NRA insiders and preferred vendors, whom LaPierre handpicked to “facilitate his abuse of charities.” and that the NRA Board of Directors has not followed an appropriate process for determining “reasonable” compensation for NRA executives, including LaPierre.
LaPierre testified during the 12-day bankruptcy process that he is currently earning $ 1.3 million after “voluntarily” taking a 20% wage cut when the organization had to cut other employees’ salaries last year.
“I think my compensation has always been reasonable,” LaPierre testified last month.
He also testified that he believed the NRA “is in a much better place today”.
“I think it’s stronger. I think the controls are stronger,” LaPierre testified. “I think the possibility of overriding controls will not occur. The protection is in place. I feel very good where we are.”
This story has been updated with additional details and background information.
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