The NRA Went To Texas Bankruptcy Court To Avoid New York AG, And This Judge Can't Stop Laughing!
Yesterday a federal judge dumped the NRA's bankruptcy petition, ruling that bankruptcy is not an appropriate vehicle to evade legal liability for the charity's past sins. So pour one out for Wayne LaPierre, who thought he'd jujitsu triple axel himself right out of New York, and wound up flat on his ass staring up into the face of that state's Attorney General Letitia James. Truly, it was a thing of beauty.
The NRA's path to bankruptcy was highly unorthodox, not to say shady AF. At a January meeting, the charity's board approved new language for Wayne LaPierre's employment contract allowing him to "exercise corporate authority in furtherance of the mission and interests of the NRA, including without limitation to reorganize or restructure the affairs of the Association for the purposes of cost minimization, regulatory compliance or otherwise."
The board had no idea that it had just deputized him to declare the charity bankrupt and ride that Chapter 11 filing right out of the state of New York. But that was LaPierre's secret plan, and he set about establishing a shell company in Texas and using it as a beach head to declare bankruptcy in Dallas using $5 million he'd surreptitiously transferred to outside lawyers. Almost no one at the NRA knew about the filing in advance — not the board, not the general counsel, not the CFO. Which rather proves the point that the NRA is run like a personal fiefdom in violation of New York laws mandating board oversight of charitable dollars, as alleged by AG James in her Enforcement Action seeking to dissolve the NRA.
It's not clear how Ol' Wayne thought this was going to go down. Perhaps he expected that everyone would applaud his clever maneuver, with AG James congratulating him on a flawless victory. If so, he was sorely disappointed, as the state of New York, an NRA board member, and Ackerman McQueen, the charity's longtime media company turned arch nemesis, sued to intervene. LaPierre found himself on the witness stand having to admit that he'd taken hundreds of thousands of dollars worth of gifts from vendors to the NRA and gone to some lengths to hide his own spending from the board, just as AG James accused him of doing.
And thanks to COVID protocols, every reporter in the country was able to listen to him do it in real time. Well done, Wayne!
From the outset, the NRA faced questions about why it was in bankruptcy at all. The charity seems to be in good fiscal health — apparently they just needed to lay off some staff and ax coffee, and they appear to have righted their ship — and various officials gave conflicting testimony justifying the decision to file for bankruptcy, which makes sense since they'd only learned about the filing after the fact. But LaPierre, whose priority seems to be maintaining his hold on the organization, leaned hard into messaging to members that they need to keep him around because only he can make it rain money. This totally undercut any claim that the NRA was seeking to reorganize in Texas for financial reasons and made it clear that the charity was simply using the bankruptcy court to evade New York state courts, which would adjudicate the AG's enforcement action.
It's hard to argue with a straight face that you're protecting the charity's bottom line when your own website crows that your organization is in its "strongest financial condition in years" and is only filing for bankruptcy to escape "the unhinged and political attack against the NRA by the New York Attorney General."
They've since removed that link, because DOH! But they couldn't unlink to LaPierre himself, who was an absolute disaster on the witness stand.
"Yes, we filed the Chapter 11 to — because the New York State attorney general is seeking dissolution of the NRA and [seizure of] its assets, and we believe it's not a fair, level playing field," he testified.
"So really what we're down to is that it's — the New York attorney general action is the reason you believe you need to be in bankruptcy, and, really, solvency and all your other litigation, those are not issues that would require you to be in bankruptcy; is that correct?" he was asked by opposing counsel.
"That's correct," LaPierre agreed.
So much for seeking "a centralized, neutral forum in which it can streamline, resolve, and address all outstanding claims and preserve its ability to pursue its constitutionally protected mission as a going concern."
Usually, organizations filing for bankruptcy are either broke or trying to get out from a debt which threatens their viability. But after LaPierre set fire to their fig leaf, the NRA's lawyers were forced to argue that civil penalties for breaking New York charity laws were exactly the same as a debt or judgment that threatened the NRA's viability, and thus the bankruptcy court should allow itself to be used to thwart state regulatory authorities. It was a shit hand, and they had to play it.
"The question the Court is faced with is whether the existential threat facing the NRA is the type of threat that the Bankruptcy Code is meant to protect against. The Court believes it is not," wrote US Bankruptcy Judge Harlin Hale. "For the reasons stated herein, 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."
And while the court refused to accede to Ackerman McQueen's request to appoint a trustee to oversee the NRA, Judge Hale offered a stinging criticism of the "surreptitious manner in which Mr. LaPierre obtained and exercised authority to file bankruptcy," which he described as "nothing less than shocking." The court also worried over "lingering issues of secrecy and a lack of transparency" and noted that the NRA "appears to have very recently violated its approval procedures for contracts in excess of $100,000."
So the NRA's bad faith bankruptcy case is dismissed, and Wayne LaPierre heads back to face AG James. He went to Dallas, and all he got was a stupid T-shirt that says, "I just admitted under oath that I broke New York charity law!"
In January, the @NRA filed for bankruptcy in an attempt to evade accountability in New York, despite claiming to ha… https://t.co/d0TlSXZYTg— NY AG James (@NY AG James)1620761759.0
FUCK AROUND AND FIND OUT.
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Liz Dye lives in Baltimore with her wonderful husband and a houseful of teenagers. When she isn't being mad about a thing on the internet, she's hiding in plain sight in the carpool line. She's the one wearing yoga pants glaring at her phone.