A federal judge in Texas has dismissed the National Rifle Association’s bankruptcy case, finding that the group had advanced bogus arguments while improperly seeking legal advantage over New York Attorney General Letitia James.
The decision returns the focus of the NRA’s legal saga to New York, where James is pursuing a case against the gun group for violation of nonprofit laws.
“Weeks of testimony have demonstrated that the NRA and Wayne LaPierre simply filed chapter 11 bankruptcy to avoid accountability,” James said in a statement. “Today’s order reaffirms that the NRA does not get to dictate if and where it will answer for its actions.”
Judge Harlin Hale did not bar the NRA from refiling its bankruptcy, as James’s office had requested. However, Hale indicated that if the case again comes before his court, he would consider the appointment of a trustee who could assume control of the organization.
“Should the NRA file a new bankruptcy case,” Hale wrote, “this court would immediately take up some of its concerns about transparency, secrecy, conflicts of interest of officers and litigation counsel, and the unusual involvement of litigation counsel in the NRA’s affairs, which could cause the appointment of a trustee.”
The “litigation counsel” that Hale referred to is Brewer Attorneys & Counselors. The Trace has reported extensively on the influence of firm founder William A. Brewer III at the NRA.
Anthony Casey, a professor at The University of Chicago Law School who specializes in bankruptcy, said he saw little chance of Hale being overturned should the NRA appeal. “The judge plainly applied the right legal standard,” Casey said. “So they would have to argue that the judge got the facts clearly wrong or abused his discretion. Neither of those are likely. “
Neither the NRA nor the Brewer firm responded to requests for comment. The NRA tweeted a statement, attributed to CEO Wayne LaPierre, that expressed disappointment and read: “We remain an independent organization that can chart its own course, even as we remain in New York to confront our adversaries. The NRA will keep fighting, as it has for 150 years.”
As The Trace has reported, the NRA had explored ways to evade James since at least last summer. In July, lawyers at the Brewer firm prepared a slide presentation on potential escape routes. They concluded that the NRA was legally boxed in, largely because the New York attorney general has authority over dissolution of nonprofits chartered in the state and distribution of their assets. The attorneys drew up a “wish list” of changes that a friendly state could make to its laws in order to aid an NRA getaway.
In August, before any such move could be attempted, James filed her suit, which seeks remedies that include repayment of wasted NRA assets and the group’s dissolution. She alleged that LaPierre and other executives had looted the nonprofit and that their various schemes had cost the NRA more than $63 million in the last three years alone. The NRA reacted with its typical belligerence. “We’re ready for the fight,” LaPierre said. “Bring it on.”
LaPierre and his inner circle were soon planning for bankruptcy. In November, the NRA quietly formed an affiliate, Sea Girt LLC, in Texas. On January 7 — after failed attempts by NRA attorneys to get James’s case halted and rerouted to federal court — the group’s board met in Dallas and approved a revised employment agreement for LaPierre that authorized him “to reorganize or restructure the affairs of the association.” The bankruptcy was filed a week later.
James and Ackerman McQueen, a public relations firm that worked closely with the NRA for decades before the relationship collapsed in 2018, moved to dismiss the filing for bad faith or to appoint a trustee to supplant NRA leadership. In hearings, they detailed how LaPierre, a core group of loyalists, and a band of well-paid lawyers orchestrated the bankruptcy filing without the knowledge or approval of the NRA board and hid the move from key officials, including the group’s CFO and general counsel. “The process Mr. LaPierre followed to file these bankruptcy cases is itself a master class in bad faith and dishonest conduct,” New York’s assistant attorney general, Monica Connell, told the court during opening statements in early April. “It is at once a public display and distillation of the larger problems that plague this organization.”
In his opening statement, NRA bankruptcy counsel Greg Garman readied the court for troubling revelations. “Are there going to be facts that are moderately cringe-worthy? The answer to that is yes,” Garman said. “We are not going to run from them.”
LaPierre testified that since 2013, he and his extended family had enjoyed regular jaunts to the Bahamas and Europe aboard an NRA vendor’s yachts. Until this year, LaPierre said, he had not reported the trips, as required by the NRA’s conflict-of-interest policy. “I believe now that it should have been disclosed,” he testified. “It was one of the mistakes that I made.” LaPierre indicated that he had withheld the information for security reasons, saying, “I was living under incredible threat at the time.” James’s attorneys produced documents showing the NRA had since 2018 paid a trio of companies linked to the vendor, Hollywood producer David McKenzie, more than $800,000 a month above the maximum amount stipulated in contracts.
LaPierre also told his longtime travel agent to omit private jet stops in the Bahamas and Nebraska from invoices that she submitted to the NRA, according to a taped deposition played to the court. LaPierre has relatives in Nebraska who have traveled with him.
During his testimony, LaPierre repeatedly meandered, sometimes to describe New York’s persecution of the NRA, despite his attorney and the judge urging him to be direct. “I very much need you to answer these questions yes or no only to the extent possible,” his attorney told him at one point. The judge followed up, saying: “Can you answer the questions that are asked? … Do you understand that I have said that to you more than a dozen times over the last day?”
Responding to what the Attorney General’s Office called “last-minute surprises” in the NRA’s 2019 federal tax disclosure, outgoing CFO Craig Spray told the court that he refused to sign the document. In early November of last year, as the deadline to file the disclosure neared, Spray testified he learned that three NRA board members had flown on the group’s dime in violation of controls he’d enacted to reform what he described as the organization’s ‘Wayne said” culture, a reference to LaPierre. An angry Spray sent emails to NRA leaders, saying in one, “I am disappointed in all of you,” and in another, “I can’t emphasize what a breakdown this is.”
Spray also testified that disclosure of improper benefits paid to NRA executives, including LaPierre, were hastily included in the filing. In the case of $300,000 in benefits reported as having been improperly paid to LaPierre in 2019, Spray said that the Brewer firm blocked him from substantiating the figure. With Spray unwilling to put his name on the federal filing, LaPierre ultimately signed the document. According to testimony, LaPierre fired Spray in late January after keeping him and other top NRA officials in the dark about the bankruptcy plan.
In a deposition given by NRA president Carolyn Meadows, a LaPierre defender, that was read to the court, Meadows stated that in early 2019, after the NRA’s general counsel advised her they could be subpoenaed, she destroyed notes and records from meetings with board members and employees. “Some I shredded,” Meadows said, “some I actually burned.” Parts of a deposition given by Woody Phillips, a former CFO, were also read in court. Phillips, who like LaPierre is a defendant in James’s case against the gun group, helped engineer many of the financial arrangements that were under scrutiny in the bankruptcy. While being deposed, Phillips repeatedly invoked his Fifth Amendment rights against self-incrimination and declined to answer questions.
Owen “Buz” Mills was one of several NRA board members who leveled stinging criticism at the organization’s leadership, saying, “I don’t see anything there that’s salvageable.” Mills, a 12-year veteran of the board who owns an Arizona firearms training academy, testified on behalf of dissident directors who sought the appointment of an examiner in the case to investigate financial malfeasance by leadership. Mills rejected repeated claims by NRA attorneys that corrective action had been taken and argued that the organization needs reform. “I believe that the management is corrupted,” Mills said, “and I believe that the board is corrupted.”
Though experts in nonprofit law have told The Trace that the New York court hearing James’s case is unlikely to dissolve the NRA — they say a settlement or court-ordered restitution and leadership changes are more plausible — it is a possible outcome.
At the end of witness testimony on April 29, the judge asked the parties to consider in closing arguments whether bankruptcy protection extends to debtors for whom potential dissolution is not a secondary effect of litigation, but “rather is the intended relief sought and would only occur upon a judicial determination that dissolution is in the best interest of the public?”
It’s clear from his ruling that Hale decided that James and Ackerman offered the most satisfactory response. “The court agrees with the NYAG that the NRA is using this bankruptcy case to address a regulatory enforcement problem, not a financial one,” Hale wrote in his 37-page decision. “The court finds that the NRA did not file the bankruptcy petition in good faith because this filing was not for a purpose intended or sanctioned by the bankruptcy code.”
Bill Powers, executive vice president at Ackerman and a former director of public relations at the NRA, said that Hale’s ruling “underscores the incompetence and failure of NRA leadership and its legal team. This is not the first case of a flawed NRA strategy to protect one top official, a situation that has increasingly disturbed NRA members.”
In his closing, Garrett Pronske, a lawyer for the attorney general, called the bankruptcy “a circus sideshow” and argued that the NRA was seeking to evade oversight in New York and had no financial justification for the move — claims supported by testimony from group leaders. The filing in Texas was “clearly and cavalierly the result of impermissible forum shopping,” Pronske said, and was brought about by “intentionally deceiving” the NRA’s board of directors.
Garman, the NRA’s bankruptcy counsel, stressed the “existential threat” the NRA faces in New York at the hands of politically hostile leaders who have targeted the group for destruction. “We have the right to exist, we have the right to live, we have the right to exert our First and Second Amendment rights,” he said. In attempting to prove that the NRA was, in his words, a “real debtor,” some of Garman’s arguments seemed to have little basis in the law. “We have the look, we have the feel, we are a debtor that deserves to be here,” he said.
Lisa Lambert, an attorney for the U.S. Trustee Program, a Department of Justice office that acts as a bankruptcy watchdog, said that James and Ackerman had proved their case for dismissal or appointing a trustee, saying, “This evidentiary record clearly and convincingly establishes that executive vice president Wayne LaPierre has failed to provide the proper oversight.”
Lambert’s statement prompted Garman to tell the judge: “Your honor, we have natural enemies. This Department of Justice may not see eye to eye with the National Rifle Association, but so be it. We have done the right thing.” In response Brian Mason, an Ackerman attorney, questioned whether allegations like those the NRA has lodged against New York were being made.
“Is the Department of Justice now weaponized against the NRA?” Mason asked.
This story has been clarified to reflect that Judge Harlin Hale dismissed the NRA bankruptcy because of an absence of good faith and lack of a valid bankruptcy purpose.
