Filing Summary

Ackerman McQueen, the NRA’s former PR company and a member of Creditors Committee, filed a motion to dismiss the bankruptcy based upon “bad faith, cause, and bankruptcy fraud.” (p.1).  If the court grants the motion, the bankruptcy process would end and the NRA would return to litigating its numerous disputes in courts throughout the country.  

In the alternative, Ackerman asks the court to appoint an independent trustee to run the NRA as the bankruptcy proceeds. This comes just days after NRA board member Phillip Journey, who is also a Kansas state judge, asked the bankruptcy court to appoint an independent examiner to investigate the allegations of waste and fraud at the NRA. 

Key Points

• The filing notes that the “NRA has embarked on scorched-earth litigation designed to identify various scapegoats for its decades-long fraud and mismanagement and to keep [attorney Bill] Brewer’s promise to [NRA CEO Wayne] LaPierre that he was going to keep him out of jail.” (para. 14) 
• Ackerman argues that the NRA “wants to use this self-created quagmire of litigation, primarily created by the Brewer Firm, as justification for filing bankruptcy.” (para. 16)
• Ackerman discloses that, absent the bankruptcy, the NRA would have faced a September 2021 trial in the litigation between the parties. In addition, Ackerman planned to amend its case to add the NRA Foundation as a defendant, alleging that it operated “as the NRA’s alter ego.”  Ackerman also planned for the amended claims against the NRA to include “fraud, civil conspiracy, and business disparagement.” (para. 30)
• Ackerman points out the faulty logic in the NRA’s “dump New York” strategy, writing “New York law requires permission of the NYAG before a non-for-profit organization can dissolve. New York law also requires the NRA to obtain the NYAG approval or N.Y. Supreme Court approval to merge or consolidate with a foreign entity.” (para. 58)
  • “Presumably, the NRA also wants this Court to bless the transfer of its asserts from New York to Texas in the interest of creditors – another clear violation of New York state law.” 
  • “Stated differently, the very relief that the NRA is seeking through the chapter 11 (i.e., reorganization in Texas without approval of the State of New York) is not permitted under the law and is further evidence of bad faith.” 
• The motion points to the creation, by the NRA, of a Texas LLC “Sea Girt” just two months before the filing as indicia of a “scheme” to commit bankruptcy “fraud” on the Court. Ackerman refers to Sea Girt as a “‘mere shell, without substance’ formed as a sham and fraud upon this Court and the NRA’s creditors solely to promote the NRA’s own interests in a manner not intended by Chapter 11.” (para. 68)
• If the Court were to rule against the motion to dismiss, Ackerman argues that the Court must appoint a trustee to oversee the NRA in order to “investigate and preserve valid derivative claims against current and/or former management for the benefit of creditors.” Ackerman points to the allegations of fraud and breaches of fiduciary duty by management, and the allegations against proposed special counsel (attorney Bill Brewer and his firm), as reasons necessitating a trustee.  (para. 80-86) 
  • A trustee is needed “because of the NRA’s rampant mismanagement, corruption, and embezzlement by insider executives and board members, fraud, breaches of fiduciary duties, and a vexatious litigation….” (para. 83)
  • “Neither the NRA, nor LaPierre at its helm, can realistically carry out the fiduciary duties of a debtor-in-possession towards creditors when both the NRA and LaPierre face liabilities for those misdeeds.”