Court Dismisses NRA Bankruptcy Case
Judge Harlin Hale dismissed the NRA’s chapter 11 filing for not being filed in “good faith,” holding the “NRA is using this bankruptcy case to address a regulatory enforcement problem, not a financial one (p.37)”. The Court also wrote “there are several aspects of this case that still trouble the Court,” and agreed with comments from the NRA’s own counsel that “there were cringeworthy facts during this trial” (p.33). The Court, which heard 12 days of trial testimony, wrote “it has become apparent that the NRA was suffering from inadequate governance and internal controls” (p.1).
The decision notes that “some of the conduct that gives the Court concern is still ongoing,” listing issues relating to apparent violations of internal controls for large contracts, LaPierre’s financial disclosures, and “lingering issues of secrecy and a lack of transparency.” (p.34)
The Court’s decision relied largely on the testimony and actions of NRA CEO Wayne LaPierre in throwing out the case, writing “what concerns the Court most though is the surreptitious manner in which Mr. LaPierre obtained and exercised authority to file bankruptcy for the NRA. Excluding so many people from the process of deciding to file for bankruptcy, including the vast majority of the board of directors, the chief financial officer, and the general counsel, is nothing less than shocking.” (p.34) (emphasis added).
With respect to the purported reasons for filing bankruptcy, the Court noted counsel for the NRA had listed several reasons why the NRA filed for bankruptcy, but the testimony of LaPierre pointed to only one reason – to evade the New York Attorney General’s lawsuit. The court wrote LaPierre “testified that but for the NYAG Enforcement Action, it would note have been necessary to file for bankruptcy.” (p.24). As such, the Court found that “the primary purpose of the bankruptcy filing was to avoid potential dissolution” in the New York AG case (p.26).
The Court also noted that “some facts regarding the NRA’s past conduct were not available to this Court because the NRA’s former treasurer asserted his rights under the Fifth Amendment during large swaths of his deposition” (p.33).