Filing Summary

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. 

The filing highlights the risks associated with the NRA’s chapter 11 bankruptcy filing and comes just days after the appointment of two NRA adversaries, former vendor Ackerman McQueen and donor David Dell’Aquilla, to the Creditors Committee in the bankruptcy proceedings. 

Mr. Journey points to a number of the allegations made by the New York Attorney General in her complaint against the NRA as justification for a court-appointed examiner. The motion, filed by his attorneys, seeks “to bring to light the veracity of the alleged fraud, dishonesty, incompetence, and gross mismanagement that has plagued the NRA’s reputation.”

The request will be heard by the bankruptcy court in the coming weeks. Some key points from the motion are below.

Key Points

• The motion indicates that the NRA has “improperly paid excessive compensation to current management in base salaries, and, perhaps more troubling, via a series of excessive perks that were wholly for the [NRA’s] insiders’ personal benefit.” (para. 8)
• Mr. Journey’s motion further indicates that “other former and current board members have grave concerns” about the lack of oversight the NRA board of directors is providing, and that it has been reduced to a “figure head while management steered the [NRA’s] overall direction.” (para. 15)
• The filing raises questions about the conduct of the NRA board of directors legal counsel, saying that both NRA management and the board’s own lawyer withheld information from board members. And that “On one occasion, the board’s attorney ostensibly told a board member to sit back, shut her mouth, stop asking questions, and trust NRA management had everything under control.” (para. 19 and 20)
• “These egregious violations have led to the resignation of one or more board members. They may also be related [to] the recent resignation of the NRA’s chief financial officer and the failure of the Reorganization Manager requested by the debtor to assume his appointment.” (para. 17). This passage seemingly refers to the departure of NRA CFO Craig Spray, and the Chief Restructuring Officer the NRA had announced would be part of the team dealing with the bankruptcy. 
• According to this filing, the full NRA board of directors was not made aware of the NRA’s intent to file for bankruptcy. Nor did the NRA board of directors approve the formation of the Texas LLC “Sea Girt”, which was used as a jurisdictional hook to file the bankruptcy in Texas. (para. 16 and 18)