NRA Bankruptcy Proceedings

NRA On Trial: Top Moments and What Happens Next As We Await Ruling

May 4, 2021

Today, closing arguments were delivered in the NRA’s bankruptcy trial in Dallas, Texas—a case with major implications for the future of the beleaguered organization. The bankruptcy was filed as a desperate attempt by an organization losing power and hemorrhaging money to escapelegal responsibility for alleged fraud and lining the pockets of their top executives. 

The bankruptcy process has been a massive failure for the NRA. Utilizing what is referred to as the “automatic stay” provisions of the bankruptcy code, the NRA is attempting to use the bankruptcy process to halt legal proceedings against it by former vendors, donors, and others but instead the case has shined a light on how NRA executives, CEO Wayne LaPierre in particular, have used the organization for years to help pad their own pockets. 

Testimony, highlighted below, has shown how the organization hid the bankruptcy from its board of directors, detailed the uncontrolled spending by executives (that has continued long beyond LaPierre’s so-called “course correction” of the organization in 2017), and featured a board member saying that both management and the board “is corrupted.”

When to expect a ruling: The judge presiding over the trial, Judge Harlan Hale, has indicated that he expects to issue a written ruling approximately a week from today. 

What could happen: The core factual issues during the trial were the NRA’s financial management and extravagant spending. The court could (i) dismiss the bankruptcy for being filed in bad faith, (ii) appoint an examiner to investigate fraud and mismanagement at the NRA, (iii) appoint a trustee to takeover running the NRA during the course of the bankruptcy, (iv) allow the NRA to propose a reorganization plan and continue with bankruptcy. 

None of the options are good for the NRA: 

  • If the bankruptcy is dismissed, the NRA will go back to fighting various litigations across the country against former vendors, angry donors, etc.  In addition, the NRA will continue to face lawsuits brought against it by the NYAG and DCAG.
  • If a trustee is appointed, current NRA leadership will have to answer to the oversight and judgment of a court-appointed (and independent) trustee who will be empowered to make decisions for the NRA. The extent of the trustee’s powers will be determined by the court, but could involve the power to hire/fire management. 
  • If an examiner is appointed, the NRA will face an investigation from a court-appointed (and independent) examiner who will have access to NRA records and witnesses to probe the organization’s financial mismanagement, vendor relationships, conflicts of interest, etc. The examiner’s work will culminate in a public report.
  • If the bankruptcy moves forward as-is, the NRA remains in bankruptcy, and must continue to make extensive financial disclosures and work with creditors to put forward a plan of reorganization.  Regulatory actions by NYAG and DCAG do not disappear.  In this scenario, it is also possible that the Court appoints or recommends appointment of a Chief Restructuring Officer to oversee parts of the NRA bankruptcy.

What we learned from the trial: The NRA’s bankruptcy has resulted in the public airing of the depths of the NRA’s mismanagement over the years. One of the core issues at the trial is whether the NRA’s current leadership has meaningfully turned the corner and reformed its financial practices — something repeatedly undermined with admissions of continued lavish spending, questionable internal safeguards, and the concealment of the bankruptcy itself from the board. 

Highlights from the trial have included:

  • NRA President Admitted to Burning and Shredding Documents Ahead of Subpoena. In a deposition read into evidence, NRA Board President Carolyn Meadows acknowledged that she “shredded and actually burned” her notes from phone calls and meetings in the early part of 2019. She said she did so because NRA General Counsel John Frazer told her “they could be subpoenaed or used.” Meadows described the conversation with Frazer as a consultation, and said the destruction of documents occurred ahead of receiving a formal document hold notice. In his testimony earlier, Frazer confirmed he was aware of this prior testimony from Meadows about document destruction, adding “she later testified that it was someone else that she had discussed it with.”
  • Former CFO Took the Fifth. Deposition testimony read in court showed longtime NRA CFO Woody Phillips invoking his Fifth Amendment rights on several topics. He invoked the Fifth no fewer than 80 times according to the parts of his testimony read into evidence. The Fifth Amendment of the U.S. Constitution provides rights to individuals to prevent implicating oneself in a crime or exposing oneself to criminal prosecution. Phillips is a named defendant in the New York Attorney General lawsuit against the NRA and has been at the heart of several questionable financial transactions discussed at the trial. 
  • LaPierre Admitted He Didn’t Tell the Full NRA Board of Directors that He Intended to Put the NRA Into Bankruptcy. Other than three members, LaPierre was unable to identify any other member of this 70-plus person board of directors he informed of the bankruptcy. Moreover, he did not tell any of the salaried officers of the NRA about the bankruptcy filing until the day it occurred, including the General Counsel or the Chief Financial Officer. 
  • LaPierre’s Life of Luxury: Trips To The Bahamas, Hunting Trips, Designer Suits All Paid For By Vendors Or The NRA. 
    • LaPierre testified that starting in 2013, he made annual trips to the Bahamas, staying on yachts owned by David McKenzie, a Hollywood producer and stakeholder of multiple NRA vendors. LaPierre claimed that he took these trips  because he was “looking for a place to be safe.” He admitted McKenzie paid for separate annual stays at Atlantis Resort on Paradise Island as well, and that he did not disclose the trips on his conflict of interest form. 
    • LaPierre testified that he had shopped at Zegna for suits, blaming former NRA PR firm Ackerman McQueen while admitting he had a regular sales representative at the Beverly Hills boutique.
    • LaPierre admitted that NRA vendor Under Wild Skies covered the costs of hunting trips — including airfare, licenses, professional hunters, and game assistants — to locales like Botswana for him and his wife. The vendor even paid to preserve and ship their hunting trophies to the couples’ home.
      • Under Wild Skies was also in the news last week as newly-uncovered video published by The New Yorker and The Trace on Tuesday showed  LaPierre repeatedly shooting an elephant in the wrong spot before a guide had to step in, and LaPierre’s wife killing an elephant, cutting off its tail, and holding it over her head exclaiming “Victory!” The article detailed how “LaPierre is a coddled executive who is clumsy with a firearm.”
  • A filing from the New York Attorney General detailed millions in private jet travel by NRA executives. A filing by the New York Attorney General’s office identified extensive private jet travel by NRA executives detailed flights, costs, dates, and locations of trips from 2015 through 2019. These flights include several trips to Palm Springs, Las Vegas, and the Bahamas
    • While the NRA contended that private jet travel was necessary for security purposes, NRA lead fundraiser Tyler Schropp testified that he was not aware of any written policy at the NRA that required Wayne LaPierre to travel by private plane. Schropp also testified he travelled by private jet, without Wayne LaPierre, with certain NRA donors.
  • Steps Taken To Buy $6 Million Home for LaPierre, Former Employees Receive Massive Payments, and More—All After LaPierre’s Claimed “Course Correction.”  LaPierre testified at length about how he initiated a “course correction” at the NRA starting in 2017. However, under cross examination, the New York Attorney General pointed out several incidents that occured after the NRA’s purported course correction, including:  
    • The issuance of a May 2018 LaPierre contract update that was not put in front of the full NRA board which included a $17 million “golden parachute.”
    • Also in May 2018, former CFO Woody Phillips was given a $360,000-a-year post-employment consulting contract from the NRA. Phillips has since pleaded the Fifth Amendment in this trial. 
    • In 2018, the NRA considered the purchase of a $6 million Dallas mansion for Wayne LaPierre. Although the purchase was never completed, a check for $70,000 was cut from the NRA relating to the home. 
    • LaPierre acknowledged that through at least 2019, the NRA continued to pay former NRA executive Kyle Weaver, whom he had fired, as part of a post-employment contract. As of 2019, Weaver had been paid at least $1.68 million after the end of his employment. 
    • LaPierre also admitted that in 2020, the NRA paid nearly $1 million in breach of contract settlements with two other former NRA executives for their post-employment contracts. The NRA continued to pay at least one of these contracts through 2018. 
  • Longtime NRA Board Member Owen “Buz” Mills Called NRA Management “Corrupted” and Said “I Don’t See Anything That is Salvageable.” Mills, who has been on the NRA board since 2009, called CEO Wayne LaPierre a “trainwreck” as a manager of the NRA, and stated his belief that the NRA’s current problems were “our fault” because “[t]he board had failed to provide adequate direction and supervision.” When asked about the NRA’s purported “self-correction” that has been at the heart of the NRA’s defense during the trial, Mills testified “I believe that the management is corrupted and I believe the board is corrupted. I don’t see anything there that is salvageable.”