National Rifle Association files for Chapter 11 bankruptcy protection
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The National Rifle Association, the powerful gun lobby that has been at the center of some of the nation’s most heated debates over weapons rights, filed for Chapter 11 bankruptcy protection Friday.
The NRA’s bankruptcy filing in Texas comes after the New York attorney general recently filed a lawsuit seeking to dissolve the group. The New York AG, Letitia James, has accused the organization of diverting millions in charitable giving for “personal use by senior leadership.”
Chapter 11 bankruptcy is designed to allow companies or organizations to restructure their operations, shed debt, delay lawsuits and emerge as a sustainable enterprise. But it can lead to dissolution or liquidation.
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The NRA said in a statement Friday that it is in its “strongest financial condition in years” and that it filed for bankruptcy protection to escape “a corrupt political and regulatory environment in New York.”
But James has accused NRA leaders of wasteful, unchecked spending that led the organization to go from a $27.8 million surplus in 2015 to a $36.3 million net deficit in 2018.
The NRA, which did not immediately respond to a USA TODAY request for comment, said in a statement that it would make no immediate changes to its operations or workforce.
But the group also said it would use bankruptcy court to “streamline costs and expenses” and “proceed with pending litigation in a coordinated and structured manner” in pursuit of “many financial and strategic advantages.”
Although headquartered in Fairfax, Virginia, the organization is registered as a 501(c)(4) not-for-profit corporation in New York. In a lawsuit seeking to recoup millions and close the NRA for good, James has accused the organization of enabling executives to use NRA funds for personal travel spending, including private jets and swanky meals.
“The NRA’s influence has been so powerful that the organization went unchecked for decades while top executives funneled millions into their own pockets,” James said last year in a statement.
NRA CEO Wayne LaPierre, among those accused of using the group’s funds for his personal benefit, has denied wrongdoing.
The NRA said it will shift its nonprofit registration to Texas to “enable long-term, sustainable growth and ensure the NRA’s continued success as the nation’s leading advocate for constitutional freedom.”
The NRA has been chartered in New York since the late 19th century. That status grants James significant leverage over the association as she seeks to shut it down for alleged violation of state laws governing charities and nonprofits.
“This strategic plan represents a pathway to opportunity, growth and progress,” LaPierre said in a statement. “Obviously, an important part of this plan is ‘dumping New York.’ The NRA is pursuing reincorporating in a state that values the contributions of the NRA, celebrates our law-abiding members, and will join us as a partner in upholding constitutional freedom. This is a transformational moment in the history of the NRA.”
The bankruptcy filing likely represents a strategic bid to consolidate pending lawsuits over allegations of mismanagement in one forum, where it may not be required to compensate accusers in full, said John Pottow, a bankruptcy law professor at the University of Michigan.
The bankruptcy process typically allows filers to delay lawsuits against them until they’ve reorganized their finances and emerged from court.
“That means they’re definitely trying to preempt the litigation,” Pottow said. “It signals real litigation anxiety. They’re worried they’re going to be sued.”
Filing for bankruptcy in Texas was also likely a strategic play for a more favorable venue, he said. Organizations can legally file for federal bankruptcy protection in any jurisdiction where they operate affiliate groups.
“They’re hoping they’ll have a more Second Amendment friendly” judge in Texas, Pottow said.
There are risks in filing for bankruptcy, though. It will expose the group’s financials to public dissemination and could empower creditors to file motions seeking the ouster of executives who have mismanaged funds, Pottow said.
“If there are serious allegations of mismanagement then you might see a disgruntled creditor seek to kick out the management,” he said.
Anti-gun groups accused the NRA of trying to hide in bankruptcy.
“Let’s be clear about what’s happening here: The NRA — which is losing power and hemorrhaging money — is now filing for bankruptcy in an attempt to escape legal culpability for years of financial mismanagement and illegal self dealing,” John Feinblatt, president of Everytown for Gun Safety, said in a statement. “This desperate maneuver is a de facto admission of guilt.”
The NRA said it had “utilized all donor contributions in furtherance of the NRA’s mission.”
The NRA also said Friday it is studying the possibility of relocating its headquarters or “segments” of its operations.
The group added that it “expects to uphold commitments to employees, vendors, members and other community stakeholders.”
Founded in 1871, the NRA has built a reputation as one of the nation’s fiercest protectors of gun rights, becoming a major force in national politics and government.
The controversial organization, which boasts of more than 5 million members, has faced financial and leadership turmoil in recent years, headlined by a public power struggle between LaPierre and NRA President Oliver North that ended with North’s ouster in 2019.
In 2020, Joshua Powell, former chief of staff to LaPierre, published a book accusing the group of raising millions by cynically stoking fears of looming gun restrictions, then squandering that money on contracts, consultants and what he called LaPierre’s “billionaire lifestyle” of private planes and designer clothes.
Among other things, the NRA explored buying a $6 million mansion in a gated community near Dallas when LaPierre became concerned about his safety after a notorious school shooting in Parkland, Florida, Powell said.
“She’s only at the tip of the iceberg,” Powell said of the New York AG in a USA TODAY interview last year. “When she sees below the waterline, what she’ll find is decades of fraud, corruption, no-bid contracts to the tune of not tens of millions but hundreds of millions of dollars. It’s far worse than, in my opinion, what she has on paper at this point.”
Contributing: Jon Campbell of the Democrat & Chronicle, Susan Page of USA TODAY
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
This article originally appeared on USA TODAY: National Rifle Association, at center of heated national gun debate, files for Chapter 11 bankruptcy protection