NATIONAL RIFLE ASSOCIATION FILES FOR BANKRUPTCY ANNOUNCES PLAN TO MOVE TO TEXAS FOR FREEDOM

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National Rifle Association introduction

The National Rifle Association is America’s champion gun right protector of Second Amendment legal rights. They are protectors of US patriots – advocating the right to keep as well as bear arms, advancing shooting sports and also championing weapon safety, education and training.

On January 15, 2021, at 2:48 PM, the National Rifle Association of America made its voluntary petition bankruptcy filing under Chapter 11 of the United States Federal Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in Dallas.

In this Brandon’s Blog, I look at the reason why the National Rifle Association filed for bankruptcy protection and what it means.

Attorney General James Files Lawsuit to Dissolve National Rifle Association

On August 6, 2020, New York Attorney General Letitia James filed a lawsuit looking to dissolve the National Rifle Association, the largest most significant pro-gun organization in the USA. Attorney General James claims the organization with unlawful conduct as a result of their:

• diversion of millions away from the charitable mission of the organization for personal use by senior management;
• granting contracts to the economic gain of close associates and their families; and
• appearing to hand out lucrative contracts to previous employees apparently requiring them to do nothing, in order to purchase their silence and loyalty.

The lawsuit specifically makes the claim that the National Rifle Association or NRA, as well as senior leader Executive Vice-President Wayne LaPierre and 3 other senior officials with financial mismanagement, improperly managing the organization’s funds and failing to follow various state and federal regulations, contributing to the loss of more than $64 million in simply three years for the National Rifle Association.

Allegations against the National Rifle Association

In the complaint, Attorney General James sets out numerous instances where the four specific accused stopped fulfilling their fiduciary duty to the National Rifle Association and made use of millions upon millions from its reserves for personal use and illegal self-dealing, including:

• trips for them and their families to the Bahamas;
• private jets;
• costly meals; and
• other personal travel.

In addition to shuttering its doors, Attorney General James was looking to get back millions of dollars in restitution and to prevent the four individual offenders from ever again acting as board members of any not-for-profit philanthropic organization in the state of New York.

The coronavirus pandemic has likewise negatively affected the National Rifle Association. It had to terminate its national convention. Cancelling the annual convention ended up harming fundraising. Still, the NRA declared in revealing the move that the company was “in its strongest financial condition in years.”

What led to the New York State National Rifle Association lawsuit?

The National Rifle Association chaos began with a power battle in 2019 between North and LaPierre, which included claims of self-dealing. After former NRA President Oliver North (for those of you who may be too young to know who Oliver North is, check out the Iran-Contra affair) accused the National Rifle Association‘s senior management of financial misconduct.

As a result, Wayne LaPierre pushed him out of his unpaid position. The National Rifle Association filed a claim against North to try to silence him. North counterclaimed. That is what led Attorney General James to first conduct an investigation resulting in her filing the State’s suit in August.

Another previous National Rifle Association insider exposes information about one of the most powerful lobbyists in the US. Joshua Powell was discharged from the NRA and has made strong accusations in his book titled “Inside the NRA: A Tell-All Account of Corruption, Greed, and Paranoia within the Most Powerful Political Group in America“. The book was released on September 8, 2020.

In his book, he charges Wayne LaPierre of a number of the very same allegations of mismanagement included in the New York State lawsuit. He states that the NRA has blood on its hands due to the many mass shooting cases in the United States. He charges LaPierre as well as other executives of misleading dues-paying members. He takes great care to say that some transactions fall into the classification of fraud. Powell is also named in the legal action filed by Attorney General James.

This situation immediately posed one of the biggest dangers the NRA faced since it started in New York in 1871. The National Rifle Association counterclaimed. In its counterclaim, the NRA denies the self-dealing claim and accused her of tampering with its First Amendment rights. He also claimed it is merely a “political witch hunt” (does that sound familiar?).

In response to the Chapter 11 filing, Attorney General James said she will continue to pursue the NRA in spite of the situation in Texas. “We will continue our effort because this organization has gone unchecked for years and it’s critically important that we continue to hold them accountable, even in bankruptcy court”, she said.

The National Rifle Association Chapter 11 bankruptcy filing

According to Wayne LaPierre, in filing for bankruptcy protection, the National Rifle Association states that:

“The plan can be summed up quite simply: We are DUMPING New York and we are pursuing plans to reincorporate the NRA in Texas “

In their filing, a standard question asked is: Are any bankruptcy cases pending or being filed by a business partner or an affiliate of the debtor? They answered that question by saying yes, there is a separate bankruptcy filing for Sea Girt LLC. The NRA is the single member, owner and manager of Sea Girt. Sea Girt, a limited liability corporation, was incorporated in November 2020. Wayne LaPierre signed the voluntary petition on the same day that it was filed, January 15, 2020.

This Chapter 11 filing is the opening document to get bankruptcy protection. In this first filing, the National Rifle Association estimates that it has assets of $100 million to $500 million. It estimates its liabilities as in the same range. The reason for the range is not because they don’t know, it is the standard format of an initial filing on a pre-printed form.

This initial filing is merely a summary document to gain the protection of Chapter 11 of the United States Bankruptcy Code until the debtor files the actual restructuring proposal. It is very much analogous to the filing of a Notice of Intention To Make A Proposal before filing a Division I Proposal under the Canadian insolvency regime.

As part of the Chapter 11 filing, the National Rifle Association set up a special litigation committee “to oversee the prosecution and defense of certain litigation”.

As Wayne LaPierre has stated, the real reason for the filing is to dissolve the organization and leave all of its debts behind. They plan to incorporate a new entity in Texas and then continue. Time will tell as to what transactions come under scrutiny, what will happen with the New York State litigation and the attempt to recoup millions of dollars.

National Rifle Association bankruptcy summary

Time will tell how the National Rifle Association Chapter 11 filing will proceed. It is only at its initial stage. I hope you enjoyed this Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

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We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.