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Texas judge considers whether to dismiss NRA’s bankruptcy petition

The virtual lawsuit in a North Texas bankruptcy court included testimony from current and former senior NRA officials, including CEO Wayne LaPierre, who testified on April 7 that he had heard news of the impending bankruptcy filing the General Counsel of the NRA, Chief Financial Officer. officer and other salaried officials of the NRA.

New York Attorney General Letitia James’s Office Has Asked US Bankruptcy Judge Harlin Hale To Dismiss The Bankruptcy Claim, Saying It Was Filed As A Way To “Remove The NRA From Regulatory Oversight” .

Texas attorney Gerrit Pronske, who represents James’s office in court, argued in closing arguments Monday that the bankruptcy filing should be dismissed for being filed in “bad faith,” a public letter said addressed to members of the NRA on the day the organization filed for bankruptcy in which LaPierre wrote: “The NRA is not” bankrupt “or” bankrupt. “

“We are as strong financially as we have been for years,” reads the letter signed by LaPierre.

Gregory Garman, an attorney for the NRA, argued on Monday that the organization had $ 40 million in “unfunded future litigation.” But Pronske countered that the financial statements showed the NRA had “a lot of cash on hand.”

“I would say that, as part of a good faith filing, you must be having problems with your financial situation and you must have debt problems now or for the foreseeable future,” Pronske said. “The NRA doesn’t have a debt problem … it has a regulatory problem.”

James’s office asked Hale to dismiss the bankruptcy case with prejudice so that the NRA could not re-file for bankruptcy at another location.

“ Exodus from New York ”

The NRA’s headquarters are in Fairfax, Virginia, but it was incorporated into New York State shortly after the Civil War – for 150 years.

In January, the NRA filed for bankruptcy and, as part of its petition, sought to be reincorporated in Texas, a move that came five months after James’ office filed a complaint to dissolve the organization.
James’ office alleged that the organization violated New York City laws governing nonprofit organizations by routinely bypassing the organization’s internal controls to participate in expenses that were “an improper and unnecessary use of corporate assets. charity ”.

The lawsuit alleges that the NRA leadership used millions of dollars from the group’s reserves to fund lavish private jet trips, meals and other personal expenses and that money was siphoned off to benefit insiders from the NRA and preferred suppliers, which LaPierre handpicked from associates to “facilitate his misuse of charitable assets.” and that the NRA board did not follow an appropriate process to determine the “reasonable” compensation of NRA officers, including LaPierre.

LaPierre testified during the 12-day bankruptcy lawsuit that he currently earns $ 1.3 million, after taking a 20% pay cut “voluntarily” when the organization had to cut the wages of others. employees last year.

“I think my compensation has always been reasonable,” LaPierre testified Thursday.

He also said he believed the NRA “is in a much better place today”.

“I think it’s stronger. I think the controls are stronger,” said LaPierre. “I think the ability to override the controls is not going to happen. The protections are in place. I feel very good where we are at.”

James’ office argued that if Hale does not reject the NRA’s bankruptcy petition, he should appoint a trustee to oversee the organization’s financial operations, saying “there is evidence of fraud, dishonesty, incompetence and mismanagement “on the part of current leaders.

Garman denied Monday that the NRA’s bankruptcy filing was a strategy to avoid litigation from New York Attorney General and pointed to a letter from New York Gov. Andrew Cuomo asking his administration to urge companies to ” weigh reputational risks ”for business relations with the NRA. in 2018.

“This is the start of our exodus from New York,” Garman said Monday. “Because public policy allows us to be in a place where we can exercise our constitutional rights.”

Case setting a precedent

If the NRA’s bankruptcy petition is approved, it would set a “dangerous” precedent by not allowing the New York attorney general’s lawsuit against the organization to go ahead, Brian Mason said, a lawyer litigating on behalf of the NRA’s largest creditor, advertising firm Ackerman McQueen. .

“If this case is not dismissed, Your Honor, it will throw a monkey wrench into the cogs of federalism. It will throw gasoline on the ideological fires that are already raging out of control in this country,” Mason said.

Pronske, who practiced bankruptcy law for 38 years, called the NRA filing the “worst abuse” of bankruptcy law he has ever seen, and said if the case was not not dismissed, it would be a precedent “instruction booklet” on how to file Chapter 11 “with impunity and with complete success”.

“If this case isn’t thrown out, Your Honor, you would wire that if you don’t like what’s going on in your trial in state court, get off in Dallas,” Pronske argued.

CORRECTION: An earlier version of this story contained a transcription error in a quote from attorney Gregory Garman.

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