The federal judge in the NRA’s bankruptcy case said on Monday he was “shooting” to deliver a ruling early next week.
“I’ve found the matters that are being concluded today to be awfully hard,” Judge Harlin Hale said after closing arguments finished. “I said the other day that this one is right at the top of my list on importance of things that I will decide over my judicial career.”
Judge Hale’s will determine what the country’s largest and most influential gun group will look like moving forward or, perhaps, if it will continue to exist at all.
Hale could allow current NRA leadership to continue through bankruptcy and protect the group from potential dissolution in New York Attorney General Letitia James’s state case against it. He could appoint a Chapter 11 trustee to displace current leadership. He could appoint an examiner to deliver an independent audit of the group. Or he could dismiss the case outright and allow James to continue her state case undisturbed.
The United States Trustee, which represents the Department of Justice in federal bankruptcy cases, made a surprise declaration that the bankruptcy should be dismissed or, alternatively, current leadership should be investigated and removed.
“This evidentiary record clearly and convincingly establishes that Executive Vice President Wayne LaPierre has failed to provide the proper oversight,” said Lisa Lambert, a lawyer in the United States Trustee’s Dallas office.
Greg Garman, who represented the NRA, bemoaned the U.S. Trustee waiting until closing arguments to take a definitive position and disputed its claims. He admitted there was wrongdoing by NRA officials, including former CFO Woody Phillips but said the group had self-corrected. He said LaPierre is not corrupt, and his leadership is needed for the group to prosper.
“There is no evidence, clear and convincing or otherwise, of fraud, dishonesty, or gross mismanagement,” he said. “The uncontroverted testimony is that Mr. LaPierre is forward-facing and that he is a prolific fundraiser, the likes of which are difficult to replace.”
Lambert said the NRA’s filing was made in bad faith and shouldn’t go forward. She said NRA leadership created a shell company to file bankruptcy in Texas and hid the plan from the rest of the NRA until the case was already filed.
“The consequences of the NRA’s actions are its own,” she said. “A filing by a solvent entity to avoid litigation in its relatively early stages with created venue, no clear board disclosure, no clear officer disclosure, is cause to dismiss. But if the court does not dismiss the Chapter 11 trustee or an examiner is an appropriate remedy.”
Garman said there is “no basis” to appoint a trustee or dismiss the case. He said, outside of the four dissenting members, the board was unified behind LaPierre and confident in his leadership.
“Their leader is Wayne LaPierre, and they will ensure that he does, as he has, the right thing for the National Rifle Association,” he said.
The Unsecured Creditors Committee sided with the NRA, stating it “strongly believes” dismissing the case would not be in the creditors’ best interest. David Dell’Aquila, a former NRA donor on the committee, broke with the committee’s official position to say a trustee should be appointed to take over the group due to continued mismanagement. Ackerman McQueen, a former top contractor of the NRA and another committee member, said the case should be dismissed and questions over NRA leadership’s financial impropriety should be settled in New York court instead.
“Whether dissolution is necessary or not is best answered by the New York State courts, who are charged with protecting the public interest,” said Brian Maso, Ackerman’s lawyer. “There’s no reason for this court to usurp the New York judiciary’s role or right to answer that question. But that’s exactly, your honor, what the NRA is asking you to do here.”
Mason said the NRA, with whom Ackerman worked closely for decades before the relationship devolved into dueling accusations of corruption in 2019, had presented a case where LaPierre was allowed to violate internal controls with unreported yacht trips at a contractors’ expense as well as lavish vacations and private flights on the NRA dime.
“The NRA spent most of its time making the case that no matter what Mr. LaPierre does, as long as the money rolls in, their big fundraiser—no matter how big of a slice he and his cronies take of that money—should be allowed to stay,” he said. “But this is the very definition of corruption. Sacrificing what is right for what is lucrative.”
Lawyers for the New York AG said the judge must dismiss the case and allow her to continue her suit in New York court or risk setting a dangerous new precedent.
“If this case is not dismissed, Your Honor, you would be telegraphing that if you don’t like what’s going on in your state court lawsuit, come on down to Dallas,” said Gerrit Pronske, the AG’s lawyer. “This abuse would not be limited to New York regulatory proceedings. If you are massively solvent and your legal case in state court in, for example, Sherman, Texas, is not going well, it’s so simple: file your new shell company in Dallas, call yourself an affiliate, file bankruptcy, and then send out a press release that afternoon that says, ‘Dump Grayson County.’ That would be the lasting legacy of this case if it’s not dismissed.”
Clay Taylor, representing the four dissenting NRA board members, including Kansas state judge Phillip Journey, got the final say at Monday’s hearing. He argued the dissenting board members have come up with a “Goldilocks solution” they believe could please everyone in the case.
“When considering the relief or, at a minimum, the alternative relief sought by the parties, the paths of the [Unsecured Creditors Committee], the U.S. Trustee, the NRA, and Judge Journey are all converging on a single solution: that someone must be responsible for the oversight and reorganization of the NRA in this court. Our proposal for an examiner meets this joint goal, fully and legally.”
Judge Hale reiterated, as he had multiple times throughout the trial, that he considers this to be the most important case he had ever presided over.
“This isn’t the longest trial I’ve ever had,” Hale said. “And it’s not the biggest one I’ve ever had with dollars, but it certainly has been a hard one on everybody, I think. I want you to know that we’re putting this at the top on importance.”