The National Rifle Association’s bankruptcy trial kicked off to fireworks in a federal court in Texas on Monday, as a lawyer from New York Attorney General’s office ripped CEO Wayne LaPierre’s gambit as a “masterclass in bad faith and dishonest conduct.”
When the NRA filed a federal bankruptcy petition in Texas earlier this year, the group’s website boasted of being “in its strongest financial condition in years.” The GOP power broker claims that it is “dumping New York” and “utilizing the protection of the bankruptcy court” in order to organize its “legal and regulatory matters in efficient forum.”
“By the NRA’s own words, it is not only solvent but financially strong,” Assistant Attorney General Monica Connell told a judge on Monday morning.
The NRA has no offices in Texas but has asserted venue via an affiliate, Sea Girt, LLC, an entity that the attorney general described as a “wholly-owned shell company” established in the Lone Star State three months ago as a “toehold” for the proceedings.
Attorney Brian Mason, representing the NRA’s former public relations firm Ackerman McQueen, also argued that the bankruptcy petition had been filed in bad faith.
“Bankruptcy courts cannot be the subject of fraud,” Mason told the judge, adding that the NRA is trying to “game” the bankruptcy system.
The NRA has been embroiled in litigation with New York Attorney General Letitia James (D), Ackerman McQueen, and the gun group’s ex-president Oliver North in the Empire State. The attorney general’s suit threatens to shut the NRA down for violating New York charity law, accusing LaPierre of using the gun group as his “personal piggy bank” and funding his private jet trips to the tropics and African safaris with donor money. The bankruptcy judge was told today that donor money also paid LaPierre’s “wife’s glam squad.”
Describing that lawsuit as politically motivated, the NRA noted that James described the group as a “terrorist organization” on the campaign trail, and LaPierre has denied the allegations of fraud and mismanagement.
The NRA’s lawyer Greg Garman used James’s remark from the campaign trial against her in his opening statement.
“She called us a terrorist organization,” Garman noted. “She called us a criminal enterprise.”
Garman, who defended LaPierre flying private as necessary for his protection, claimed that her predecessor Eric Schneiderman, a fellow Democrat who resigned in disgrace amid sexual misconduct allegations printed in the New Yorker, warned the NRA to get its house in order because regulators were going to scrutinize them.
In 2018, the NRA’s counsel claims, the organization conducted a “360-degree top-down review” as a course correction. Garman said that the NRA made a whistleblower its chief financial officer, fired its lobbyist, and established an audit committee.
Turning against its longtime client, Ackerman McQueen’s attorney warned that allowing a solvent entity to declare bankruptcy to skirt liability will “open to floodgates” to other corporations hoping to duck enforcement actions in other jurisdictions perceived to be unfriendly.
“Today it’s New York and the NRA, tomorrow it’s X or Y Corporation, in any of the other 49 states,” Mason said.
During his opening statement, Mason rolled footage from LaPierre’s deposition where the NRA chief fretted that putting the association into a receivership would effectively “destroy” the organization. The NRA’s counsel claimed that this was an appropriate remark, because a receivership would amount to a “death sentence.”
As for Ackerman McQueen’s request to dismiss the NRA’s bankruptcy petition, Mason emphasized: “My client does not make this request lightly: Ackerman McQueen stood side-by-side with the old NRA.”
Ackerman McQueen’s lawyer claims that it was the NRA that became of a “shadow of itself,” beset by “fraud, dishonesty, misconduct and gross mismanagement.”
Other former allies have turned against the NRA in court: Its board member and ex-Wichita judge Phillip Journey wants an examiner to probe the group, and the NRA’s former heavy hitting donor David Dell’Aquila, a tech company head, proposed a class action lawsuit alleging financial improprieties.
Journey’s lawyer Jermaine Watson told the judge his client still believes the NRA is important to the country but “definitely” has concerns its current leadership is “totally destroying an organization that has withstood the test of time for 150 years.”
Bankruptcy Judge Harlin Hale is presiding over the trial, which will enter into witness testimony on Monday afternoon.
Update—April 5 at 2:51 p.m. Central Time: This story has been updated to add the opening statement of the NRA’s attorney Greg Garman.
[photo by SAUL LOEB/AFP/Getty Images]
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