The National Rifle Association filed for bankruptcy protection and said it plans to restructure itself as a Texas nonprofit, the latest twist in its legal battle with New York Attorney General Letitia James. The gun rights group, a New York-registered nonprofit since 1871, said it was taking the measures “to exit what it believes is a corrupt political and regulatory environment in New York.”
The New York attorney general’s office, which oversees the state’s charities bureau, filed a lawsuit in August seeking to dissolve the NRA, alleging that insiders violated the state’s nonprofit laws by illegally diverting tens of millions of dollars from the group through excessive expenses and contracts that benefited relatives or close associates.
The NRA has denied the allegations and claimed they were politically motivated. The NRA filed a chapter 11 bankruptcy petition Friday in U.S. Bankruptcy Court for the Northern District of Texas, court documents show, listing both assets and liabilities of $100 million to $500 million and more than 200 creditors. Ms. James said, “The NRA’s claimed financial status has finally met its moral status: bankrupt. While we review this filing, we will not allow the NRA to use this or any other tactic to evade accountability and my office’s oversight.”
Court documents show the NRA’s board authorized the chapter 11 petition and reorganization at a meeting on Jan. 7. The NRA said it would seek court approval to reincorporate in Texas. “This strategic plan represents a pathway to opportunity, growth and progress,” NRA Chief Executive Wayne LaPierre said. “Obviously, an important part of this plan is ‘dumping New York.’ ” Legal specialists said the bankruptcy filing, at the minimum, would complicate and delay the attorney general’s lawsuit against the NRA. Organizations often file for bankruptcy to pause litigation brought against them. Legal experts said there are risks to the NRA in the chapter 11 filing. The group will now be subject to supervision by a bankruptcy court where creditors can object to spending decisions and demand transparency into financial dealings.
Adam Levitin, a Georgetown University law professor who specializes in bankruptcy law, said one danger for the NRA is the courts may determine the petition doesn’t have a legitimate purpose. “There’s no obvious reorganizational purpose here, it’s just, ‘We want to screw over the New York AG.’ ” Mr. Levitin said that the New York attorney general’s office could seek to have the chapter 11 case dismissed or ask the bankruptcy court to appoint an independent trustee, which could wrest control of the group from Mr. LaPierre.
In addition to the NRA itself, the attorney general’s lawsuit in August named four current or former NRA officials as defendants, including Mr. LaPierre. “The lawsuit against those individuals should not be affected by the bankruptcy filing,” said Jason Lilien, a nonprofit attorney at Loeb & Loeb. As for the NRA’s plan to move to Texas, New York law requires a nonprofit to get approval from the state’s attorney general to shift its assets to another entity, says James Fishman, a Pace University Law professor and co-author of a book on nonprofit law. “There’s no way that’s going to happen until there’s a total change in the board and the AG is satisfied the organization has been cleaned up,” he said.
The headquarters of the NRA in Fairfax, Va. The gun-rights group says it plans to restructure itself as a Texas nonprofit. JIM LO SCALZO/EPA-EFE/SHUTTERSTOCK
The NRA said its restructuring plan aims to streamline costs and expenses, and there would be no immediate changes to NRA operations. For 2019, the NRA posted a $12 million deficit and a 34% drop in membership dues, as it grappled with internal turmoil and legal probes related to alleged expense abuses.
