CLOSE

The National Riflemen̵

7;s Association filed for protection against bankruptcy in Chapter 11 in Texas as part of an attempt to restructure the organization.

USA TODAY

The National Rifle Association, the powerful arms lobby that has been at the center of some of the country’s most heated arms rights debates, has filed for protection against bankruptcy under Chapter 11.

The NRA’s declaration of insolvency in Texas comes after the New York Attorney General recently filed a lawsuit to disband the group. The New York AG, Leticia James, accused the organization of diverting millions into charitable donations “for personal use by senior management.”

Chapter 11 insolvency is intended to allow companies or organizations to restructure their operations, default on debts, delay litigation and become sustainable businesses. But this can lead to dissolution or liquidation.

Is bigger better ?: Are car screens getting bigger?

IRS tax season 2021 starts soon: That’s why it starts so late

In a statement Friday, the NRA said it was “in its strongest financial position in years” and had applied for protection against bankruptcy to escape “a corrupt political and regulatory environment in New York.”

But James blamed NRA leaders for wasteful, uncontrolled spending that forced the organization to move from a surplus of $ 27.8 million in 2015 to a net deficit of $ 36.3 million in 2018.

The NRA, which did not immediately respond to a request for comment from the United States TODAY, said in a statement that it would not make immediate changes to its activities or workforce.

But the group also said it would use an insolvency court to “streamline costs and expenses” and “continue pending lawsuits in a coordinated and structured way” in pursuit of “many financial and strategic advantages”.

Although headquartered in Fairfax, Virginia, the organization is registered as a 501 (c) (4) nonprofit corporation in New York City. In a lawsuit aimed at recovering millions and closing the NRA forever, James accused the organization of allowing executives to use NRA funds for personal travel expenses, including private jets and luxury meals.

“The NRA’s influence has been so powerful that the organization has been out of control for decades as top executives put millions into their own pockets,” James said in a statement last year.

NRA Chief Executive Officer Wayne Lapierre, among those accused of using the group’s funds for personal gain, denied wrongdoing.

The NRA said it would relocate its non-profit registration to Texas to “enable long-term, sustainable growth and ensure the continued success of the NRA as a leading defender of the country’s constitutional freedom.”

The NRA has been chartered in New York since the late 19th century. This status gives James significant leverage for the association, as it seeks to close it down for alleged violations of state laws governing charities and nonprofits.

“This strategic plan is a path to opportunity, growth and progress,” LaPierre said in a statement. “Obviously, an important part of this plan is the ‘disposal of New York.’ The NRA seeks to rejoin a country that values ​​the contribution of the NRA, celebrates our law-abiding members and will join us as a partner in upholding constitutional freedom. This is a transformational moment in the history of the National Revenue Agency. “

“They want to take away your speech”: The cry for censorship unites Trump supporters and extremists after the Capitol attack

Bankruptcy is likely a strategic bid to consolidate pending lawsuits for mismanagement in a forum where prosecutors may not be required to be fully compensated, said John Potau, a professor of insolvency law at the University of Michigan.

The insolvency process usually allows the plaintiffs to delay the lawsuits against them until they reorganize their finances and go out of court.

“That means they’re definitely trying to prevent litigation,” Potou said. “This signals a real concern about litigation. They are worried that they will be tried.”

The Texas declaration of bankruptcy is also likely a strategic game for a more favorable location, he said. Organizations can legally apply for federal insolvency protection in any jurisdiction where affiliated groups operate.

“They hope to have a friendlier Judge Second Amendment,” Texas, Potow said.

There are risks in filing for bankruptcy. This would expose the group’s finances to public distribution and could empower creditors to file claims to remove executives who have mismanaged funds, Pottau said.

“If there are serious allegations of mismanagement, then you may see a disgruntled lender try to evict management,” he said.

Anti-gun groups have accused the NRA of trying to hide in bankruptcy.

“Let’s be clear what’s going on here: the NRA – which is losing power and hemorrhaging money – is now filing for bankruptcy, trying to escape legal guilt for years of mismanagement and illegal self-mutilation,” said John Feinblatt, president of Everytown. on Weapon Safety, a statement said. “This desperate maneuver is a de facto admission of guilt.”

The NRA said it had “used all donor contributions to support the NRA mission.”

The NRA also said on Friday that it was exploring the possibility of relocating its headquarters or “segments” of its operations.

The group added that it “expects to fulfill commitments to employees, vendors, members and other stakeholders in the community.”

Founded in 1871, the NRA has built a reputation as one of the fiercest defenders of gun rights, becoming a major force in national politics and government.

The controversial organization, which boasts more than 5 million members, has faced financial and leadership turmoil in recent years, led by a public power struggle between LaPierre and NRA President Oliver North that ended with the overthrow of North in 2019.

In 2020, Joshua Powell, a former chief of staff at LaPierre, published a book accusing the group of raising millions by cynically instilling fears of looming arms restrictions, then squandering that money on contracts, consultants and what he calls ” the lifestyle of the billionaire of LaPierre ”from the private sector aircraft and designer clothes.

Among other things, the NRA was investigating the purchase of a $ 6 million mansion in a gated community near Dallas when LaPierre worried about his safety after the infamous school shooting in Parkland, Florida, Powell said.

“She’s just on top of the iceberg,” Powell told New York AG in an interview with the United States TODAY last year. “When he sees below the waterline, what he will find is decades of fraud, corruption, contracts without an offer worth not tens of millions, but hundreds of millions of dollars. This is far worse than what I think is on paper in this moment. “

Contribution: John Campbell of Democrats and the Chronicle, Susan Page of the United States TODAY

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

Read or share this story: https://www.usatoday.com/story/money/2021/01/15/nra-bankruptcy-national-rifle-association-files-chapter-11/4182011001/