NRA Declares Bankruptcy and Wants to Move to Texas

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Photo by Bill Oxford on Unsplash

Running away will not magically prevent the NRA from facing legal consequences.

On January 15, 2021, the Associated Press reported that the National Rifle Association announced that it has filed for bankruptcy protection and will seek to incorporate in Texas.

The Associated Press also reported that that the NRA filed for Chapter 11 bankruptcy in federal court in Dallas and said it planned to incorporate in Texas, where records show it formed a limited liability corporation, Sea Girt LLC, in November of 2020. Sea Girt LLC made a separate bankruptcy filing Friday, listing few assets and fewer than $100,000 in liabilities.

This news isn’t surprising, considering the number of lawsuits that the NRA has been involved in recently.

In February of 2020, The New York State Department of Financial Services (DFS) charged that the NRA acted as an unlicensed insurance producer and deceived its members with misleading marketing practices. DFS sought civil monetary penalties and injunctive relief.

…The Department alleges that the NRA, which does not have a license to conduct insurance business in New York, violated various New York State Insurance Laws, among other things, by acting as an insurance producer without a license in endorsing and marketing insurance programs, including “Carry Guard”….

In addition, DFS alleges that the Carry Guard program “was primarily offered to firearms owners, in particular those with concealed carry permits, to provide insurance coverage that is unlawful in New York State. Carry Guard offered coverage for losses and costs associated with the aftermath of the purposeful use of a firearm, including defense costs in a criminal prosecution. Under New York law, such intentional acts cannot be insured.”

The DFS also alleged that the NRA misrepresented the cost of the Carry Guard insurance. It told members that the insurance was being offered at the lowest possible cost. Instead, “the NRA was taking for itself substantial royalties, sometimes more than 20 percent of the premiums paid.”

As a result, the NRA faced civil monetary penalties of up to $500 for each of the 28,000 Carry Guard policies — with respect to each of the three charges that carry such penalties.

On April 3, 2020, Bloomberg reported that the NRA sued New York State Governor Cuomo for closing gun shops during the coronavirus pandemic.

There were many different types of shops and restaurants that had to close down during the pandemic. The NRA only cared about the gun shops. The excuse for the lawsuit that the NRA came up with, according to Bloomberg, was that the restriction “is unconstitutional and leaves citizens defenseless while prisoners are being released early as a result of the crisis”.

Why were prisoners being released? Law360 posted a blog post in January of 2021 that provides answers to that question. In March of 2020, U.S. Attorney General William Barr issued a memorandum directing the bureau to prioritize “statutory authorities to grant home confinement for inmates seeking transfer in connection with the ongoing COVID-19 pandemic.”

That decision was made during the coronavirus pandemic, when the virus was rapidly spreading through the prison population.

Law360 also pointed out that on April 3, 2020, U.S. Attorney General William Barr released another memorandum. This one directed bureau officials to “immediately maximize appropriate home transfers to home confinement” and consider “all at-risk inmates — not only those previously eligible for transfer.”

You may have noticed that the memorandums called for home confinement. That means the prisoners would be sent home. It did not mean, as the NRA tried to imply, that prisoners would be released from prison and allowed to go wherever they wanted to and commit crimes. The NRA was using the release of prisoners — in an effort to prevent the spread of COVID-19 through the prison system — as a scare tactic.

On April 14, 2020, Bloomberg reported: A federal judge threw out a National Rifle Association lawsuit against New York Governor Andrew Cuomo for refusing to label gun shops as essential businesses allowed to stay open during the coronavirus lockdown he ordered in March.

According to Bloomberg, U.S. District Judge Mae D’Agostino in Albany, New York, ruled that the NRA did not have legal standing to sue on behalf of its members. The judge also denied the NRA’s request to once again amend its complaint to try to show it had been injured by Cuomo’s actions because it had to answer phone calls about the closure of gun shops in the state.

A copy of U.S. District Judge Mae D’Aguostino’s decision was posted on ABC News 10. From the decision:

  • The NRA claimed that Governor Cuomo’s actions violated the Second, Fifth and Fourteenth Amendments of the Constitution.
  • The NRA asked for the following relief: (1) a declaration that firearm and ammunition product manufacturers, retailers, distributors, and shooting ranges constitute essential businesses and services, and that Governor Cuomo’s prohibition of the operation of firearm and ammunition products manufacturers, retailers, importers, distributors, and shooting ranges violates the Second, Third and Fourteenth Amendments.
  • (2) A temporary restraining order, preliminary injunction and permanent injunction restraining Governor Cuomo and his officers, agents, servants, employees and all others from enforcing the Executive Order to prohibit the operation of the same group mentioned in (1)
  • (3) Nominal damages against Defendants on behalf of members of the NRA who are consumers that have been prevented by Defendants’ from purchasing ammunition or firearms.
  • Attorney’s fees (for the costs of this lawsuit).

Here are some key points from the judge’s decision: Standing

“An association has standing to bring suit on behalf of its members when (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and © neither the claim asserted nor the relief requested requires the participation of the individual members in the lawsuit”…

…In the present matter, the first amended complaint [from the NRA] alleges as follows:

As to all claims made in a representative capacity herein, there are common questions of law and fact that substantially affect the rights, duties, and liabilities of many similarly-situated New York residents and visitors who knowingly or unknowingly are subject to the New York orders, statutes, regulations, policies, practices, and customs in question. The relief sought in this action is declaratory and injunctive in nature, and the action involves matters of substantial public interest. Considerations of necessity, convenience, and justice justify according relief to Plaintiff in our presentative capacity. Further, to the extent it becomes necessary or appropriate, the NRA is uniquely able to communicate with and provide notice to its hundreds of thousands of New York members and constituents who are or would be party to any identifiable class of individuals for whose benefit this Court may grant such relief

…Based on these allegations, it is clear that Plaintiff brought this suit in its representational capacity…

…The Court agrees with Defendants [Governor Cuomo, etc.] that Plaintiff [NRA] cannot succeed in asserting associational standing…

The judge decided that the NRA’s attempt to amend its complaint three months after the case had started was acceptable under law. The judge also decided that the NRA did not bring the case in bad faith.

Futility

“In addition to undue delay, bad faith, and undue prejudice, a court may exercise its discretion to deny a party’s motion to amend a pleading when the proposed amendment would be futile.”… To survive such a motion, a party need only plead “a short and plain statement of the claim.”…

Plaintiff seeks leave to file a second amended complaint to include additional allegations, “which form an independent basis for [Plaintiff’s] standing in this case.” Plaintiff seeks to add facts it contends will support an organizational standing theory. Defendants oppose this proposed amendment, alleging it is futile because the proposed additional facts do not support organizational standing theory…

…Plaintiff’s proposed second amended complaint adds facts that Plaintiff alleges supports an organizational standing claim. The injuries allegedly suffered by Plaintiff as an organization are that Defendants’ conduct forced Plaintiff “to dedicate staff and resources to fielding … calls and providing advice to its members.”…

… Plaintiff further alleges that “[t]he time and resources dedicated to these efforts was diverted from the NRA’s core functions of advocacy, safety and training” and that Plaintiff had to “cancel firearm education and training events in the State of New York and therefore preventing [Plaintiff] from conducting its core functions and responsibilities… …The relief Plaintiff seeks includes nominal damages, as well as injunctive and declaratory relief…

…Based on the facts before the Court in Plaintiff’s proposed second amended complaint, the alleged dedication of staff and resources to field phone calls and provide advice to Plaintiff’s members, as well as allegedly cancelling events, is “insufficient to establish organizational standing to pursue a claim for injunctive or declaratory relief.”…

…The proposed second amended complaint is completely devoid of any allegation detailing how the general support that was purportedly provided by Plaintiff, which consisted of fielding phone calls and providing advice to its members, was inconsistent with Plaintiff’s ordinary operations of advocating its members’ rights… …Plaintiff also provided no specific facts to allege that Defendants’ conduct burdened Plaintiff’s ability to carry out its usual activities. Furthermore, while Plaintiff alleges that it was forced to cancel firearms education and training events… …Plaintiff does not reference how many events were cancelled because of the Executive Order. Additionally, Plaintiff did indeed organize an online training program…

…In sum, having failed to establish that the alleged conduct by Defendants caused any “perceptible impairment” to its ordinary advocacy operations, Plaintiff has failed to satisfy its burden to affirmatively show an injury-in-fact requisite for organizational standing…

CONCLUSION

After carefully reviewing the entire record in this matter, the parties’ submissions and the applicable law, and for the above stated reasons, the Court hereby

ORDERS that Defendants’ motion for judgement on the pleadings is GRANTED; and the Court further

ORDERS that Plaintiff’s cross motion for leave to amend the first amended complaint is DENIED; and the Court further

ORDERS that the Clerk of the Court shall enter judgement in Defendants’ favor and close this case; and the Court further

ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision and Order on the parties in accordance with the Local Rules.

As you may recall, on August 6, 2020, New York Attorney General Letitia James filed a lawsuit against the National Rifle Association (NRA). The lawsuit has nothing to do with guns. Instead, it is about the inappropriate uses of money that the NRA received as donations.

In short, the NRA registered as a 501(c)(4) not-for-profit charitable organization. The lawsuit alleges mismanagement led to the waste and loss of millions of assets and contributed to the NRA reaching a deteriorated financial state.

The lawsuit also alleges that the NRA’s board’s audit committee was negligent in its duty to ensure appropriate, competent and judicious stewardship of assets by the NRA leadership. Part of the lawsuit alleges that four men “overrode and evaded internal controls to allow themselves, favored board members, employees, and vendors to benefit through reimbursed expenses, related party transactions, excess compensation, side deals, and waste of charitable assets without regard to the NRA’s best interests”.

The four men named in the lawsuit were: Executive Vice-President Wayne LaPierre, Former Treasurer and Chief Financial Officer Wilson “Woody” Phillips, Former Chief of Staff and Executive Director of General Operations Joshua Powell, and Corporate Secretary and General Counsel John Frazer. The NRA’s Public Relations and Advertising Firm Ackerman McQueen was also named.

Attorney General James seeks to dissolve the NRA and asked the court to order LaPierre, Phillips, Powell, and Frazer: to make full restitution for funds they unlawfully profited and salaries earned while employees; pay penalties; recover illegal and unauthorized payments from the four individuals; and remove LaPierre and Frazer from the NRA’s leadership. (Phillips and Powell were no longer part of the NRA at the time this lawsuit was filed).

In addition, Attorney General James wanted the court “to ensure that the four individual defendants can never again serve on the board of a charity in New York.”

Also on August 6, 2020, Fox News reported that the NRA “is fighting back against a lawsuit filed Thursday by New York’s attorney general by submitting its own civil suit against the state official, accusing her of defamation and violating its rights to free speech.”

Again, the lawsuit filed by New York Attorney General Letitia James has absolutely nothing to do with free speech. The lawsuit is about the inappropriate use of money that the NRA, which is a charitable organization, received from donations.

Fox News also reported that President Trump called Attorney General Letitia James’s lawsuit against the NRA “a very terrible thing.” Fox News included this quote from President Trump:

“I think the NRA should move to Texas and lead a very good and beautiful life. And I’ve told them that for a long time. I think they should move to Texas — Texas would be a great state or to another state of their choosing — but I would say that Texas would be a great place and an appropriate place for the NRA”

The quote makes it clear that the reason the NRA chose to leave New York and move to Texas was because President Trump suggested it.

The NRA filed their lawsuit against New York Attorney General Letitia James in the United States District Court for the Northern District of New York. That is a different venue than the lawsuit New York Attorney General Letitia James filed against the NRA. She chose the Supreme Court of the State of New York.

The NRA sued New York Attorney General Letitia James “both individually and in her official capacity”.

In short, the NRA’s lawsuit appears to try and mislead the court about the purpose of lawsuit against it that was filed by Attorney General Letitia James. There is no mention of the four people in the NRA who took donations and used the money for their own personal gain.

Most of the lawsuit is a personal attack on New York Attorney General Letitia James. After making comments that are completely unrelated to the lawsuit filed by Attorney General Letitia James, the NRA tried to persuade the Court that the New York Attorney General’s lawsuit against the NRA was actually a violation of the NRA’s first and fourteenth amendment rights.

In addition, the NRA also decided to use their lawsuit to complain about New York Governor Andrew Cuomo. The Governor has nothing to do with the lawsuit filed by New York Attorney General Letitia James against the NRA. Governor Cuomo was involved in an entirely unrelated lawsuit against the NRA.

Again, the lawsuit filed by New York Attorney General Letitia James is focused on the misuse of funds by four members of the NRA. There is nothing in her lawsuit that has anything to do with freedom of speech.

In its countersuit, the NRA claimed that New York Attorney General Letitia James called the NRA a terrorist organization.

In October of 2018, Ebony posted an article titled: “Letitia ‘Tish’ James on Becoming New York’s Next Attorney General”. It was written by Teddy Grant.

The article was written when Letitia James was running to be elected as the next New York Attorney General. If she won, she would become the the first Black woman to hold a statewide elected office in New York state.

Here is the full quote from Letitia James that the NRA shortened in their countersuit. She was asked by Ebony, “What is the most important issue you’ve heard from prospective voters?” Letitia James answered:

President Donald Trump and the threat to our democracy and our values. The fact that his policies have reversed all the progress that we made under President Barack Obama and others. There’s an issue of public corruption in New York state; I will seek to restore confidence and integrity in public service. The foreclosure crisis is not behind us, students debt is a major issue, health care is a challenge since they repealed the individual mandate, people are having a difficult time with premiums that have increased and are often times deciding to go without medicine because of the costs, resulting in premature death and gun violence. The NRA holds [itself] out as a charitable organization, but in fact, [it] really [is] a terrorist organization. Women’s rights . . . in New York, we have not codified Roe v. Wade, and last but not least, equal pay for equal work. We can address the feminization of poverty in the state.

Letitia James was asked what prospective voters thought were important issues. She listed them out. It appears some prospective voters identified the NRA as a terrorist organization. When you see the full quote, it is obvious that the NRA “cherry picked” a tiny piece of it, took it out of context, and used it as a way to anger NRA members.

The Free Dictionary defines “terrorist organization” as: a political movement that uses terror as a weapon to achieve its goals.

It is clear that the NRA is a political movement. The vast majority of its political funding goes to Republican politicians, according to OpenSecrets.org. In 2019–2020, the NRA spent $589,200 on federal candidates. $583,250 (98.99%) went to Republicans. $4,950 (0.84%) went to Democrats. The NRA spent $5,000 on Donald Trump in 2019–2020.

On December 24, 2020, the NRA tweeted: “NRA invests at least $4.5 million in Georgia runoff elections”. It included a link to a Fox Business article featuring a photo of Republican candidates Kelly Loffler and David Perdue.

(Both of those candidates lost their seats.)

The NRA also uses terror as a weapon to achieve its goals. For example, its Twitter account contains several tweets that appear to be designed to make people feel afraid or unsafe. These tweets are likely to designed to help the NRA to achieve its goals of recruiting new members. People who don’t buy guns aren’t going to be interested in becoming a member of the NRA.

A few examples:

January 14, 2021: ‘CRIMINALS DO NOT FOLLOW GUN CONTROL LAWS! It’s really that simple”.

January 10, 2021: “On Friday, Biden pledged to DEFEAT THE NRA. Biden wants to ban our semi-auto rifles, tax our guns/mags & more. He knows the only thing standing in his way to DISMANTLE THE 2ND AMENDMENT is NRA. Gun owners must stay vigilant & be engaged in elections and the legislative process.”

November 28, 2020: “.22 .300 .9MM .40 .45 All faster than dialing 911!”

November 27, 2020: “The only way to stop a bad guy with a gun IS A GOOD GUY WITH A GUN.”

November 23, 2020: “19.48 million Americans carry concealed handguns — up 34% since 2016! That’s 19.48 million more Americans who REFUSE to be victims.”

November 8, 2020: “Making good people HELPLESS will NOT make bad people HARMLESS.”

November 2, 2020: “VOTE TOMORROW like your guns, and your lives, depend on it. Because they do.”

October 7, 2020: “Vote like your gun and your life depend on it. Because THEY DO! #VPDebates2020”

September 29, 2020: “Vote like your gun and your life depend on it. Because THEY DO!”

September 13, 2020: “Vote like your gun and your life depend on it. Because THEY DO!”

On August 7, 2020, New York Attorney General Letitia James posted a press release titled: “Attorney General James Refuses to Back Down in Fight Against NRA”. From the press release:

AG James Bats Down Notion NRA Can Pick Up and Move to Another State

New York Attorney General Letitia James today released the following statement in response to a National Rifle Association (NRA) countersuit that seeks to distract from illegal conduct to divert millions of dollars away from the organization’s charitable mission to personally benefit senior leadership, as well as to claims by President Donald Trump and others that the NRA should relocate to another state:

“While President Trump and others have suggested that the NRA should simply pick up and leave New York in an effort to evade responsibility, I’d remind them that we shut down the president’s own foundation, recouped millions in diverted funds after unearthing the illegal use of charitable funds, and directed those funds to lawful organizations for legitimate charitable purposes. We intend to do the same with the NRA. To be clear, no charity registered in New York state, including the NRA, can dissolve and relocate to another state without approval from my office or the Supreme Court of New York. As long as our lawsuit continues, the NRA must stay right where it is and answer for their deep-rooted fraud. The facts speak for themselves and our lawsuit will continue undeterred…

On November 18, 2020, DFS Superintendent of Financial Services Linda A. Lacewell announced that the New York State Department of Financial Services has entered into a consent order with the NRA. This is in reference to the February 5, 2020, lawsuit. The case was resolved by a consent order that included a civil monetary penalty of $2.5 million for violations of New York insurance laws.

In addition, the NRA was banned from marketing insurance in the state of New York or receiving compensation in connection with any newly issued New York insurance policies for five years — irrespective of whether the NRA obtains a license. DFS Superintendent of Financial Services Linda A. Lacewell noted that this brought to a close a three-year investigation.

“The NRA operated as an unlicensed producer and broke the New York Insurance Law by soliciting insurance products and receiving compensation,” said Superintendent Lacewell. “Even worse, the NRA violated the New York Insurance Law by soliciting dangerous and impermissible insurance products, including those within its Carry Guard program that purported to insure intentional acts and criminal defense costs. The Department will continue to protect the integrity of the insurance market for the purposes of safety and soundness and the good of all customers.”

The same day, Democrat & Chronicle reported that New York was one of several regulators investigating the NRA’s Carry Guard program after the NRA launched it in 2018. The insurance program promised to cover the legal fees and civil liability costs of policy holders involved in incidents in which they claimed they acted in self defense.

New York State’s investigation expanded to examining a variety of insurance products, which were offered by licensed insurers Lockton Affinity and AGIA. The NRA marketed those policies to its New York members through advertisements, including YouTube videos, and received compensation for every sale. State regulators found that the NRA was illegally acting as an insurance provider in part because it was compensated for sales.

According to Democrat & Chronicle, part of the agreement prevents the NRA from allowing licensed insurers to use its logo for the next five years in New York. The NRA was also not allowed to collect compensation from any insurance sales.

The NRA had to pay a $2.5 million penalty, as part of the consent decree. The consent order did not require the NRA to admit fault. However, it does prevent the organization from disputing any of the facts contained in it.

On November 25, 2020, The Wall Street Journal posted an article titled: “NRA Acknowledges Improper Executive Benefits in New Tax Filing”. It was written by Mark Maremont. From the article:

The National Rifle Association disclosed that current and former top executives received at least $1.4 million in improper or excessive benefits from the organization in violation of nonprofit rules, the first time the group has publicly admitted the lapses.

The NRA, in its tax filing covering 2019, also reported a $12.2 million deficit and 34% decline in member dues in 2019, as the gun-rights organization grappled with internal turmoil and external legal probes related to alleged expense abuses by its top officials.

Wayne LaPierre, the NRA’s chief executive, repaid the NRA $300,000 related to travel expenses from 2015 to 2019 that the nonprofit group originally paid for him but has now determined to be an “excess benefit” under tax rules, according to the filing. Mr. LaPierre is estimated to owe a special excise tax of about $75,000 on the extra income, the NRA said.

“The vast majority of Mr. LaPierre’s travel was undertaken in strict compliance with NRA policy,” an NRA spokesperson said in a statement Wednesday. “To the extent here were any questions about certain travel expenditures, Mr. LaPierre reimbursed the NRA.”…

On December 22, 2020, The Hill (and other news sites) reported that a coalition of 16 Republican attorneys general were backing the NRA in its legal challenge against New York Attorney General Letitia James.

The group of attorneys general is led by Arkansas Attorney General Leslie Rutledge. He filed an amicus brief supporting the NRA in the U.S. District Court for the Northern District of New York. Republican Attorneys General from Alaska, Georgia, Idaho, Mississippi, Oklahoma, Kansas, Kentucky, Louisiana, Missouri, Ohio, South Carolina, South Dakota, Texas, Utah, and West Virginia also joined in on the amicus brief.

I’ve read the amicus brief, and it sounds like the attorneys general do not understand what New York Attorney General Letitia James’s lawsuit against the NRA is about. Attorney General Letitia James’s lawsuit against the NRA is about the money the charitable organization received which was used for the personal gain of four members of the NRA.

The attorneys general appear to be under the incorrect impression that the lawsuit is about the first amendment and the second amendment. Neither the first, nor the second, amendment allows people to misuse the money that was given to a charitable organization.

The attorneys generals are also asking the Court to dismiss Attorney General Letitia James’s lawsuit against the NRA.

In a statement to The Hill, Attorney General Letitia James said the NRA “went unchecked for years while executives funneled millions into their own pockets to fund lavish lifestyles filled with private jets, pricey vacations, expensive meals, and no-show contracts.”

“The NRA has been a breeding ground of fraud, abuse, and brazen illegality,” she said. “Simply put, the rot runs deep, which is why our lawsuit to dissolve the organization will continue undeterred.”

On January 15, 2021, The National Rifle Association (NRA) posted a press release titled: “NRA Leaves New York To Reincorporate in Texas, Announces New Strategic Plan”. Here is a little bit of the press release:

The National Rifle Association of America (“NRA”) today announced it will restructure the Association as a Texas nonprofit to exit what it believes is a corrupt political and regulatory environment in New York. The move will enable long-term, sustainable growth and ensure the NRA’s continued success as the nation’s leading advocate for constitutional freedom — free from the toxic political environment of New York.

The NRA plan, which involves the protection of the bankruptcy court, has the Association dumping New York and organizing its legal and regulatory matters in an efficient forum. The move comes at a time when the NRA is in its strongest financial condition in years…

The rest of the press release mentions the second amendment (several times) and is incredibly vague about exactly what their plan is. It appears the NRA is unaware that it cannot move itself to Texas without the permission of New York Attorney General’s office or the Supreme Court of New York.

It is incomprehensible why the NRA stated that the move to Texas “comes at a time when the NRA is in its strongest financial condition in years” in the same press release where it points out that it is seeking the protection of the bankruptcy court. Both things cannot possibly be true at the same time.

On January 15, 2021, New York Attorney General Letitia James posted a press release titled: “NRA’s Financial Status Finally Matches Moral Status: Bankrupt”. From the press release:

New York Attorney General Letitia James today released the following statement after the National Rifle Association (NRA) declared it would seek bankruptcy protections in federal court, as well as sought to reincorporate its nonprofit status in the state of Texas:

“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.”

UPDATE: On January 16, 2021, The Guardian posted an article titled: “Major NRA donor to challenge gun group’s bankruptcy over alleged fraud”. It was written by Ed Pilkington. From the article:

A major donor to the National Rifle Association is poised to challenge key aspects of the gun group’s bankruptcy filing, in an attempt to hold executives accountable for allegedly having defrauded their members of millions of dollars to support their own lavish lifestyles.

Dave Dell’Aquila, a former tech company boss who has donated more than $100,000 to the NRA, told The Guardian on Saturday he was preparing to lodge a complaint in US bankruptcy court in Dallas, Texas. If successful, it could stop top NRA executives discharging a substantial portion of the organization’s debts.

It could also stop Wayne LaPierre, the NRA’s controversial longtime chief executive, avoiding ongoing lawsuits that allege he defrauded the pro-gun group’s members to pay for luxury travel to the Bahamas and Europe and high-end Zegna suits…

Originally published at https://bookofjen.net on January 18, 2021.

Freelance writer with invisible illnesses and chronic pain. Poet, podcaster, video game player, creator of strange artwork, they/them

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