#13: Dissolving the NRA

Table of Contents:

Dissolving The NRA
The NRA Shoots Back—Or First
The NRA Fires at Ackerman McQueen
The NRA In 2021

Dissolving the NRA

We live in the era of Shoot First and Stand Your Ground advocates. We have the NRA to thank for that. But at least as of August 6, 2020, there may be light at the end of the tunnel between NRA’s headquarters in New York and the Office of the New York Attorney General.

“NEW YORK—New York Attorney General Letitia James today filed a lawsuit seeking to dissolve the National Rifle Association (NRA), the largest and most influential pro-gun organization in the nation. Attorney General James charges the organization with illegal conduct because of their diversion of millions of dollars away from the charitable mission of the organization for personal use by senior leadership, awarding contracts to the financial gain of close associates and family, and appearing to dole out lucrative no-show contracts to former employees in order to buy their silence and continued loyalty. The suit specifically charges the NRA as a whole, as well as Executive Vice-President Wayne LaPierre, former Treasurer and Chief Financial Officer (CFO) Wilson “Woody” Phillips, former Chief of Staff and the Executive Director of General Operations Joshua Powell, and Corporate Secretary and General Counsel John Frazer with failing to manage the NRA’s funds and failing to follow numerous state and federal laws, contributing to the loss of more than $64 million in just three years for the NRA.”[1]

The core allegations are based on “laws governing the NRA’s charitable status, false reporting on annual filings with the IRS and with the OAG’s Charities Bureau, improper expense documentation, improper wage reporting, improper income tax withholding, failure to make required excise tax reporting and payments, payments in excess of reasonable compensation to disqualified persons, and waste of NRA assets.”[2]

The NRA’s finances are stunning, even to lifelong NRA members. According to Attorney General James, the NRA has “substantial losses on its balance sheet, going from a surplus of $27,802,714 in 2015 to a net deficit of $36,276,779 in 2018—contributing to a total loss of more than $64 million in just three years.”[3]

National Public Radio reported, “Seeking to dissolve the NRA is the most aggressive sanction James could have sought against the not-for-profit organization, which James has jurisdiction over because it is registered in New York. James has a wide range of authorities relating to nonprofits in the state, including the authority to force organizations to cease operations or dissolve. The NRA is all but certain to contest it.”[4]

The NRA said, “The legal action was political, calling it a ‘baseless premeditated attack on our organization and the Second Amendment freedoms it fights to defend . . . we not only will not shrink from this fight—we will confront it and prevail.’”[5]

The Voice joined the fray in its August 12, 2020, report: “Before the coronavirus pandemic posed a great threat to American life, gunmen wielding semi-automatic weapons seeking vengeance and violence in public places did, while gun lobbyists repeatedly shot down each ensuing effort to address and ensure public safety in our schools and other public venues. Most recently, a gun control bill calling for universal background checks for all gun purchases—the first major gun control legislation to come out of Congress in a quarter of a century—had passed through the House in February 2019 before predictably stalling and eventually dying in the Republican-controlled Senate.”[6]

The Voice’s early response noted, “The GOP has remained a steadfast protector of the NRA as conservatives repeatedly torpedo any attempt to pass any gun-controlling legislation. . . . [T]he NRA bills itself as ‘America’s longest-standing civil rights organization’. . . . [It] has become a multi-million [dollar] lobbying firm that contributes millions of dollars toward numerous high-profile political campaigns to support candidates whom curry favor toward the association, specifically those who block any gun-safety measures.”[7]

The Voice connected the NRA to the NRC: “The NRA plans to contribute millions on Trump’s current campaign, although the group’s spending is well below usual this time around. According to the Federal Election Commission, the NRA has spent about $900,000 since the beginning of the current election cycle, well behind previous campaign spending levels. At this point in 2018, the NRA had already spent in excess of $1.6 million.”[8]

President Trump “[S]lammed James’ suit against the group, calling it ‘a very terrible thing. 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.’”[9]

On August 24, 2020, the NRA got more bad news. It lost its own suit against New York Governor Andrew Cuomo over claims the State of New York had “was deprived of its rights under the Second, Fifth, and Fourteenth Amendments stemming from an executive order pursuant to which Governor Cuomo indefinitely shut down gun stores in New York during the pandemic by designating them as ‘non-essential’ businesses.”[10] Not surprising to most lawyers, the New York count “[g]ranted defendants’ motion for judgment on the pleadings. . . plaintiff failed to establish that the alleged conduct by defendants caused any ‘perceptible impairment’ to plaintiff’s ordinary advocacy operations.”[11]

The likely demise of the NRA was spelled out in both media and political terms by The Washington Post. Its banner headline on August 8, 2020, said all that needed to be said: “The NRA Is Doomed—It Has Only Itself to Blame.”[12] In the article/essay, the Post’s subtitle explained, “The warning signs of the group’s collapse were there before New York’s lawsuit.”[13] It chronicles five obvious reasons for the NRA’s imminent departure from America’s gun scene:

1. The 2016 elections seem light-years ago for the NRA. Its early and enthusiastic embrace of GOP presidential candidate Donald Trump represented a long-shot bet that hit the jackpot on Election Day. And the NRA was all in, pouring over $70 million into the 2016 campaign, including $31 million for Trump, triple it’s spending for 2012 Republican nominee Mitt Romney.

2. Yet two years later, the NRA’s open money spigot slowed to a trickle, which in retrospect signaled its money problems. In the 2018 midterm election cycle, the NRA found itself outspent by gun safety groups—the first time ever in a national campaign. And its cause took a political drubbing.

3. A study of political ads nationwide found an increase by a factor of twenty-two in pro-regulation ads in 2018 compared with 2014. These efforts proved key to many Democratic victories across the country, where voters ranked the gun issue as among their top three concerns.

4. The New York lawsuit (the NRA is incorporated in New York) reveals in detail extensive new allegations of rampant cronyism, corruption, sweetheart deals, and fraud. It argues that LaPierre used the NRA as his personal bank account, and that blame extends to the rest of the organization’s leaders as well.

5. NRA dissidents and their allies will regroup, whether under a reformulated banner or combined with an existing, smaller gun group, like the National Association for Gun Rights or the Citizens Committee for the Right to Keep and Bear Arms. That organization will not be able to replicate the NRA’s revenue and reputation at its height, but it has a viable path forward for a related reason. The NRA’s core source of strength has long been a resource few other interest groups can match: motivated grassroots gun activists throughout the country. These gun activists have been thoroughly betrayed by NRA leaders, yet the root cause remains no less important to them.[14]

The Washington Post speaks to and for a large segment of those who see the need for some gun regulation, and those who can fairly be described. To both groups, it said, “The NRA juggernaut of old—betrayed from within—is gone.”[15]

Sean Delany, a Westchester attorney who led the Charities Bureau of the New York Attorney General’s office in the late 1990s said, “given the amount of wrongdoing alleged in the complaint, which draws a picture of a cesspool of fraud, it’s hard to believe that the attorney general won’t be able to prevail if she can prove even a fraction of those allegations.”[16]

The NRA Shoots Back—Or First

On the same day New York Attorney General Letitia James sued the NRA, it filed a “countersuit” against her, claiming, “She has misused her office to go after the organization for political reasons. There can be no doubt that the James’s actions against the NRA are motivated and substantially caused by her hostility toward the NRA’s political advocacy.” [17]

It is unclear whether the NRA shot first or second, but either way the range was wide open. Leticia James made a campaign promise to investigate the NRA’s legitimacy as a non-profit organization and carried that torch after she was elected for the AG post because she disagrees with its politics, the suit charges.

The NRA says it was forewarned by former AG Eric Schneiderman about a possible investigation into the group, prompting the organization to undertake “a top-to-bottom compliance review of its operations and governance.”[18]

The NRA Fires at Ackerman McQueen

In September 2020, the NRA also sued its former advertising, Ackerman McQueen, in Dallas, Texas. It may be a countersuit since the NRA has for some time been the target of the company and two of its employees in Virginia.[19] “After more than 30 years in business together, the NRA and Ackerman parted ways earlier this year amid a caustic legal battle. The NRA sued Ackerman over its billing practices. Ackerman countersued for defamation. The latest legal action comes as the group faces intense scrutiny of its finances, a shakeup in its legal team and leadership, and criticism in the wake of two mass shootings earlier this month. In the new lawsuit, the NRA claims that Ackerman is still touting its work for the NRA on its website, giving the impression that the NRA is still a client and that it endorses the work Ackerman performed on its behalf. For example, Ackerman’s website falsely proclaims that NRATV is the ‘world’s most comprehensive video coverage of freedom-related news, events and culture,’ which creates the misimpression that NRATV was a successful endeavor that the NRA endorses, according to the NRA’s complaint. In actuality, the NRA recently concluded. . . that NRATV was a failed endeavor under any appropriate performance metric.”[20]

The NRA In 2021

On January 21, 2021, the NRA filed bankruptcy, and announced it would leave New York and re-incorporate in Texas instead of New York. It filed for Chapter 11 bankruptcy protection 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 2020. Sea Girt LLC made a separate bankruptcy filing Friday, listing fewer than $100,000 in liabilities.[21] That filing ran into trouble faster than a speeding bullet. “On May 11, 2021, Judge Harlin D. Hale, of the Bankruptcy Court for the Northern District of Texas found that the bankruptcy cases of the National Rifle Association of America and its subsidiary Sea Girt LLC were filed in bad faith to (i) gain an unfair litigation advantage, and (ii) avoid the regulatory scheme of the State of New York. The Court dismissed the cases without prejudice but noted that if the NRA filed a new case, the Court would revisit its concerns regarding, among other things, disclosure, transparency, secrecy, and conflicts of interest, which could cause the appointment of a trustee to address the ability of the NRA, as a debtor in possession, to fulfill its fiduciary duties.”[22]

Politico.com reported on the AP story. “The coronavirus pandemic has also upended the NRA, which last year laid off dozens of employees. The group canceled its national convention and scuttled fundraising. The NRA’s bankruptcy filing listed between $100 million and $500 million in assets and between $100 million and $500 million in liabilities. Still, the NRA claimed in announcing the move that the organization was ‘in its strongest financial condition in years.’”
Politico reported the bankruptcy came from a “special litigation committee, comprising three NRA officials formed . . . to oversee its legal strategies. The NRA board voted Jan. 7 to clarify LaPierre’s employment agreement, giving him the power to “reorganize or restructure the affairs” of the organization. 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.”

Shortly after the announcement, New York Attorney General Letitia James said she would not allow the NRA to evade accountability or oversight. The NRA’s claimed financial status has finally met its moral status. “Bankrupt,” James said.
Republican Texas Gov. Greg Abbott welcomed the news, tweeting: “Welcome to Texas — a State that Safeguards the 2nd Amendment.”[23]

On May 21, 2012 Reuters updated its coverage as the NRA moved to Texas. It said, “New York Attorney General Letitia James has urged a state court to toss the National Rifle Association’s claims that her attempts to disband the gun rights group are unconstitutional. James on Thursday evening filed a motion to dismiss the NRA’s counterclaims in litigation she brought last summer accusing the organization of financial misconduct, including diverting millions of dollars in charitable funds for the personal benefit of NRA executives and associates. Her lawsuit, proceeding in Manhattan state court, aims to dissolve the organization or, in the alternative, remove its leadership.[24]

The NRA counterclaimed “accusing James of violating its right to free speech and ‘weaponizing’ her powers to pursue a ‘blatant and malicious retaliation campaign’ against the group because she is politically opposed to its mission. The NRA also attempted to protect itself through a Chapter 11 bankruptcy in Texas, but the judge overseeing that case threw it out in May, finding that it was not filed in good faith.”[25]

Attorney General Leticia James answered, “The NRA is fraught with fraud and abuse, which is why we filed our lawsuit to remove senior leadership and dissolve the organization. For nearly a year now, the NRA has utilized one tactic after another to delay accountability, but each time the courts have rejected their maneuvers.”

James argued in Thursday’s motion that the NRA can’t support its claims that she violated its rights under the 1st and 14th Amendments of the U.S. Constitution, adding, “Illegal conduct is not subject to First Amendment protection. The attorney general also said that the NRA, in arguing that she “selectively” enforced New York non-profit law against it, failed to offer examples of similarly situated entities that received different treatment. Additionally, she argued, the organization didn’t allege specific facts to show that its rights have been violated.”

The state court litigation was largely put on hold while James worked to have the bankruptcy case thrown out in Dallas. During the bankruptcy trial, CEO Wayne LaPierre testified about gifts he received, including yacht trips provided by a Hollywood producer who does business with the NRA, but denied any wrongdoing.

[1] https://ag.ny.gov/press-release/2020/attorney-general-james-files-lawsuit-dissolve-nra.

[2] Ibid.

[3] Ibid.

[4] https://www.npr.org/2020/08/06/899712823/new-york-attorney-general-moves-to-dissolve-the-nra-after-fraud-investigation.

[5] Ibid.

[6] Will Buss, the Voice Posted Aug 12, 2020 at 2:23 PM. https://www.mcdonoughvoice.com/news/20200812/nra-needs-fixing-not-disbanding.

[7] Ibid.

[8] Ibid.

[9] Stephanie Pagones, Fox News, August 6, 2020. https://www.foxnews.com/us/nra-lawsuit-ny-attorney-general-lawsuit.

[10] New York Law Journal. August 24, 2020. Copyright 2020 ALM Media Properties, LLC. SUMMARY; Pg. p.17, col.3; Vol. 264; No. 38.

[11] Ibid.

[12] Robert J. Spitzer, The Washington Post, August 28, 2020.

[13] Ibid.

[14] Ibid.

[15] Ibid.

[16] https://www.usatoday.com/story/news/politics/2020/08/19/nra-lawsuit-ny-ag-letitia-james-past-comments/5606437002/.

[17] https://nypost.com/2020/08/06/nra-files-countersuit-against-new-york-ag-letitia-james/.

[18] Ibid.

[19] https://edition.cnn.com/2019/08/30/politics/nra-sues-ad-firm-ackerman-mcqueen/index.html.

[20] Ibid.

[21] https://www.politico.com/news/2021/01/15/nra-bankruptcy-459810

[22] https://www.kslaw.com/news-and-insights/not-in-my-court-northern-district-of-texas-bankruptcy-court-dismisses-nra-bankruptcy-cases-as-filed-in-bad-faith

[23] Ibid.

[24] The case is New York v. National Rifle Association of America Inc, New York State Supreme Court, New York County, No. 451625/2020.

[25] https://www.politico.com/news/2021/01/15/nra-bankruptcy-459810

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