The National Rifle Association, whose questionable use of member dollars and shady financial arrangements The Trace unearthed, filed for bankruptcy protection in Texas.
The move comes as the gun group is contesting multiple lawsuits and facing off with attorneys general in New York State and Washington D.C. who allege violations of nonprofit law. In its most recent annual filing with the IRS, the NRA admitted to having diverted assets to leadership and identifies its outside law firm, Brewer Attorneys & Counselors, as its top vendor.
The NRA’s filing lists liabilities of $100 to $500 million and the same range for its assets.
Bankruptcy experts questioned the move on several grounds, including whether the filing was made in good faith and whether the NRA, a New York State corporation, was shopping around for a friendlier court.
NRA chief executive Wayne LaPierre announced the bankruptcy in a public letter to members and supporters. In the letter, LaPierre cast the bankruptcy filing as a way to “streamline legal and financial affairs.” In an accompanying Q and A, the NRA assured members that it was “in its strongest financial position in years” and “not insolvent.”
Secrecy, Self-Dealing, and Greed at the NRA
LaPierre also announced that the NRA “was pursuing plans” to relocate to Texas from New York, where Attorney General Letitia James filed a lawsuit in August that seeks to dissolve the gun group. LaPierre said the proposed move to Texas, which GOP officials there had encouraged, was an effort to escape “the toxic political environment in New York.”
But such a relocation would be more difficult than LaPierre let on. Under New York law, the attorney general’s office controls the dissolution of nonprofits. In 2016, President Donald Trump’s namesake foundation was under scrutiny for misuse of funds and declared that it would close, but the office blocked the move and eventually prevailed in court.
In response to the NRA’s news, James said in a statement: “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 avoid accountability and my office’s oversight.”
Brian Mittendorf, an accounting professor at The Ohio State University who has tracked the group’s finances, said available records point to structural weakness, not a liquidity crisis. “They certainly have financial problems,” he said. “But I wonder whether this is really about restructuring their liabilities, or a strategy to help navigate their ongoing legal problems.”
Anthony J. Casey, a professor at The University of Chicago Law School, said in an email that bankruptcy cannot be used to escape regulation and that the NRA’s filing may face an initial test of whether it was made in good faith. “It needs some bankruptcy purpose — usually the debtor tells a story about a perfect storm of financial distress or the breakdown of negotiations among creditors,” said Casey, a bankruptcy law specialist. “The NRA seems to claim the opposite — that they are financially doing great. They are filing just to dump New York. So they have announced that they are using bankruptcy for an improper purpose: just to avoid this state law. That is a strange way to start. And it could end up with the case getting kicked out.”
If the case goes forward, Casey said an automatic stay could bar creditors from taking action against the NRA, but the law makes an exception for government exercise of police and regulatory authority. In other words, it may not be possible for James to collect on NRA debt, but she could continue the dissolution case against the gun group. “These rules make plain sense,” Casey said. “You can’t use bankruptcy to get around prohibitions on pollution, selling illegal goods, running a criminal enterprise, or committing fraud.”
The NRA’s outside counsel William A. Brewer III, has been criticized for his massive fees and a sense among some gun rights proponents that he’s protected LaPierre to the NRA’s detriment. In November, the NRA established a subsidiary in Texas called Sea Girt LLC, a move that facilitated filing for bankruptcy in the state, where Brewer has long been a prominent attorney.