Judge Harlin Hale

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The Full NRA Response To Bankruptcy Dismissal

May 12, 2021 by 6 Comments

The NRA has put out a much longer and complete response to the dismissal of their Chapter 11 bankruptcy case. A quick read through it shows a few thing. First, they are trying to put a positive spin on what is really not a positive for the NRA. That is to be expected.

Second, they cherry-picked the decision. When they say they have the option to file a new case, they forget to say the judge said any new case would have a trustee. That would mean Wayne and Bill Brewer would be booted. Do you really think Wayne and Brewer would file again when they know they are out?

Third, Wayne and the rest of the “Gang of Four” (as some have called them) all made statements to the effect that the NRA is strong, secure, and they will keep up the good fight. The question is are they fighting to keep their positions or actually fighting to advance the Second Amendment. As many have commented, just think what all the millions wasted on the bankruptcy’s legal fees could have done to advance the fight for the Second Amendment.

Below is the NRA’s full response in its entirety. I haven’t even highlighted the stupid shit.

NRA Moving Forward with Legal and Business Strategy in Response to Dismissal of Bankruptcy Filing 

Court Finds That NRA’s Move to Texas Could Still Be Accomplished Outside Bankruptcy

In response to today’s dismissal of a prior bankruptcy filing, the National Rifle Association of America (“NRA”) announced that it will continue to fight on all fronts in the interests of its mission and its members.   

The New York Attorney General and others had aligned against the NRA in opposition to the NRA’s reorganization plan announced on January 15, 2021. They sought to dismiss the NRA’s bankruptcy filing with prejudice or, in the alternative, appointment of a court-appointed trustee, to take control of the Association’s business and financial affairs. Importantly, a United States Bankruptcy Court in Dallas did not appoint a Trustee or examiner, even as it ruled the Association may not proceed with the chapter 11 case. The court dismissed the bankruptcy filing without prejudice, meaning the NRA does have the option to file a new bankruptcy case. 

During a 12-day hearing that occurred over approximately four weeks, the NRA established that it had adopted new policies and accounting controls, displaced many “insiders” who had allegedly abused the Association, and accepted reparations for costs voluntarily determined to be excess benefits. The hearing proceedings focused on the NRA’s compliance efforts, and the organization’s renewed commitment to good governance. 

In an opinion, dated May 11, 2021, the Hon. Harlin D. Hale, U.S. Bankruptcy Judge, Northern District of Texas, wrote, “In short, the testimony…suggests that the NRA now understands the importance of compliance. Outside of bankruptcy, the NRA can pay its creditors, continue to fulfill its mission, continue to improve its governance and internal controls, contest dissolution in the NYAG Enforcement Action, and pursue the legal steps necessary to leave New York.”

Underscoring the importance of the proceedings, Judge Hale previously said the NYAG motion contesting the NRA’s Chapter 11 filing was “the most important motion I’ve ever heard as a judge.”  

The NRA remains determined to further streamline its legal and business affairs in the best interests of its constituents and members.  

NRA CEO & EVP Wayne LaPierre said today’s decision – and the ongoing independence of the NRA – empowers the Association’s approximately 5 million members. 

“The NRA remains committed to its members and our plan for the future,” says NRA CEO & EVP Wayne LaPierre. “Although we are disappointed in some aspects of the decision, there is no change in the overall direction of our Association, its programs, or its Second Amendment advocacy. Today is ultimately about our members – those who stand courageously with the NRA in defense of constitutional freedom. We remain an independent organization that can chart its own course, even as we remain in New York to confront our adversaries. The NRA will keep fighting, as we’ve done for 150 years.” 

The NRA remains determined to confront NYAG Letitia James in her attempt to dissolve NRA. The NYAG seeks such remedies as part of a lawsuit she filed on August 6, 2020. In summer 2018, then NYAG candidate James called the NRA a “criminal enterprise” and “terrorist organization.” Her subsequent pursuit of the NRA has been characterized by many legal experts and constitutional scholars as a gross weaponization of legal and regulatory power.

“The NRA will continue to defend the interests of the Association in New York,” says William A. Brewer III, counsel to the NRA. “Our client has faith in its leadership, and its demonstrated commitment to good governance.” 

“The record reflects the NRA undertook a ‘course correction’ with respect to its management,” says NRA President Carolyn Meadows. “The Association is strong and secure – once again moving forward above the objections of its adversaries and those who oppose Second Amendment freedoms.”

The NRA can still pursue establishing business operations in Texas, and the organization will continue to explore moving its headquarters there from Virginia. Texas is home to more than 400,000 NRA members. 

The bankruptcy hearing became the nation’s highest -profile legal proceeding of its kind. The virtual proceedings, involving more than 20 witnesses, explored novel issues that define the roles and responsibilities of legal defendants subjected to the threat of dissolution. The NRA has maintained it is financially viable, following its current pathway, in part, to escape a toxic political environment in New York. The NRA was incorporated in New York in 1871. 

The legal proceedings revealed the NRA’s commitment to good governance and efforts to follow the “principled path” with respect to its management practices, board oversight, and member obligations under Mr. LaPierre’s leadership. Mr. LaPierre remains at the helm of the organization, directing political affairs, grassroots activities and other functions essential to the defense of the Second Amendment. 

“The record establishes that NRA members can have great confidence in this institution and its plans for the future,” says NRA First Vice President Charles Cotton. “The Association will work with members, vendors, and other constituents to continue the fight for freedom.” 

“Our NRA is pressing forward with its plans, and remains determined to promote constitutional freedoms,” says NRA Second Vice President Lt. Col. Willes K. Lee, USA (Ret). “We will never shrink from the tough and principled stands we take on behalf of our law-abiding 5 million members.” 

Read Judge Hale’s Order Granting Motions To Dismiss here.

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NRA Bankruptcy Dismissed

May 11, 2021 by 6 Comments

Just a few minutes ago, Judge Harlin Hale issued his decision in the NRA bankruptcy case. In what can only be considered a blow for the NRA, he dismissed the case.

He said:

The question the Court is faced with is whether the existential threat facing the NRA is the
type of threat that the Bankruptcy Code is meant to protect against. The Court believes it is not.
For the reasons stated herein, the Court finds there is cause to dismiss this bankruptcy case as not
having been filed in good faith both because it was filed to gain an unfair litigation advantage and
because it was filed to avoid a state regulatory scheme. The Court further finds the appointment
of a trustee or examiner would, at this time, not be in the best interests of creditors and the estate.

I will say I expected him to take the middle ground of either an examiner with enhanced powers or a trustee.

More later after I have had time to read the full decision.

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No Decision Yet In NRA Bankruptcy Case

May 11, 2021 by

Judge Harlin Hale has not rendered a decision yet in the NRA’s Chapter 11 bankruptcy case.

Every hour or so today I would check the Federal court’s online website called Pacer to see if anything new related to the case had been filed. The only filing today was by an attorney who wanted to be admitted before the court.

I will keep a watch going tomorrow and every day afterwards until a decision is released.

In the meantime, the blog NRA In Danger has three new posts that are worth reading. The first deals with Wayne, the second with the Board, and the third with the timing of the debacle. I don’t know who is writing that blog but their observations are spot-on.

On Wayne:

From the first, LaPierre was in far over his head. He was educated in politics and made his living in lobbying. He had zero training and experience in lobbying, and now he the supreme leader of what became a $350 million a year corporation. It was as if you took a not-particularly-bright private and gave him command of a brigade. “What do I do now?”

La Pierre’s handlers, the real power. He reacted by relying on “handlers” and hoping they knew how to handle things. They made all his decisions. In theory the board elected LaPierre EVP, in fact they elected his handlers, Angus McQueen and later Bill Brewer. He became a figurehead while they dictated his decisions.

On the Board:

For most, it is the highest achievement of their life, their greatest boast, and so it is something to be protected at all cost.

Both of these observations perfectly correlate with what I’ve been told by former directors and other insiders. I don’t know what Judge Hale is going to rule but I really hope that he doesn’t accept the reorganization plan as it now stands nor does he leave Wayne in charge minus an overseer.

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Closing Arguments In NRA Case

May 4, 2021 by 5 Comments

All sides had their chance to make their closing arguments yesterday in the NRA’s bankruptcy case. The morning session was devoted to the NY Attorney General, the US Trustee, and a few others with the afternoon being primarily the NRA along with short rebuttal statements from the NY Attorney General’s team, AckMac, and Judge Journey’s attorney.

The blog NRA IN Danger does a good job summarizing the arguments from the morning and the afternoon so I won’t go into much detail.

I listened in to parts of both the morning and the afternoon arguments. The most surprising came from Lisa Lambert who is the Assistant US Trustee. Her job is to represent the process and preserve the integrity of bankruptcy.

From what I saw and heard yesterday morning, she was on fire. I wish I had video to be able to post but that is not available nor would it be permitted.

Danny Hakim of the New York Times devoted an entire column to her argument.

The National Rifle Association’s hopes of end-running a legal challenge in New York were dealt a serious blow on Monday when a Justice Department official rebuked its leadership and called for the dismissal of its bankruptcy filing or the appointment of an outside monitor to oversee its finances.

Lisa L. Lambert, a lawyer in the United States Trustee’s office, which is part of the Justice Department, said the “evidentiary record clearly and convincingly establishes” that Wayne LaPierre, the longtime N.R.A. chief executive, “has failed to provide the proper oversight.” For a number of years, she added, “the record is unrefuted that Wayne LaPierre’s personal expenses were made to look like business expenses.”

She said that if an Examiner is appointed that they must have a budget much higher than the $350,000 proposed by Judge Phillip Journey and that they have power over spending.

Her comments flustered Greg Garman who is one of the bankruptcy attorneys representing the NRA according to Hakim. I don’t know whether it is because she didn’t mince words or because it is rare to have the US Trustee fire a broadside. Professor Adam Levitin of Georgetown Law said he thought the NRA was in real trouble if the US Trustee gets involved as she did. Professor John Pottow of the University of Michigan Law School echoed his comments noting it was very rare.

While Mr. Garman asserted the transgressions of the NRA were relatively minor and that it “had righted its ship” obviating the need for outside oversight, Ms. Lambert, the Assistant US Trustee, disagreed as she laid out episodes of corruption by LaPierre and others in the NRA.

Regarding the charter flights, she said: “LaPierre says these are for security, but the evidence says he picked up family. The evidence says that extra stops were not to be noted in the booking records. And the testimony is unrefuted that no N.R.A. policy authorizes charter plane flights.”

Mr. LaPierre’s close aide, Millie Hallow, even diverted $40,000 for her son’s wedding, Ms. Lambert noted, but beyond repaying that amount after she was caught, she “otherwise has suffered no additional consequences.”

Mr. Garman said throughout the trial that there was a “line of demarcation” in 2018, when the N.R.A. undertook a self-audit and corrective measures. But Ms. Lambert said the evidence presented in the 12-day trial showed that “even after the self-described course correction the irregularities were not fixed,” noting that, among other things, Craig Spray, the former chief financial officer, refused to sign the N.R.A.’s 2019 tax filings.

“The N.R.A. has stated that it is seeking refuge from the New York attorney general’s actions and wishes to change its state of incorporation,” she added. “That can be done outside of bankruptcy. It is not a legitimate reason for filing bankruptcy. ”

Judge Hale ended the hearing by thanking the attorneys on all sides for keeping it relatively civil and noted this was one of the longest trials in his career as a bankruptcy judge. He also jokingly said that this trial was not the reason he plans to retire next year as he had already announced those plans before being assigned this case.

Judge Hale ended by saying a written ruling on the case would be out by next week.

UPDATE: For more perspective on the closing arguments, please read Stephen Gutowski’s report in The Reload on the final day.

UPDATE II: Frank Tait has his impressions of the final day of the bankruptcy hearing here. I missed that part of the arguments about a contract with Marion “The Enemy Within” Hammer running to 2030 but I think any sane person would be appalled by it.

My own feeling is that the best outcome would be an Examiner with an ample budget and powers to make a difference. As Jeff Knox has said to me repeatedly, his fear of a Trustee is that he or she could decide to put the NRA into Chapter 7 liquidation.

What pisses me off more than anything is that just when we need a powerful NRA the most, it is distracted from its task of defending gun rights due to the corruption of Wayne and his cronies. It is beyond frustrating that the Board of Directors cares more about not offending Wayne and preserving the statue quo than about doing what it should be doing to clean house. I feel like invoking Godwin’s law to compare the Board to those Wehrmacht generals who supported Hitler even when they knew he was insane but I won’t. I’ll just say that not doing their job has put the NRA and its members in the position we are in today.

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For Your Weekend Reading

May 1, 2021 by 5 Comments

The NRA Board of Directors is having a special meeting today in Dallas along with a regular meeting tomorrow on Sunday. The special meeting is to approve the reorganization plan and the Chief Restructuring Officer. This comes on the heels of the last day of testimony in the US Bankruptcy Court hearings.

Day 10, as reported by the blog NRA In Danger, had testimony from the NRA’s outside auditor and the proposed Chief Restructuring Officer as well as cross-examination of Wayne LaPierre. While there is a lot there and you should read it in its entirety, three things captured my attention.

This witness did not do well under cross examination. He argued he’d reformed everything, then was faced with improper events that occurred after his alleged reforms. His choices were to appear corrupt or to appear incompetent and out of control, and he went with the second choice.

That to me provides even more evidence to Judge Harlin Hale that perhaps a trustee is called for. As those who are no fans of Wayne but are really worried about the future of the NRA have observed, a trustee would have the power to convert the Chapter 11 into a Chapter 7 and dissolve the NRA.

The second thing that captured my attention was Wayne’s response to the NRA’s attorney Greg Garman when asked about his background and history.

Background. MA from Boston College in politics, VA legislature. Got Phd. Over at DNC, knew NRA people, NRA right across street. Went into NRA building, they offered me job, late 1977. State liaison for year, then director state local. 1 year, then head govt affairs, in 1980. Membership now 4.9 million. Tried convert NRA into freedom organization. Outreach to celebrities. Celebrity shoots in Hollywood, dinners, etc.

Wayne does not have a PhD. He may have been in a PhD program in political science at BC but he never earned a PhD. I was admitted to the PhD program in political science at UNC-Chapel Hill. However, I left with a wife and no degree. I would never, ever, claim to hold a PhD if I hadn’t earned it. It just isn’t done and is consummately tacky.

Finally, there is Judge Hale’s question that he ordered the attorneys for both sides to answer on Monday. Judge Hale may be nicknamed “Cooter” but he is no fool.

Judge asks question, to be answered in arguments Monday (no court Friday)—chapter 11 purpose is to save company from liquidation bankruptcy. Does court have jurisdiction where sole purpose is to save company from dissolution under state law, which dissolution will only occur if the state court concludes dissolution is in best interests of public?

The blog NRA In Danger examines Judge Hale’s question in more detail. It is the critical question: does the court have jurisdiction? If not, then the case must be dismissed and the NYAG is free to continue in her attempt to dissolve the NRA.

Her dissolution suit has been strengthened by the bankruptcy court revelations. Just the lad day of testimony saw Wayne LaPierre claiming that he’d begun cleaning everything up in 2017, but forced to admit that he’d been given an incredibly lucrative “golden parachute” agreement in mid-2018 (it would have given him many millions had the board ever stopped electing him) that was signed by an outgoing president and Carolyn Meadows, now NRA president and head of the board’s Special Litigation Committee. The signing of the contract implicates NRA’s current board leadership, and also LaPierre himself, and shows his supposed 2017 reforms are. sham. He himself is free to loot despite them. On the same day those board officers signed another golden parachute for Woody Phillips, the NRA treasurer who had to “take the Fifth” dozens of times in his testimony. Others who got such agreements, LaPierre testified he had no idea of the contracts, showing that even if he were honest, in practice others are free to loot NRA at will without his being able to discover it.

Read the whole thing.

Moving on, a column by Stephen Gutowski on his new platform The Reload examines what he calls the membership program. In 2013, Wayne promised to double the membership after it had just hit five million members. Membership now stands at 4.89 million members. Not only has membership not doubled under Wayne’s most recent watch but it has regressed.

If the NRA’s membership has hit a ceiling, that’s significant, and it’s a bad sign for the most influential gun-rights group on the planet. It’s also a bad sign for NRA leadership’s argument in their current argument in the bankruptcy case. NRA leadership has repeatedly argued the LaPierre is the driving force behind fundraising at the organization, and it could not operate anywhere as effectively without him. But LaPierre has not only failed to meet his self-set 2013 goal of doubling NRA membership; membership has actually receded by his own account.

There are millions of new gun owners out there. I imagine some may have joined the NRA this year but the majority have not. Moreover, if what I’m reading across the Internet in forums on hunting, on the Second Amendment, and the like is correct, then there are a lot of people refusing to renew memberships or to make donations so long as Wayne and his grifter cronies remain in power. I am hearing this from both Gun Culture v1.0 and 2.0. I know my own wallet will remain closed to the NRA so long as Wayne is there.

Finally, my friend Kevin Creighton has an excellent post about the NRA’s fund raising approach. He notes Stephen Gutowski’s column on the NRA’s negative growth and relates it to their fund raising approach.

However, let’s face facts. For over 10 years now, the NRA’s primary messaging has been “Give us money, they’re a-comin’ for yer guns.” Okay, fine, let’s say they actually ARE coming for our guns. What have you, the NRA, done to prevent that from happening? What value am I getting for my donation? Why should I give to you right now, except out of habit?

Kevin relates his success fund raising for a faith-based organization using a positive approach. He urges the NRA to get away from the negative approach and return to the more positive approach of the past. Then, both money and membership might grow.

If you are a NRA member or were at one time, you really need to read all these blog posts and articles. Those of us who want a reformed NRA may be voices crying in the wilderness like the Old Testament prophets but the fight for the Second Amendment depends upon it.

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NRA Bankruptcy Hearing

April 8, 2021 by 1 Comment

The US Bankruptcy Court for the Northern Texas District is holding a live hearing on the NRA’s bankruptcy petition today. You can watch it live using this link: https://us-courts.webex.com/webappng/sites/us-courts/dashboard/pmr/hale

I believe this is the third day of the hearing and the witness is NRA EVP Wayne LaPierre.

Wayne does not make a good witness. The judge has had to admonish him a dozen times or more to limit his answer to the question asked. His own attorney has instructed him to just answer “yes or no” when asked that kind of question. On virtually every other answer, the attorney asking him the question has to ask the judge to strike part or all of the answer as being non-responsive and Judge Hale is sustaining that objection.

I believe every NRA Board member needs to be watching Wayne’s testimony. There are a few that I’ve noticed listed in the WebEx as being online. Given what I’ve seen so far, board members need to be asking themselves this question: Is it or is it not time for Wayne to retire?

I know what my answer is.