The National Rifle Assocation took what was perhaps the biggest legal gamble of their life and lost. Now, there is a potential outcome ahead that progressive US politicians have long wanted – a complete dismantling of the most powerful gun lobby.
A Texas judge on Tuesday denied the NRA's bankruptcy filing, paving the way for a fraud lawsuit by New York Attorney General Letitia James. James made no secret of her desire to dissolve the nonprofit, calling it "full of fraud and abuse" last year. But a New York judge has to decide whether her case is well founded.
It's an amazing twist for the organization that has gone through many personality changes in its 150 years. Founded after the Civil War by former Union Army officers who were appalled by the accuracy of their soldiers, it developed into an organization loved by hunters and marksmen. Wayne LaPierre took the lead in 1991, promoting a burgeoning membership in line with the Republican Party.
The bankruptcy dismissal re-focuses on the state's lawsuit which, if successful, could diminish the NRA's political clout, deter badly needed donors and force the organization to stir up its management, said Eric Chaffee, a professor at the University of Toledo College of Law in Ohio, advising charities.
"We could end up seeing a National Rifle Association that is a very different entity than the one that currently exists," said Chaffee. "It may not be as strong as it has been in the past when it comes to being the juggernaut for gun rights prosecution."
A trial in New York is tentatively scheduled for next year. The case is not about gun rights, but about the NRA ripping off its members by wasting donated money on luxury spending.
The NRA said in a written statement that it remains determined to face James. It has also been advised that it can continue to operate in Texas, and the organization will continue to consider moving its headquarters from Virginia there. There are more than 400,000 NRA members in Texas.
"We remain an independent organization that can determine its own course, even if we stay in New York to confront our opponents," LaPierre said in the statement. "The NRA will continue to fight as we have for 150 years."
The NRA's political clout peaked in 2016 when it spent $ 54.4 million on federal elections, including $ 31.2 million on Donald Trump as president, according to the Center for Responsive Politics. Spending decreased to $ 29.4 million in 2020. Only 18% of spending went to the winners last year, compared to 94% in 2016. Membership has remained relatively constant over the past few years and is currently at $ 4.9 million.
For years, the group has received millions of dollars annually from its nonprofit, the NRA Foundation, whose donors receive a tax deduction. The Covid-19 pandemic disrupted grassroots fundraisers on which the foundation relied. But even before the pandemic, the NRA fundraising campaign had declined. According to the federal tax return, the last available year, it raised $ 291 million in 2019, a 17% decrease from the previous year.
Almost three years ago, the organization warned in a separate lawsuit that it was under financial strain due to New York’s efforts to curtail insurance policy protection. In response, New York Governor Andrew Cuomo jokingly sent "thoughts and prayers" to the group, a general refrain given by many conservative political figures after mass shootings.
When the NRA announced bankruptcy in January, it said in a letter on its website that it was aiming to "DUMPING" its New York home and reintegration into gun-friendly Texas. When Judge Harlin Hale in Dallas denied filing, he said the group had "used this bankruptcy case to address a regulatory enforcement problem, not a financial one."
The NRA could attempt to re-file for bankruptcy with the same judge in Dallas. However, Hale cautioned that his concerns about the management of the NRA could lead him to remove LaPierre and appoint a trustee to lead the organization.
The testimony in the case was alive. Among the revelations: LaPierre admitted he hadn't disclosed free yacht rides from a seller, saying he and some close associates had the NRA's own board of directors, chief financial officer and general counsel on the January bankruptcy filing pending filing in the Kept in the dark.
"It is nothing short of shocking to have so many people excluded from filing for bankruptcy, including the vast majority of the board of directors, chief financial officer and general counsel," the judge wrote in his ruling.
These revelations must upset the top management of the NRA, said Robbin Itkin, a Sklar Kirsh partner who was not involved in the case.
"Given the widespread publicity and, in particular, the total disregard for corporate governance in filing a bankruptcy petition, including failing to report to your own board of directors, all of this will come back to keep track of current management and organization," she said .
Hale, who said he will retire next year, described James' motion to challenge the NRA's bankruptcy filing as "the most important thing" he heard. He called the case "one of the most important" he will hear during his career.
But he noted that James was facing a high bar in their attempt to disband the NRA. "New York law does not allow NYAG to dissolve a charity all together," he said. Instead, “the attorney general must demonstrate that the misconduct of a regulated company” has caused or is likely to cause harm to the public. The transgression must not only be formal or accidental, but also material and serious in order to damage or threaten the common good. "
James, a Democrat who became the first black woman to win nationwide office in New York, has shown that she is not afraid to take big cases, file lawsuits against Facebook and Google, and open an investigation by the state governor.
In February, the NRA hit James with a series of counterclaims, accusing her of targeting the organization to advance her political career. The state has never before attempted to dissolve a non-profit organization based on allegations of proprietary trading, argued the NRA.
"The difference is James' well-documented animus against the NRA," the organization said on the file. "James' radical departure from precedent to pursue the resolution therefore cannot reasonably be viewed as anything other than the abuse of charitable laws to silence a political enemy."
In a call to reporters Tuesday, James denied what the NRA called "mud throwing," saying her lawsuit was justified.
Kris Brown, president of Brady, a nonprofit that aims to prevent gun violence, described the judge's decision as "a historic victory for the rule of law and a sure sign of defeat for the NRA and its corrupt leadership."
Brown said the decision was the right one and the Brady organization reiterated their support for James. "It is time to dispel today's corrupt version of the NRA, which has hopelessly strayed from its roots, which are focused on gun safety."
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