Texas Judge Blocks NRA From Declaring Bankruptcy

A federal judge in Texas ruled Tuesday that the National Rifle Association cannot file for bankruptcy, a decision that calls into question the gun-rights group's plan to relocate its headquarters to escape oversight by New York regulators. 

Judge Harlin Hale's decision comes almost 10 months after New York Attorney General Letitia James filed a lawsuit against the NRA, accusing four of the organization's top executives of mismanaging funds and violating state and federal laws. 

"The @NRA does not get to dictate if and where it will answer for its actions, and our case will continue in New York court," James tweeted Tuesday after the ruling. 

In January, the NRA filed for Chapter 11 bankruptcy protection from its debts, declaring its intent to reorganize and relocate to Texas. The NRA is based in Virginia but has long been chartered as a nonprofit organization in New York state.

"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," LaPierre said in a statement after the ruling. 

"We remain an independent organization that can chart its own course, even as we remain in New York to confront our adversaries," he added.

In New York, the NRA's top officials are accused of squandering more than $64 million in organization funds in a span of three years. Senior leaders spent NRA money on trips to the Bahamas, private jets, luxury hotels and fine dining, James alleges.

LaPierre has denied the accusations, calling the lawsuit "a baseless, premeditated attack on our organization." 

NRA doesn't face "existential threat"

Hale suggested in his ruling he didn't believe the NRA had filed for bankruptcy solely for financial purposes. 

"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," he wrote. "The court believes it is not."

Hale also suggested that LaPierre and the NRA filed for bankruptcy only to escapee James' pending litigation. Hale noted that LaPierre filed the bankruptcy documents without telling the NRA's governing board. 

"Excluding so many people from the process of deciding to file for bankruptcy, including the vast majority of the board of directors, the chief financial officer and the general counsel, is nothing less than shocking," Hale wrote.

Hale's ruling also comes one week after the U.S. Department of Justice publicly objected to the NRA's bankruptcy plan. The Justice Department has also accused LaPierre and others of mismanaging funds. 

"The record is unrefuted that Wayne LaPierre's personal expenses were made to look like business expenses," assistant U.S. Trustee Lisa Lambert said last week during the NRA's bankruptcy hearing in Texas.

The judge's ruling comes as a surprise to some bankruptcy experts, who previously told CBS MoneyWatch they expected Hale to appoint an examiner to study the NRA's finances. Hale's ruling is without prejudice, a legal term that means the NRA can attempt to file for bankruptcy again if the group wishes. 

It's unclear if the NRA plans to refile. The organization did not immediately respond to requests for comment Tuesday. 

First published on May 11, 2021 / 4:52 PM

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