NRA is 'out of ammo' as it faces a legal mess of its own making, many experts say

The National Rifle Association was plagued by fighting and under a thorough investigation. It found itself in its own legal network, several experts told ABC News when a federal judge considered the fate of the bankruptcy proceedings, which the organization has scrutinized.
New York prosecutors last summer sued the NRA to disband the gun lobby juggernaut, accusing it of "fraud and abuse" - an allegation the NRA has repeatedly and vehemently denied. The NRA then filed for bankruptcy protection and announced plans to reintegrate in Texas.
The offer to restructure the Lone Star State is part of a series of high-risk measures the NRA is taking to survive, legal experts say as the organization tries to bypass the threat posed by New York attorney general Letitia James' probe. The organization did this in part to free itself from the "toxic political environment of New York" and "to rationalize costs and expenses, to continue pending litigation in a coordinated and structured manner, and to realize many financial and strategic advantages," according to a January letter from CEO Wayne LaPierre.
Judge Harlin Hale of the US Bankruptcy Court for the Northern District of Texas is currently reviewing motions from James' office and others to dismiss the NRA's bankruptcy suit. Legal experts interviewed by ABC News believe the chances of being fired are high, especially given the NRA's demand that the organization remain financially viable - a position that undermines the traditional purpose of a Chapter 11 motion.
MORE: New York Attorney General's lawsuit seeks to dissolve the National Rifle Association
Adam Levitin, a bankruptcy professor at Georgetown University Law Center, said the NRA's plan to file for bankruptcy protection was little more than a "Hail Mary Pass."
"If the alternative is for the New York Attorney General to shut down the NRA, what do you have to lose with that strategy?" Said Levite. "You're out of ammunition."
Another scenario, however, could pose an entirely different threat to the beleaguered weapon group: if Hale allows the NRA's bankruptcy filing to proceed, he can appoint a trustee to investigate fraud allegations - or even take control of the organization.
"The first thing a trustee would do would be to take control of the organization, all assets, and all records," said Jay Westbrook, a bankruptcy scientist at the University of Texas-Austin. "From the point of view of the people who now control the NRA, that would be a very undesirable development."
Pamela Foohey, a professor of bankruptcy law at the University of Indiana, suggested that the appointment of a trustee or auditor could further jeopardize the organization.
"The most likely bankruptcy scenario, when a trustee is appointed, is a plan of liquidation and then dissolution," said Foohey.
PHOTO: This photo taken Jan 10, 2013 shows the main building of the National Rifle Association of America in Fairfax, Virginia. (The Washington Post via Getty Images, FILE)
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In its motion to dismiss the NRA's bankruptcy filing earlier this month, the New York attorney general sought the appointment of an independent trustee in case Hale moves the bankruptcy case forward.
Michael J. Collins, an attorney for the NRA, called the trustee request a "disappointing but predictable response" from James' office.
"We will continue to operate within the parameters of the bankruptcy court - for the benefit of the NRA, its members and their suppliers," said Collins.
Whether or not Hale dismisses the bankruptcy case, experts believe that the NRA has ever greater chances of resolving its legal problems and regaining a foothold as one of the most powerful forces in US politics. The group's decision to file for bankruptcy has a clear ending - reintegration in Texas - but the means it sought to get there has largely puzzled legal experts.
MORE: Ex-NRA Insider Speaks: Gun owners should be "appalled" by what I've seen
"What might they think of the bankruptcy filing? If there is a clear strategy, I cannot derive it," Levitin wrote on a bankruptcy blog this week. "Maybe I'm missing something and the NRA is mad as a fox, but it really looks like a step in desperation."
Among other things, the New York attorney general has accused the leaders of the NRA of using the organization's funds for personal use. The NRA has vehemently denied these claims.
In addition to attempts by the New York Attorney General to appoint a trustee, a separate effort led by other forces within the NRA seeks additional judicial oversight of the organization.
Phillip Journey, a Kansas state judge who was recently elected to the NRA board of directors, asked the court last week to appoint an "independent investigator" to investigate "the veracity of the alleged fraud, dishonesty, incompetence and the gross mismanagement that has plagued the NRA's reputation. "Experts said the appointment of an independent auditor would likely result in the appointment of a trustee.
PHOTO: Judge Phillip Journey is shown in this undated file photo from the 18th District Court, Sedgewick County, Kansas website. (18th Judicial District, Sedgewick County, Kansas)
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"I think it is in everyone's best interest that these issues be resolved quickly and that fraternal behavior be kept as short as possible," Journey told ABC News. "Let's try to get to the bottom of this."
In its court file, Journey also suggested that the NRA's leadership failed to properly inform the board members of their plan for bankruptcy - a possible violation of the organization's bylaws. William Brewer, attorney for the NRA, repressed Journey's claim.
"Unfortunately, [Judge Journey] seems to mistakenly believe that the NRA's reorganization plan was inconsistent with the board and internal protocol," Brewer said in a statement. "This plan was implemented in full compliance with NRA policy. The plan was broadly approved by NRA board members, NRA members, elected officials and other key stakeholders."
On Wednesday, the US government's bankruptcy bureau dismissed Brewer as "special adviser" to the NRA, stating that Brewer is "deeply involved in numerous disputes that are at the heart of NRA bankruptcies" - including some of the "accounting errors" reported by the New York Attorney General's Office were cited in their complaint.
MORE: The National Rifle Association files Chapter 11 bankruptcy
Charles Cotton, chairman of the NRA's audit committee, denied the allegations in the government filing, which "reflect a misinformed view of the brewery, its bills and its endorsement of the NRA".
Experts believe that Hale will first decide on the bankruptcy dismissal application before answering a trustee or auditor's question.
The New York attorney general's office in its motion for dismissal accused the NRA of "fleeing or seeking an end to an enforcement action in New York." Advertising agency Ackerman McQueen, which claims to be the NRA's largest creditor, brought a similar case in its dismissal motion, accusing the NRA of "bad faith" filing for bankruptcy in order to gain legal control in New York State avoid.
PHOTO: In this Aug 6, 2020 file photo, New York Attorney General Letitia James speaks during a press conference in New York. (Brendan McDermid / Reuters, FILE)
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Both filings cited public comments from NRA leaders who have repeatedly stated that the organization will remain financially stable and that the bankruptcy process is intended to bypass control in New York State.
Robert Lawless, a bankruptcy professor at the University of Illinois, said both items "immediately raise questions of malicious filing".
"Large cases are usually not turned away for bad faith," Lawless said. "But there is a great opportunity here."
Brewer said all allegations of malicious filing reflect "another transparent move in a partisan crusade to shut down the NRA".
And some of the arms group's best-known supporters applaud the organization's attempts to restructure itself in Texas.
In August, in response to news of the New York attorney general's lawsuit, then-President Donald Trump suggested moving the NRA to Texas and "leading a very good and beautiful life." And in a tweet last month, Texas Republican Governor Greg Abbott told the NRA, "Welcome to Texas - a state that protects the 2nd Amendment."
The NRA is out of ammunition as it faces legal chaos of its own. Many experts say they originally appeared on abcnews.go.com

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