NEW YORK (NewsNation Now) — A lawyer for New York Attorney General Letitia James called the National Rifle Association’s bankruptcy bid “a circus sideshow” during closing arguments on Monday in a case over whether to allow the NRA to reorganize in the state of Texas. The NRA’s lawyers will present their closing arguments later on Monday.
The NRA filed for Chapter 11 in January, saying it planned to use the bankruptcy process to restructure as a Texas nonprofit and exit what it has called “a corrupt political and regulatory environment in New York” state, where it is currently registered.
The influential group said in a January statement there would be no immediate changes to its operations or workforce, and that it “will continue with the forward advancement of the enterprise – confronting anti-Second Amendment activities, promoting firearm safety and training, and advancing public programs across the United States.”
It is attempting to fend off a lawsuit to dismiss the bankruptcy case by James and the group’s former ad agency, Ackerman McQueen, an Oklahoma City-based advertising agency that says the NRA owes it more than $1 million.
Gerrit Pronske, a lawyer for James, called the NRA’s bankruptcy “a circus sideshow” on Monday during the closing stages of the trial that began on April 5.
The NRA has accused James of violating the organization’s right to free speech, “weaponizing” her powers to pursue a political attack that is a “blatant and malicious retaliation campaign” against the group because she dislikes what it stands for.
The case before U.S. Bankruptcy Judge Harlin Hale in Dallas coincides with the United States reeling from another spate of mass shootings, with President Joe Biden calling for a ban on assault weapons and tighter gun control measures.
If the NRA is permitted to proceed with the Chapter 11 case, it could make it easier for it to fend off allegations of financial wrongdoing and corruption.
James, a Democrat, sued the NRA and Chief Executive Wayne LaPierre in New York state court in August, accusing it of financial misconduct and aiming to dissolve the organization.
She said the NRA had diverted millions of dollars to fund luxurious trips for officials, no-show contracts for associates, and other questionable expenses.
LaPierre has testified that he sought bankruptcy protection out of fear that James would try to place it into receivership. The embattled executive defended his leadership but also tried to acknowledge enough mistakes and course corrections to avoid having the NRA’s reins handed to a court-appointed overseer — a move he said would be a death blow to the 150-year-old group that claims 5 million members.
James has said the NRA claims to be solvent and called its bankruptcy and plan to reincorporate in Texas after 150 years in New York a bad-faith effort to escape her lawsuit and oversight.
A New York state judge on Jan. 21 dismissed the NRA’s effort to quash the New York attorney general’s lawsuit or move it to a federal court in Albany, the state capital.
When nonprofits file for bankruptcy, that generally halts pending litigation while providing more time to pay off creditors. But there is an exception for actions by governments, such as the pending lawsuit the New York attorney general filed in 2020. The bankruptcy case could give the NRA more time to proceed with reincorporation by stopping claims from creditors and also allow the bankruptcy court to decide how to distribute and organize the NRA’s assets. This shift in decision-making authority for the NRA’s assets may help the NRA with its reincorporation efforts.
Incorporation in New York, where the group was founded 150 years ago, means that the state regulates the nonprofit and thereby regulates the NRA’s finances. During the legal proceedings to dissolve the NRA in New York, the NRA may not transfer its assets. While the NRA could set up a new corporation in Texas, the entity’s assets would not be released without consent from New York authorities. The NRA would need the bankruptcy court to have the ability to control the NRA’s assets to have a successful reorganization.
In sum, given New York’s laws governing nonprofits, the NRA cannot dissolve without the state’s blessing.
The Associated Press and Reuters contributed to this article: Reporting by Maria Chutchian/Reuters and Jake Bleiberg/AP.