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Is the NRA’s bankruptcy filing just a way to escape regulation?

The surge of high-profile mass shootings in the U.S. are increasing calls for stronger action on gun violence, access to weapons and its limitations. When discussing gun control, people often point to the long reach and influence of the NRA, which filed for bankruptcy in January. But is it really struggling financially? Stephanie Sy explores the question with Bloomberg reporter Steven Church.

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  • Judy Woodruff:

    The epidemic of shootings in the U.S. the rising number of high-profile mass shootings recently are adding more fuel to a call for stronger action gun violence, access to weapons and some limitations.

    In these debates, people often point to the long reach and influence of the NRA. But what many people may not realize is that the leadership of the NRA itself has been on trial the past several weeks for the way it conducts business.

    Stephanie Sy has the latest.

  • Stephanie Sy:

    Judy, this case has been playing out before a federal judge in Texas. Closing arguments finished yesterday as part of this unusual bankruptcy trial.

    The NRA filed for bankruptcy in January as part of a move to reincorporate and relocate from New York to Texas. That was after New York State Attorney General Letitia James sued the NRA and sought to dissolve the nonprofit organization.

    She alleged that top executives, including longtime leader Wayne LaPierre, illegally misused tens of millions of dollars on things like designer suits and lavish personal trips. The NRA says the lawsuit is political.

    Steven Church has been covering the trial for Bloomberg, and joins me now.

    Steven Church, thank you for coming on the "NewsHour."

    I know you're a bankruptcy specialist, but I want to backtrack a little bit, because Wayne LaPierre actually testified during this trial. What came out about how he managed the NRA and used his position?

  • Steven Church:

    Well, it was clear that he had control over most everything that happened at the NRA. That was the point — that was one of the major points that the New York attorney general was trying to bring out.

    There were also some lapses in financial controls, the kinds of things that you would see at private companies or at well-run nonprofits.

  • Stephanie Sy:

    So, what does the NRA bankruptcy filing have to do with the charges against Mr. LaPierre in New York?

    Was, essentially, filing for bankruptcy in gun-friendly Texas a way to escape accountability from regulators in New York?

  • Steven Church:

    That's precisely what the argument was on the side of the New York attorney general and their allies who were arguing with them.

    The NRA is making the claim that, even though they have plenty of money, this lawsuit is an existential threat to their existence, because one of the things that could happen is that the judge — a judge in New York, if they side with the New York attorney general, could dissolve the NRA, and all of the NRA assets, which amounts to tens of millions of dollars, could be given away to other similar type nonprofits.

    So they argued, because that's a threat, because that's a possibility, they should be allowed to file bankruptcy, even though they have plenty of cash, they're solvent, they're paying their bills on time, and it doesn't look like they face any immediate threats.

  • Stephanie Sy:

    So, we have seen organizations certainly do that before, Steven Church.

  • Steven Church:

    Yes.

  • Stephanie Sy:

    But is that an appropriate use of bankruptcy filings?

  • Steven Church:

    It's arguably a misuse.

    And it's a misuse in this way. You can't escape from a government regulation or from a government prosecution simply by going into bankruptcy. You can get rid of debts, and, sometimes, you can get rid of government debts when you file bankruptcy.

    But simply eliminating — picking your own regulator is likely to invoke a judge's wrath. So, the judge in Texas hasn't really tipped his hand one way or the other, but some fairly powerful institutions have lined up against the NRA, including the U.S. Trustee, with is sort of a watchdog for the bankruptcy process.

  • Stephanie Sy:

    Well, yes, let's talk about that, because, on the last day of the trial, yesterday, a Department of Justice lawyer surprises everyone by recommending that this bankruptcy judge dismiss the bankruptcy filing, or that a federal trustee should oversee the NRA's finances, instead of current leaders.

    What impact could that recommendation have on the judge's final ruling?

  • Steven Church:

    Well, the ruling was unusual.

    U.S. Trustees don't get that involved in some cases. But, in this case, it seems the U.S. Trustee is trying to protect the process, the bankruptcy process itself. Judges typically take the U.s. trustees very seriously because their job is to act as a watchdog over corporations in bankruptcy and make sure that the process of distributing money to creditors is done fairly.

    In this case, the U.S. Trustee is saying there was no legitimate reason for the NRA to file bankruptcy. That came down squarely on the side of the New York attorney general.

  • Stephanie Sy:

    So, LaPierre and his attorneys say this lawsuit that Letitia James, the attorney general, in New York, has filed is political, that whatever wrongdoing there was at the organization just doesn't rise to the level of having a federal overseer take over finances.

    You have been following this for months, Steven Church. Do you think the judge is inclined to see things that way?

  • Steven Church:

    The judge was hard to read.

    There are some judges that tip their hands. And, sometimes, they do that on purpose to get the people to compromise. In this case, Judge Hale, whose nickname is Cooter, just didn't give a read one way or another. He was very tight with the control of the courtroom and repeatedly warned LaPierre not to go off track.

    But, in this case, it's hard to tell which way he will find, because he has several really strong options, from throwing the NRA out of bankruptcy, to appointing a trustee, to appoint ago new investigation — a new investigator to look at all of these issues, and report back later.

  • Stephanie Sy:

    Well, we know that Judge Harlin Hale did say at the close of the trial that he may be making a decision as early as early next week, and that it's one of the most important rules he's made in his career.

    Steven Church, a journalist who covers bankruptcies at Bloomberg, thank you so much.

  • Steven Church:

    Thank you very much for having me.

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