Closing Arguments - Thoughts from the NRA Trial Part 7

The must read NRA in Danger Blog has a great summary of the morning arguments and the afternoon arguments. Steve Gutowski at The Reload has a good summary as well.

One thing was clear - the NRA is not insolvent. All creditors will be paid in full. The reason for bankruptcy protection is the risk of dissolving the NRA as stated by NY Attorney General Leticia James and in the lawsuit that she filed.

Closing arguments focused on whether court could grant relief from a State’s police power of a state as the primary danger of dissolution. This is an open question as there is no clear precedent here. Judge Harlin D. Hale was impressive throughout the trial. He was calm and thoughtful. His rulings were fair and balanced. This is one of those times where the answer isn’t clear, but I’m confident that the Judge will make a solidly reasoned decision.

The US Trustee said 3 viable and 1 non-viable potential decisions. The NY Times weighed in on the US Trustee’s arguments.

  1. Dismiss the case. This is the NY Attorney General’s position. It would be reasonable to conclude that the bankruptcy case was filed in bad faith. A for profit shell corporation was created to create venue (note for profit, not non-profit, and it has no assets (a $50,000 deposit was refunded).

  2. Appoint a trustee. This is David Dell’Aquila’s position. The Trustee would need to come up to speed on the business but would have the ability to replace management and the board and change policies.

  3. Appoint an Examiner with enhanced powers. This goes beyond what Judge Journey was asking for. The Enhanced Powers would be the ability to petition the court to restructure inappropriate agreements or have management or the board members removed based on what the Examiner discovers.

  4. The NRA’s Chief Restructuring Officer (CRO) proposal is not a viable decision. This is the position of the NRA Board and the Unsecured Creditors Committee (UCC). This proposal keeps the status quo in place and has “Not even minimal transparency” and since it reports to the NRA Gang of 4 (LaPierre, Meadows, Cotton and Lee) it is effectively neutered.

Things that jumped out from the arguments:

  • “Conscious indifference of the Board” to the issues

  • Bankruptcy “Hidden” from key officers - General Counsel and CFO as well as Board

  • President Meadows “shredded and burned her notes” when informed that they might be subpoenaed

  • LaPierre has not submitted expenses for the past 2 years - so he can’t be deposed on them

  • Marion Hammer contract runs to 2030!!!

  • Organizations sometimes have a “Organizational Evil” - it is gross mismanagement - particularly with fees paid to Brewer law firm - Brewer firm paid $17M in the 90 days before the bankruptcy filing, $2M the day before - legal fees a 492% increase over 2017 up from $6.9M in 2017 to $34M in 2020 - annual cost equal to 1,600,000 annual member dues - 33% of annual member dues going to pay Brewer!!!

  • Out of control litigation - $7.8M in legal fees ($6M to Brewer and $1.8M in indemnity obligations to Chris Cox) to resolve a $2M dispute

  • Brewer is not held accountable as LaPierre was quoted as saying “he is the only one that will keep me out of jail”

  • Chief Restructuring Officer proposal is microcosm of past practice, no real authority and Wayne and cronies still firmly in charge

  • Gang of 4 has “not even minimal transparency” - appears to be a conscious choice to be deceptive

  • Board is too big to be effective

  • While not directly addressed in the trial, the NRA’s board approved restructuring plan was mentioned. John Richardson has a summary of the plan and a link to the plan in his No Lawyers Only Guns and Money blog. My read, particularly sections E and F make no mention of members power in the restructuring process, leading to the conclusion that the officers and board are further reducing members power in the By-Laws and increasing theirs.

A Trustee or an Examiner with Enhanced powers is in the best interest of the members of the NRA. The members of the NRA need relief from the corrupt and incompetent management and officers of the board (the Gang of 4 (LaPierre, Meadows, Cotton and Lee). The members of the NRA need relief from the attempt to dissolve the NRA by the New York Attorney General. The restructuring plan proposed by the NRA and endorsed by the Unsecured Creditors Committee (UCC) is a sham - it is a thin veil to maintain the status quo keeping the Gang of 4 in power and providing no meaningful oversight. The Do Nothing Board will continue to do nothing and keep the Gang of 4 in power. Trust Judge Hale to do the right thing in his decision and appoint an Examiner or a Trustee.

I’ve been a vocal critic of NRA EVP Wayne Lapierre for his leadership style, and the Board leadership in not properly exercising their fiduciary responsibilities by submitting petitions calling for EVP Lapierre’s resignation as well as the resignation of the Board Officers and members of the executive, audit and finance committees at the 2019 and 2020 NRA Annual meetings. If they have not been removed by the 2021 meeting in Houston, I will do so again.

The 2021 Board election is where the members can have a say and change the culture of the NRA Board and get long overdue new leadership. The only director up for re-election that deserves support is Owen “Buz” Mills as he is publicly supporting Judge Journey’s efforts to reform the NRA. The remaining board candidates deserve no vote.

I ask that you please write me in on the ballot for the 2021 board of directors election when you get you ballot in the next couple of weeks. It will be out in the June/July issue of your NRA magazine.

Write In’s MUST have the information as depicted below. Thank you for your support.

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