The National Rifle Association’s hopes of ending a New York court challenge were seriously cut on Monday when a Justice Department official berated his leaders and called for his bankruptcy filing to be dismissed or for the appointment of an external controller to oversee its finances. .
Lisa L. Lambert, a lawyer in the United States Trustee’s Office, which is part of the Department of Justice, said that “the evidentiary record establishes clearly and convincingly” that Wayne LaPierre, the longtime managing director of the NRA, “failed to provide proper oversight. . For a number of years, she added, “there is no question that Wayne LaPierre’s personal expenses were made to resemble business expenses.
Mr LaPierre and the NRA had filed for bankruptcy not because of financial hardship, but as a strategy to avoid litigation in New York City, where Attorney General Letitia James is seeking to shut down the organization and recover millions of dollars. would have lacked the funds of Mr. LaPierre and three other current and former executives.
The NRA was licensed in New York a century and a half ago, but it has filed for bankruptcy in federal court in Dallas and is looking to move its charter to Texas, where politicians are much more supportive of the organization. . But the position of the Office of the US Trustee, which weighed in closing arguments on the final day of the trial, will likely weigh on Presiding Judge Harlin D. Hale, who has said he will decide by early next week . The United States Trustee Program oversees the integrity of the country’s bankruptcy courts.
NRA attorney Gregory Garman appeared somewhat troubled by the intervention of the US trustee on the final day of the trial. While he said “I respect the office very much”, he also suggested that politics might be at stake, even if criticism of the NRA leadership grows on the right, and includes the former NRA chairman. , Oliver L. North.
“I’m disappointed to hear for the first time in closing arguments that the US trustee has now taken a position I’m supposed to respond to in real time, but that’s what it is,” Garman said. . “Your honor, we have natural enemies. This Department of Justice may not agree with the National Rifle Association, but too bad, we did the right thing.
Bankruptcy experts said the US trustee’s decision was rare.
“The NRA is really in trouble,” said Adam J. Levitin, a professor specializing in bankruptcy at Georgetown University. “The American trustee is rarely involved in this kind of petition, much less calls for dismissal, a trustee or an examiner. I can’t see a result where the NRA comes out unscathed. I think the real question is what recourse the judge grants.
John Pottow, who teaches bankruptcy at the University of Michigan Law School, called the trustee’s intervention a “glaring sign of deep dysfunction” at the NRA, adding that such trustee intervention “is not happening. not very often”.
The lawsuit highlighted concerns about Mr. LaPierre’s surveillance. Mr. LaPierre testified that he bankrupted the NRA without even speaking to his senior lieutenants or most of its board members. He testified that he was unaware his former CFO was given a consulting contract for $ 360,000 a year after going under a cloud, or that his personal travel agent, hired by the NRA, was charging a booking fee. 10% for rental. flights in addition to a package of up to $ 26,000 per month.
Mr Garman said in his final conclusions that the organization’s wrongdoing, while “worthy of the cringe”, was relatively minor and did not reach the appointing level of outside oversight, such as a trustee.
“I have had experience when there are foreign bank accounts, I have had experience when there is a lack of money to appoint a trustee,” he said, adding that this was not the case here. “The National Rifle Association has righted its ship.”
Ms Lambert, the deputy US trustee in Dallas, disagreed, exposing episodes of alleged corruption by Mr LaPierre and other NRA officials, a number of which were not contested during the trial . She cited spending by the NRA or its contractors on bespoke Zegna suits for Mr. LaPierre, meals at a fancy Tuscan restaurant in Northern Virginia, and charter flights for him and his family, as well as a plan that was devised to buy a million dollars. house for the use of Mr. LaPierre and his wife which was eventually abandoned.
Regarding charter flights, she said: “LaPierre says it’s for safety, but the evidence indicates he came to pick up his family. The evidence indicates that additional stops should not be noted in the reservation records. And the testimony is not refuted that no NRA policy allows charter flights. “
Mr. LaPierre’s close associate, Millie Hallow, even embezzled $ 40,000 for her son’s wedding, Ms. Lambert noted, but beyond repaying that amount after being arrested, she “suffered no harm. additional consequence ”.
Mr Garman said throughout the trial that there was a “dividing line” in 2018, when the NRA undertook a self-audit and corrective action. But Ms Lambert said evidence presented at the 12-day trial showed that “even after the self-described course correction, the irregularities were not corrected,” noting among others that Craig Spray, the former director financier, refused to sign the NRA’s 2019 tax returns.
“The NRA said it was seeking refuge from the actions of the New York attorney general and wanted to change its state of incorporation,” she added. “It can be done outside of bankruptcy. It is not a legitimate reason to declare bankruptcy. “