NRA Board Member Demands LaPierre Probe in Bankruptcy Case

(Bloomberg) -- A gun-collecting Kansas judge is leading a new crusade to save the National Rifle Association from two existential threats: New York’s Attorney General and the executives who currently run the organization.

Phillip Journey, a family court judge in Wichita and member of the NRA’s board, inserted himself into the group’s bankruptcy to try and block New York’s top law enforcement official from dissolving the 150-year-old group and distributing its $200 million in assets to other, less controversial gun-rights organizations. To do so, he says he must take on a culture of subservience and alleged financial misdeeds that has sprung up around the group’s top executive, Wayne LaPierre.

In February, Journey urged the court to call a timeout in the bankruptcy case and appoint an independent examiner. That, Journey says, is the only way to get to the bottom of a dispute riddled with allegations of fraud and self-enrichment by NRA executives, conflicts of interest among attorneys and creditors and claims of over-reach by New York Attorney General Letitia James, who had called the gun-rights group a “terrorist organization” even before she took office.

“A lot of times, bankruptcy looks like a dog pile,” Journey, who sold about 100 weapons from his personal collection to fund his successful campaign for his judicial seat last year, said in an interview. “All I want is to open the door, let in an examiner and see where to go. Restore corporate governance and let the NRA operate like it’s supposed to.”

The legal maneuvering comes as recent mass shootings in Georgia and Colorado have reignited a hyper-partisan debate over the Second Amendment and the NRA’s extensive lobbying against gun control.

U.S. Bankruptcy Judge Harlin D. “Cooter” Hale is scheduled to start a multi-day hearing April 5 that could strengthen James’ effort to shut down the NRA. James has urged Hale to either appoint a trustee to run the NRA or throw out its bankruptcy case, which would make it easier for her to seize the group’s assets if she prevails in her New York lawsuit.

Leadership Fate

The bankruptcy judge has warned James that in deciding whether to strip the NRA of the protections it has in Chapter 11, he will consider what she plans to do with the organization’s money if she wins her case in New York. As long as the NRA remains in bankruptcy, James would likely need Hale’s permission to redistribute its assets.

Matthew Bruckner, an associate professor of law at Howard University, says that courts are inclined to comply with requests to appoint an independent examiner in cases like the NRA’s, where the assets in question exceed $5 million. What’s more, in the NRA’s case the court is likely to give weight to the fact that the request is coming from a board member with Journey’s background, he added.

“Phil Journey is a serious person making serious allegations,” Bruckner said. “The fact that he’s a judge indicates he’s not likely to make these allegations lightly.”

Journey, a former president of the Kansas State Rifle Association, says he felt compelled to launch his GoFundMe-financed legal effort after spending a week reading up on the case following skin cancer surgery that left his face too disfigured to preside over family court cases, where physical abuse is common.

In an interview, he declined to call for LaPierre’s immediate ouster, arguing instead that a new investigation backed by the bankruptcy court would help determine the fate of the NRA’s leadership.

Nonprofit Laws

NRA Second Vice President Willes K. Lee said in a statement that Journey’s motion is “not genuine nor credible.”

The NRA filed its Chapter 11 bankruptcy petition in January as part of a bid to restructure and transfer its charter from New York to Texas. It said at the time that it remained not only solvent but “in its strongest financial condition in years.”

The filing came five months after James sued it for violating her state’s nonprofit laws. She has since accused the NRA of using bankruptcy in a “bad faith” bid to undercut a case in which she’s charged the group, LaPierre and three other executives with illegally diverting tens of millions of dollars from its charitable mission.

The NRA’s First President Vice Charles Cotton said in a statement that the board voted on Sunday to support the reorganization strategy.

Still, Journey has enlisted an ally on the NRA board. R.B. “Rocky” Marshall, the owner of Frontier Truck Gear in Center Point, Texas and a former Baker Hughes division president, has joined Journey in his call for an examiner. Marshall, who has a firing range on his ranch near San Antonio, said it was clear NRA executives weren’t interested in talking and most of its directors hadn’t even read James’ lawsuit.

“If you’re in bankruptcy court, it means you’ve made a lot of mistakes to get there,” says Marshall. “The more I dug into the filings, the more shocking the mis-management became.”

Duplicate Efforts

In a March 5 filing, Journey opposed James’ efforts to toss out the bankruptcy and described her suit as an “existential threat.” The court processes, by contrast, “represent an opportunity for the NRA to change course, foster full transparency, strengthen its corporate governance, and eradicate any mismanagement,” he wrote. He urged judge Hale to consider the interests of “millions of members, volunteers, donors, and participants across the country who actively support the NRA.”

The official committee of NRA unsecured creditors opposes an independent examiner, arguing another probe would just duplicate the efforts of the creditor panel, James and others. An examiner would also likely delay the case and cost too much, the committee said. The committee also opposes the effort to dismiss the bankruptcy case and asked Hale to appoint a restructuring officer to oversee the reorganization instead of replacing NRA management with a trustee.

Journey, Marshall and two associates have also asked the bankruptcy judge to appoint an official committee to represent NRA members in the case. Such a panel would have its legal and other advisory fees paid by the NRA. Journey argues that the members are similar to shareholders in big-corporate cases. Since the NRA claims it is financially sound, the members should have a formal body to represent their interests, according to the March 26 filing.

At an emergency board meeting in Dallas on Sunday, Journey says the NRA confiscated directors’ phones in advance, as has become customary. Inside, he was criticized for taking notes, had his motives questioned for seeking an examiner and was shouted down when he tried to explain.

The case is National Rifle Association of America, 21-30085, U.S. Bankruptcy Court for the Northern District of Texas (Dallas). To view the docket on Bloomberg Law, click here. Michael R. Bloomberg, founder of Bloomberg News parent Bloomberg LP, is a donor to candidates and groups that support gun control, including Everytown for Gun Safety.

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