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New York loses bid to dissolve gun lobby giant for fraud

State-imposed dissolution "should be the last option, not the first,” a judge concluded.

MANHATTAN (CN) — The New York attorney general cannot force the shuttering of the National Rifle Association, a state judge ruled on Wednesday.

“Her allegations concern primarily private harm to the NRA and its members and donors, which if proven can be addressed by the targeted, less intrusive relief she seeks through other claims,” Manhattan Supreme Court Judge Joel Cohen wrote this afternoon, referring to a dissolution action brought by Attorney General Letitia James.

“The complaint does not allege that any financial misconduct benefited the NRA, or that the NRA exists primarily to carry out such activity, or that the NRA is incapable of continuing its legitimate activities on behalf of its millions of members,” Cohen added.

James brought the suit to dissolve the powerful gun lobby in August 2020, saying NRA CEO Wayne LaPierre and other executives used the nonprofit as a “personal piggy bank” to pay for private jet rides and trips, among other expenditures.

As Cohen determined Wednesday, however, “the complaint does not allege the type of public harm that is the legal linchpin for imposing the ‘corporate death penalty.’”

“Moreover,” the 42-page opinion continues, ”dissolving the NRA could impinge, at least indirectly, on the free speech and assembly rights of its millions of members. While that alone would not preclude statutory dissolution if circumstances otherwise clearly warranted it, the Court believes it is a relevant factor that counsels against State-imposed dissolution, which should be the last option, not the first.”

In its September motion to dismiss, the National Rifle Association accused Attorney General James of attempting to “silence the constitutionally guaranteed political speech of its 5 million members” based on the actions of five board members and two of the organization’s executives.

Attorney General James said Wednesday that the NRA still has a long road of litigation ahead of it.

“Today, the court affirmed my office’s right to pursue its long-standing claims that fraud, abuse, and greed permeate through the NRA and its senior leadership,” James said in a statement this afternoon. “While we’re heartened that the judge rejected the NRA’s attempts to thwart most of the claims in our case against the NRA, we are disappointed that the judge ruled against the dissolution portion of the case."

While Justice Cohen granted the NRA’s motion to dismiss motions for dissolution and also tossed out unjust-enrichment claims and counts under the New York Prudent Management of Institutional Funds Act, he denied the NRA’s remaining motions to dismiss the state’s case — a point he emphasized at the top of his ruling.

“The Attorney General’s allegations in this case, if proven, tell a grim story of greed, selfdealing, and lax financial oversight at the highest levels of the National Rifle Association,” the opinion states. “They describe in detail a pattern of exorbitant spending and expense reimbursement for the personal benefit of senior management, along with conflicts of interest, related party transactions, coverups, negligence, and retaliation against dissidents and whistleblowers who dared to investigate or complain, which siphoned millions of dollars away from the NRA’s legitimate operations.”

Judge Cohen observed in a footnote that the attorney general’s claims against the NRA are not in any way on the content of the group’s gun rights advocacy. “To the extent this case involves consideration of constitutional rights, it concerns the First Amendment, not the Second,” he wrote in a footnote.

During oral arguments last week, Assistant Attorney General Monica Connell told the court it would "set terrible precedent” if it allowed the NRA’s counterclaims to proceed to discovery, essentially giving the targets of investigations carte blanche to "harry prosecutors."

“Fraud and illegal conduct are not entitled to First Amendment protection," Connell said.

“We have been very clear the First Amendment activities of the NRA are not the subject of this action at all," she added. "It is the fraud, it is the theft, it is the waste, it is the related-party transactions, it is everything else."

The NRA attempted to circumvent the suit by New York regulators by filing for bankruptcy protection in Dallas last year and announcing plans to reincorporate in the Lone Star State. Those maneuvers fell apart, however, when a Texas judge tossed the bankruptcy case for bad faith four months later.

The tax-exempt gun-rights group, which is headquartered in the wealthy Washington, D.C., suburb of Fairfax, Virginia, claimed in its Chapter 11 filing that it had between 200 and 999 creditors, between $100 million and $500 million in assets, and between $100 and $500 million in liabilities.

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