So far, the arguments have been pushing the motion to dismiss for bad faith filing. This is where NRA’s case is weakest, and the point that is most dangerous to it. If the case is dismissed, NRA will be left in New York, and it can be made to eat LaPierre’s premature announcement that the bankruptcy is meant to “dump New York.” That will be portrayed as “this is how far they were willing to go to escape our efforts to enforce our law, your honor.” The New York Attorney General has called the filing fraudulent, and the US Trustee has pointed out that it involved creating Sea Girt as a Texas corporation so NRA could merge into it, but that the attorneys forgot to make Sea Girt a nonprofit, and the only deposit into its accounts was refunded to NRA and not re-deposited, so the sham is obvious.
The US Trustee endorsed appointment of an examiner, who would investigate fraud and mismanagement, and asked that the examiner be given special powers, for example a requirement that they oversee ongoing spending. She and others made a good case for rejecting NRA’s proposal to hire a Chief Restructuring Officer, pointing out how NRA’s agreement would give him no real power to prevent fraud.
The attorney for David Dell’Aquila, an NRA member, called for appointment of a trustee to manage NRA’s finances, pointing out that LaPierre’s claimed reforms, his “course corrections,” were meaningless. He also rejected the idea of a CFO, saying that such a person would respond to the Special Litigation Committee, whose head and creator was the same officer who had approved LaPierre’s “golden parachute” contract.
The afternoon session will tell if NRA’s attorney can find a way out of these problems. He needs to prove that the filing is not in bad faith (for an ulterior motive, to escape the NY Attorney General rather than to solve financial problems) and also ward off appointment of an examiner or trustee. Given the trial to this point, that will be a very tall order.