NEW YORK (BLOOMBERG) - New York is seeking to dissolve the National Rifle Association (NRA) as the state Attorney-General accused the gun rights group and four senior officials of engaging in a massive fraud against donors.

A sprawling lawsuit filed Thursday (Aug 6) in state court in Manhattan alleges the NRA diverted charitable donations for years to enrich the organisation's top executives in violation of laws governing nonprofits, New York Attorney-General Letitia James said in a statement. The state is also demanding millions of dollars in restitution and penalties.

The case may pose one of the biggest legal threats the NRA has faced since its founding in New York in 1871.

The turmoil began with a power struggle last year between former NRA president Oliver North and longtime leader Wayne LaPierre, which led to allegations of self dealing. A subsequent state probe found wrongdoing blamed for more than US$64 million (S$87.59 million) in losses in the last three years alone, Ms James said.

"The NRA's influence has been so powerful that the organisation went unchecked for decades while top executives funneled millions into their own pockets," Ms James, a Democrat, said in the statement. "The NRA is fraught with fraud and abuse."

This isn't the first high-profile charity Ms James has targeted.

Mr Donald Trump paid US$2 million in damages last year after his charitable foundation reached a settlement with the Attorney-General, who accused the president and his children of rampantly violating non-profit rules.

Their alleged infractions included using foundation money to buy sports memorabilia, Champagne and a portrait of Mr Trump. The president shuttered the charity and denied wrongdoing.

In the NRA case, the state investigation uncovered an array of wrongdoing, including the awarding of lucrative deals to family members and close associates and the awarding of "no show" contracts to former employees to "buy their silence and continued loyalty," according to the statement.

Mr North, who was interviewed by state investigators, had accused Mr LaPierre of using the NRA to enrich himself. Mr LaPierre denied the accusation, and North was ousted as the organisation's president.

The NRA has previously claimed that Mr North plotted with its former ad agency, Ackerman McQueen Inc, to smear Mr LaPierre by leaking details of his spending. Mr North and Ackerman denied the claims.

The NRA has also accused Ms James of trying to circumvent the organisation's legal rights by demanding information about its members as part of a "political witch hunt."

Mr North's claims weren't just sour grapes, according to Ms James. Mr LaPierre, the group's executive vice-president, is accused in the lawsuit of exploiting the organisation for years, squandering donations on extravagant personal expenses.

Ms James alleges Mr LaPierre spent hundreds of thousands of dollars of NRA funds for private plane trips for himself and his family, visited the Bahamas eight times in the last three years at a cost of nearly half a million dollars.

He spent millions more on "unwarranted travel expenses" such as luxury black-car services, racking up more than US$3 million in the last two years, Ms James says.

The suit also names the NRA's treasurer and chief financial officer, Mr Wilson "Woody" Phillips; the former chief of staff and executive director of general operations Joshua Powell; and Corporate Secretary and General Counsel John Frazer. They're all accused of failing to manage the NRA's funds properly.

Their actions "fostered a culture of non-compliance and disregard for internal controls that led to the waste and loss of millions in assets and contributed to the NRA reaching its current deteriorated financial state," Ms James said in her statement. The men created a culture of self-dealing "that was illegal, oppressive and fraudulent," she said.

In addition to dissolving the NRA, Ms James said she'll seek a court order for Mr LaPierre and the others to pay penalties and make full restitution for unlawful profits and salaries. The AG also wants to have Mr LaPierre and Mr Frazer removed from the NRA's leadership and to "ensure none of the four defendants can ever again serve on the board of a charity in New York," according to the statement.