Outside the Beltway

Making Alex Jones Pay

The huckster is exploiting bankruptcy laws and the financial regulations to circumvent court judgments.

James Joyner · Sunday, March 19, 2023 · 12 comments

NYT (“Sandy Hook Families Are Fighting Alex Jones and the Bankruptcy System Itself“):

The Infowars conspiracy broadcaster Alex Jones, who faces more than $1.4 billion in legal damages for defaming the families of the Sandy Hook shooting victims, has devised a new way to taunt them: wriggling out of paying them the money they are owed.

Mr. Jones, who has an estimated net worth as high as $270 million, declared both business and personal bankruptcy last year as the families won historic verdicts in two lawsuits over his lies about the 2012 shooting that killed 20 first graders and six educators at Sandy Hook Elementary School in Newtown, Conn.

A New York Times review of financial documents and court records filed over the past year found that Mr. Jones has transferred millions of dollars in property, cash and business deals to family and friends, including to a new company run by his former personal trainer, all potentially out of reach of creditors. He has also spent heavily on luxuries, including $80,000 on a private jet, bodyguards and a rented villa while he was in Connecticut to testify at a trial last fall.

One would think that his assets would have been frozen to preclude him doing any of this.

“If anybody thinks they’re shutting me down, they’re mistaken,” Mr. Jones said on his new podcast last month.

The families now face a stark reality. It is not clear whether they will ever collect a significant portion of the assets Mr. Jones has transferred. So their ability to get anything remotely close to the jury awards is inextricably tied to Mr. Jones’s capacity to make a living as the purveyor of lies — including that the shooting was a hoax, the parents were actors and the children did not really die — that ignited years of torment and threats against them.

Lawyers for Mr. Jones said in a filing late last year that “any argument that Jones must give up his public life, or discontinue public discourse, is contrary to supporting his ability to fund a plan and pay creditors.”

Granting that it was a civil case rather than a criminal one, one would think that an injunction against continuing to spread lies about Sandy Hook would have been part of the judgment.

Mark Bankston, the families’ Texas lawyer, does not disagree. “There’s a chance we’re going to be forced into a situation where we’re going to be checking to see how Infowars is doing every month to figure out if our clients are getting paid or not,” he said.

Earlier this month, Mr. Jones offered to pay the families and his other creditors a total of $43 million over five years as part of a bankruptcy plan, which lawyers for the families immediately dismissed as laughable and riddled with financial holes. The judge ordered Mr. Jones to fill in the gaps in his financial disclosures by the end of the month.

But Mr. Jones’s continued obfuscation about his net worth has given him leverage over the families, who are also fighting an American bankruptcy system that makes the survival of businesses a priority and has so far given Mr. Jones an advantage in court.

Although Infowars has estimated revenues of some $70 million a year — hardly a mom-and-pop shop — Mr. Jones was able to file for Chapter 11 under the more lenient bankruptcy rules of the Small Business Reorganization Act, known as Subchapter V. The law first took effect in early 2020, but was soon broadened to assist small businesses struggling during the pandemic.

Unlike in a traditional Chapter 11 bankruptcy, Subchapter V gives creditors like the Sandy Hook families virtually no say in a restructuring plan, nor can they file a competing plan. They can challenge Mr. Jones’s approach, but an impasse in talks could result in liquidation of the company, putting them in line to collect a fraction of the damages.

A liquidation would end Infowars, but Mr. Jones would be free to start another company just like it.

That’s truly a bizarre outcome. Granted, the damage amount was so absurdly high that Jones was never going to be able to pay it, making bankruptcy inevitable. But it’s absurd that he can continue operating as before and retain assets beyond his primary home.

Instead, he’s openly mocking the justice system:

“We’re doing well in Chapter V,” Mr. Jones said on Infowars in September, misstating the name of the rule. “Whatever judgments they have can’t shut us down. Whatever profit there is in the future these jerks get, but who cares, we’re still on air.”

Last month, Mr. Jones’s lawyers submitted a statement of his personal financial affairs prefaced by five pages of disclaimers saying that Mr. Jones did not fully remember where he holds bank accounts, how many trusts he had set up over the past decade and the whereabouts of his 2022 W-2 form documenting his wages. He has not filed a federal income tax return since 2020.

Mr. Jones continues to appeal daily to his audience to buy more of the diet supplements and other products he markets on air and to donate to Infowars, saying the Sandy Hook families are “puppets” in a plot by his political enemies to bleed him dry. His lawyers have said in court that Infowars’ business is booming.

Again, there’s no way he was ever going to pay $1.4 billion. But the winners of the lawsuit shouldn’t have to file more lawsuits in order to collect some reasonable portion of the judgment. His assets should have been liquidated and distributed to the plaintiffs.

It does appear that much of the financial chicanery pre-dated the verdict:

In February 2020, Mr. Jones traveled to the Cayman Islands, an offshore tax haven, according to text messages that surfaced during one of the trials, although it is unknown if he conducted any business on the trip. The following year, as judges in two states threatened Mr. Jones with default for stonewalling in the Sandy Hook cases, he forged the first of a series of business partnerships with associates.

In October 2021, he made an agreement with a new company, Auriam Services, founded the previous month by Anthony Gucciardi, a wellness and lifestyle blogger who is a friend of Mr. Jones and one of his earliest supplements partners. The company was to be an intermediary for credit card processing.

In February last year, Mr. Jones transferred a $3 million home overlooking the Barton Creek Greenbelt in Austin to his current wife, Erika Wulff Jones.

Mr. Jones struck a contract in July with another new company, Blue Ascension, founded only a few months earlier by Mr. Jones’s former personal trainer and assistant, Patrick Riley.

On July 29, a parent company Mr. Jones fully owns, Free Speech Systems, filed for Chapter 11 bankruptcy. At the core of the claim was $54 million that Mr. Jones said Free Speech Systems — with claimed assets of only $14.6 million — owed to PQPR, a company controlled by Mr. Jones and his parents.

The Sandy Hook families responded with a lawsuit claiming that Mr. Jones was fraudulently moving his assets outside his business, beyond the reach of creditors, and was transferring between $11,000 a day and $11,000 a week, and up to 80 percent of his supplements sales revenues, to PQPR.

It’s unclear what the remedy for this sort of thing would be. I suppose we could give judges the authority to assess the likelihood that plaintiffs will prevail and, at a certain threshold, restrict the transfer of assets. But that’s a lot of power over the financial affairs of someone not yet found liable.

Mr. Jones’s lawyers have defended his actions as a way to keep Infowars afloat when other vendors refused to do business with him.

In early August, Mr. Jones’s financial empire began to unravel. The Texas jury ordered Mr. Jones to pay the parents of the victim nearly $50 million, and two months later a Connecticut jury awarded the families of eight Sandy Hook victims an extraordinary nearly $1 billion. A judge awarded them almost $500 million more. In December, Mr. Jones declared personal bankruptcy.

Both Chapter 11 cases went before a federal bankruptcy judge in Texas, Christopher Lopez, who replaced Mr. Jones’s chief restructuring officer for the Infowars case and expanded the powers of a Justice Department-appointed trustee, Melissa Haselden, to investigate Mr. Jones’s finances. A new chief restructuring officer ended the contracts with Auriam and Blue Ascension, but late last year Infowars asked the court to approve contracts tied to an entrepreneur who had sold products through Free Speech Systems in the past, Charles Cicack.

[…]

It remains unclear how much Mr. Jones is actually worth. Recent court documents indicate that he is continuing to transfer real estate to his family, including an adult son.

In late January, under pressure from the bankruptcy court, Mr. Jones submitted a personal balance sheet detailing only about $5.6 million in total assets, including $368,899 in bank accounts, $682,899 in something called “inventory platinum,” and a $2.2 million homestead.

In the February statement of Mr. Jones’s financial affairs, the one prefaced with disclaimers about its accuracy, his property was valued at a total of $10 million, including a home, lake house and rural acreage worth $5.4 million. The statement said Mr. Jones owned two cars and two boats valued at $274,000, but listed as “unknown” the value of his premarital agreement, eight limited liability companies and several trusts. His stated monthly income was $129,000, but $104,000 of that was from sources that were not disclosed.

“The financial reporting and records are incomplete and the accuracy is uncertain,” Ms. Haselden, the Justice Department monitor, said in a court filing.

This past week, Ms. Haselden filed a subpoena for documents showing Mr. Jones’s cryptocurrency transactions and other financial dealings. The Southern Poverty Law Center has tracked millions of dollars in cryptocurrency donations last year to accounts tied to Mr. Jones.

The degree to which Jones has been able to get away with defying judicial order after judicial order throughout this process is mind-boggling.

Last month, the families retained an asset tracing firm to try to unearth more of Mr. Jones’s money, a process expected to take months.

So far, the only money Mr. Jones has paid in the Sandy Hook matter has been to his lawyers and the courts, as he has run up millions of dollars in legal fees and sanctions for abusing the judicial process. Another trial for damages — potentially on top of the more than $1.4 billion Mr. Jones owes — is slated for this year.

“Without question, Jones is pushing the bankruptcy system to its limits,” said Avi Moshenberg, one of the families’ lead bankruptcy lawyers.

A court ruling that Mr. Jones must pay the full amount owed would send a strong public message, he added: “What a jury said is unforgivable should not and cannot be forgiven by a bankruptcy court.”

I have only cursory understanding of bankruptcy law but that’s not how it works. The whole point of it is to allow people and businesses to get a fresh start by discharging debts. But the judgment against Jones would seem to fall into one of the narrow exceptions: malicious acts.

Again, it was obvious from the start that the $1.4 billion judgment was never going to be paid. But Jones ought to be stripped of most of his assets and his wages and company earnings garnished for the rest of his life.