Alex Jones’ main company, Free Speech Systems, filed for bankruptcy on Friday, midway through a two-week trial to determine how much in damages the Texas-based conspiracy theorist will pay the parents of a Sandy Hook shooting victim. The filing is not expected to disrupt the trial to award damages for defamation taking place in Austin, which is set to resume Monday morning.
In the bankruptcy filing, posted by the Austin American-Statesman on Saturday, Free Speech Systems filed under a subchapter designated for small businesses, which a Sandy Hook families’ lawyer said is an effort to avoid oversight.
That lawyer, Avi Moshenberg, told The Texas Tribune the filing’s timing is significant because he believes Jones hopes to declare bankruptcy as a small business, with limited debt, prior to the culmination of the current trial. The damages awarded would drastically increase the company’s debt, and eliminate the possibility of filing for bankruptcy as a small business.
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“There's all sorts of protections that are supposed to be designed for a swift, quick bankruptcy with not a lot of oversight — the kind of oversight you’d see in a normal bankruptcy — because it's designed for small businesses,” Moshenberg said. He believes that Free Speech Systems hopes to take advantage of that lack of oversight.
“They obviously filed before the end of the trial because their debt is going to exceed that level that qualifies as a small business if they waited until after trial,” Moshenberg said.
The company reported $79 million in liabilities, $54 million of which is debt owed to a company called PQPR Holdings. Jones is listed as the director of that company. Sandy Hook families suing Jones for defamation and emotional distress have alleged, in a separate lawsuit, that this significant debt to PQPR Holdings is a diversion to protect millions of dollars in assets.
Separate from his company’s bankruptcy filing, Jones is in the middle of a two-week trial in Austin to determine how much he will compensate Scarlett Lewis and Neil Heslin, the parents of Jesse Lewis, a 6-year-old victim of the 2012 Sandy Hook shooting in Newtown, Connecticut. Last October, an Austin judge ordered a default judgment against Jones for defamation after he called the school shooting a hoax, leading Jones’ listeners to harass the victims’ families. Catch up on criminal justice and courts with our weekly newsletter Law and Order Weekly Roundup newsletter
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Jones and his legal team have previously used bankruptcy filings in the midst of the litany of lawsuits dogging him. In April, three other companies owned by Jones filed for bankruptcy, including one that was previously called InfoWars, which is the name of his show and website where he called the shooting a hoax.
That bankruptcy filing delayed jury selection for the current Lewis-Heslin trial. The plaintiffs decided to drop one of the bankrupt companies, the renamed InfoW, from the lawsuit to proceed.
Following the bankruptcy filing on Friday, Jones’ lawyer, F. Andino Reynal, submitted an emergency motion to lift the automatic stay provision of the bankruptcy code. The motion will enable the current trail to continue unobstructed.
But the bankruptcy filing could impact two future trials set for September in Austin and Connecticut, both of which will determine the amount in damages to be paid to Sandy Hook parents, said Moshenberg, though he hopes to preserve those court dates.
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“One thing that shouldn't be lost is this company which does millions and millions and millions of dollars in business has filed bankruptcy protection under the small business sections,” Moshenberg said.
Free Speech Systems filed under subchapter five of the bankruptcy code, which is reserved for small businesses, defined as having less than $7.5 million in debt, aside from money owed to affiliates or insiders.
Of Free Speech Systems’ $79 million in liabilities, Moshenberg said he suspects much of that debt is to insiders, like Jones and his parents and children, and therefore would be exempt from the total debts to qualify as a small business.
Reynal did not immediately respond to a request for comment on Saturday. The Austin American-Statesman reported that Reynal told Austin District Judge Maya Guerra Gamble that the filing was done now so the size of the damage from the current trial can be provided to the bankruptcy court.
