The parent company of Alex Jones’ Infowars suffered a substantial blow in bankruptcy court as a judge blocked an attorney and a restructuring executive from overseeing the case due to “lack of transparency” on financial information, including about the conspiracy theorist’s extravagant spending habits.
US Bankruptcy Judge Christopher Lopez in Houston ordered new personnel to replace Marc Schwartz, chief restructuring officer of Infowars parent company Free Speech Systems LLC, and attorney Kyung Lee in the case on Tuesday, citing conflict of interest.
The judge found that Mr Schwartz and Mr Lee failed to disclose that they sought work from Free Speech Systems (FFS) before the conclusion of earlier Infowars bankruptcies.
The decision - which came as Mr Jones is in the midst of a second defamation trial in Connecticut over his lies about the 2012 Sandy Hook massacre - could potentially throw the bankruptcy case and the company’s daily operations into further disarray.
Mr Jones launched FSS into bankruptcy proceedings in July of this year and maintains that he owes $54m to PQPR, the comapny which markets and sells his supplements. PQPR is owned and operated directly and indirectly by Mr Jones and his parents, according to the New York Times.
In his ruling on Tuesday, Judge Lopez said additional oversight is needed in part because of questionable expenditures by Mr Jones - pointing out $80,000 spent on “security” for his trip to Connecticut.
“There has to be greater transparency in this case,” Judge Lopez told the hearing. “Without transparency, people lose faith in the [bankruptcy] process.”
The judge raised the conflicts issue on Mr Schwartz and Mr Lee because he presided over the earlier Infowars bankruptcies and was concerned about the apparent overlap of work.
He said the two men showed a “lack of candor” regarding the overlap and other matters. The judge also said the problem was compounded by Mr Schwartz’s tendency to defer to Mr Jones and his other companies instead of advocating on behalf of FSS alone.
Judge Lopez said that an independent trustee, instead of Mr Schwartz, should investigate potential claims against Mr Jones and his companies.
He acknowledged that his decision would cause disruption, but he said he could not trust Mr Schwartz or Mr Lee to impartially represent FSS if a conflict arose with Mr Jones or one of his other companies.
Mr Lee did not immediately respond to a message from Reuters seeking comment. Mr Schwartz could not immediately be reached for comment. Both had told the judge they could fairly work on FSS’ behalf.
FSS is seeking bankruptcy protection to resolve its liability for Mr Jones’ false and defamatory claims that the 2012 Sandy Hook elementary school massacre was a hoax.
A Texas jury awarded nearly $50m in compensatory and punitive damages to the parents of slain six-year-old Jesse Lewis, and a Connecticut trial is underway on the amount that must be paid to other Sandy Hook parents.
Late last month, lawyers for the victims’ families submitted a filing to the bankruptcy court accusing Mr Jones of funneling nearly $62m in assets from his business to entities benefitting himself and his relatives since 2018, when the first Sandy Hook lawsuits arose.
The lawyers argued that Mr Jones’ claim he owes $54m to PQPR is “a centerpiece of Jones’s plan to avoid compensating the Sandy Hook families”.
Judge Lopez’s latest decision leaves FSS’s bankruptcy representation in question because its other attorney, Ray Battaglia, agreed only to serve as co-counsel.
“I can’t do this on my own,” Mr Battaglia said in court.
