(Photo by Drew Angerer/Getty Images)
As the Connecticut jury deliberates damages for the second set of Sandy Hook parents labeled as crisis actors by right-wing podcaster Alex Jones after their children were murdered in the 2012 school shooting, his companys bankruptcy in Texas seems to have gone well and truly off the rails. Again.
For background, Jones tried every way he could to get out of facing the Sandy Hook plaintiffs in court. Along the way his persistent refusal to cooperate with discovery earned him default judgments in both Connecticut and Texas, at which point his company Free Speech Systems (FSS) suddenly remembered that it owed $55 million to its supplement supply company PQPR, which is wholly owned by Alex Jones and his parents. FSS then executed promissory notes, securitizing the debts, prioritizing PQPR as a creditor, and allowing FSS to start shoveling mountains of cash out the door and off its books.
On the eve of the first trial in Connecticut, Jones placed three all-but worthless shell companies in bankruptcy. Because they were named defendants in the tort suits, this had the short-term effect of staying the state cases. Jones offered to fund a $10 million trust if the two dozen tort plaintiffs would drop all their claims. But the plaintiffs non-suited the LLCs, and the US Trustee accused Jones of filing a sham bankruptcy. In the end, the lawyer representing the LLCs, Kyung Shik Lee, and the proposed resettlement officer, Marc Schwartz, flounced out of court indignant at the suggestion that theyd abused the bankruptcy proceeding for litigation advantage.
But they werent gone for long. Almost as soon as the Texas case began, they were back representing FSS in its own bankruptcy filing. From the outset of the proceeding, US Bankruptcy Judge Christopher Lopez flagged the potential conflict posed by Lee and Schwartz representing the LLCs and FSS representation which overlapped chronologically, although the two were somewhat less than forthcoming about the issue. Meanwhile, Texas and Connecticut plaintiffs and the US Trustee were screaming bloody murder that the attorney and the accountant were in cahoots with Jones to loot FSS of assets, not just because theyd okayed the specious PQPR notes, but also because they were using FSS money to pay for Joness travel and legal expenses for the Connecticut trial in which he and FSS are co-defendants.
The matter came to a head in six-hour hearing on September 20, in which Judge Lopez ordered the US Bankruptcy Trustee to investigate FSSs books, particularly the PQPR notes. He also disqualified Lee and Schwartz, while saying that he hoped never to have to do anything like it again during his judicial tenure. Famous last words!
On October 4, Schwartz and Lee, along with Lees partner, R.J. Shannon, filed companion motions for reconsideration with the goal of proving that they are not biased in favor of Jones or PQPR. And the way they intend to prove their disinterestedness is to burn Jones to the ground and air a bunch of attorney work product on the public docket.
In defense of the $80,000 outlay for Joness travel costs, Lee and Shannon argue that Jones threatened to tank FSSs revenues for October by staying in Connecticut and refusing to do his show during the entire trial if FSS didnt cough it up. In the end, Jones agreed to attend just three days of the trial, ensuring that FSS would be able to sell the $40,000 of product he moves every day hes on air.
Lee makes similar allegations about Jones playing hardball to get FSS to foot the entire bill for attorney Norm Pattis, who represents both Jones and FSS in the Connecticut case. With Jones threatening revoke his consent to the joint representation, forcing FSS to find new counsel on the eve of the trial, Lee says he had no choice but to hand over the money.
Finally, Lee and Shannon accuse Pattis of giving them bad legal advice about remanding the case to Connecticut from bankruptcy court, citing an email exchange in which Shannon rebuffed Joness attempt to get him to fight the remand.
I dont think the Debtor would have removed if we had an accurate view of the situation. Norm misunderstood when he reported to us that the state court was proceeding to jury selection on the claims against the Debtor, he wrote on August 16. What the state court actually did is bifurcate the trial so that it was proceeding only as to Alex Jones and not the Debtor.
[FSS] needs to focus on things that will preserve and increase the value of its estate and not fall into the trap that the Plaintiffs are in of just fighting everything for the sake of fighting, he added later.
Well! Alex Jones hasnt been this apoplectic since he found out that the government was turnin the freakin frogs gay. After he washed the soothing barbecue sauce out of his chest hair, he and his new lawyer filed an objection to Schwartz and Lees motions for reconsideration.
Purporting to be the true representatives for FSS, Jones accuses the companys former representatives of publishing the privileged communications were to further their self-serving suggestion at a narrative on behalf of Movants, contrary and not supported by the common interest parties or communication, in an effort to apparently disclose the substantial debate among these common interests.
Although he does concede in a footnote that its unclear whether Lee and Schwartz ever signed the Common Interest Agreement which would put them in privity with tort counsel.
Indeed, Jones professes himselfshocked at the ad hominem attacks both personal and professional occasioned by the US Trustees objection to employing Shwartz and Lee, as well as their dishonest and unethical motives in filing same (filed without even showing, much less consulting, Alex Jones or co-counsel to the Debtor about the inflammatory and incorrect nature of this Response).
Swing for the fences, kids!
In response, Shannon and Lee argue that they are the real representatives of FSS, not Jones. That FSS and Jones are separate entities with separate counsel. And that, absent their signoff, there was no privity between the parties.
And tomorrow, the parties are due back in court at 10 a.m. for a motion to consider Joness preferred candidate for chief restructuring officer, which should be absolutely batshit.
Good luck, Judge Lopez!
FSS Bankruptcy Docket [via Court Listener]
Liz Dyelives in Baltimore where she writes about law and politics.
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