Month: November 2022

The Washington Post

Sandy Hook families sued Alex Jones. Then he started moving money around.

Jonathan O’Connell, The Washington Post – November 21, 2022

Alex Jones was losing in court.

Parents of children killed at Sandy Hook Elementary School had sued him and his media company for defamation after he repeatedly claimed the 2012 massacre in Connecticut was a hoax. Fans of the Infowars host had harassed and threatened grieving families. By the summer of 2020, two of the lawsuits weren’t going his way.

As the potential for damages mounted, Jones began moving millions of dollars out of his company, Free Speech Systems, and into companies controlled by himself, friends or relatives, according to a Washington Post review of financial statements, depositions and other court records. The transfers potentially put those funds out of reach of the Sandy Hook plaintiffs.

Between August 2020 and November 2021, Free Speech Systems signed promissory notes – essentially IOUs – for $55 million to cover what it said were past debts to a company called PQPR Holdings that Jones owns with his parents, according to financial records filed in court by Jones’s attorneys. PQPR, which is managed by Jones’s father, a dentist, had bought tens of millions of dollars in supplements for Jones that he then sold on his show, the records say. A lawyer for Free Speech systems has said in court that the debt accrued unnoticed due to sloppy bookkeeping.

This year, Jones started paying his personal trainer $100,000 a week to help ship supplements and other merchandise, a Free Speech Systems attorney said in court. A company managed by Jones’s sister and listed as a “supplier or vendor” was paid $240,000, financial records show.

Courts have awarded the Sandy Hook families nearly $1.5 billion in damages against Jones, including $45.2 million in a Texas case in August and $965 million in a Connecticut case two months later. On Nov. 10, the judge in the Connecticut case ordered Jones to pay an additional $473 million in punitive damages, including $323 million for legal fees. Jones has said on his show that he plans to appeal.

The IOUs and other recent transactions helped tip Free Speech Systems into bankruptcy in July, according to Jones’s court filings. An accountant hired by Jones calculated that Free Speech Systems had $79 million in liabilities at the end of May and only $14 million in assets, court records show. As a result, the Sandy Hook families could be left vying with other creditors – including the companies tied to Jones himself – to collect.

The bankruptcy court will ultimately determine which creditors are paid and how much. It is examining whether the promissory notes to PQPR and other transactions are legitimate. Attorneys for PQPR have argued in court that it should be paid before unsecured creditors, a category that would include the Sandy Hook plaintiffs.

Attorneys for the Sandy Hook families contend in a separate suit filed in April in Texas state court that PQPR is “not actually an independent business” and that Jones has engaged in fraudulent transfers to shield his wealth. They have argued in bankruptcy court that Jones began moving money out of Free Speech Systems only after he began to face legal setbacks in the defamation cases.

“In the middle of this lawsuit, they started documenting debts that had no evidence of existing beforehand,” Sandy Hook attorney Avi Berkowitz said in an interview.

A Justice Department trustee whose role in the bankruptcy case is to ensure the integrity of the process also has criticized the agreement to pay PQPR. “We, the U.S. Trustee, we do have concerns with the underlying transaction,” attorney Ha Nguyen told the court, according to a transcript. An agency spokeswoman declined to comment.

Alex Jones, his personal attorney, and attorneys for Free Speech Systems and PQPR did not respond to requests for comment or to detailed lists of questions from The Post. David Jones, Alex Jones’s father, and an attorney representing him also did not respond to requests for comment.

Jones and his father have said in court proceedings that PQPR was created in 2013 for liability protection as Jones got into the supplement business and as his father took on a management role. The accountant hired by Jones told the bankruptcy court that PQPR was a legitimate business that shared responsibility with Jones’s main company for “setting up supply chains, obtaining required governmental certifications, negotiating with vendors, procuring and paying for product, and overhead.”

Raymond Battaglia, a lawyer for Free Speech Systems, has said that as the Infowars brand ballooned, and millions of dollars poured in, the family-run business never adopted “appropriate management and accounting controls,” and so it failed to note the debt that had built up to PQPR.

“This is kind of like the garage band that became the boy band overnight, and had his girlfriend running the books, and the head roadie being the business manager,” Battaglia said in August in the bankruptcy case.

On their own, the corporate structures were not unusual, said bankruptcy experts. Many small-business owners create separate but related entities to organize and protect their wealth. Experts say the fact that the entities do not have any employees, offices or owners other than Jones and his parents does not mean they are not legitimate businesses.

The issue, said Jay L. Westbrook, a University of Texas bankruptcy law professor, is whether the court rules the transfers of wealth were made in the ordinary course of business. “At the end the of the day, the question is whether these are valid payments,” Westbrook said.

The Post examined financial records, depositions and other documents from the court cases to trace the flows of money around Free Speech Systems and establish the ownership of the other companies that were involved. The analysis shows that the transfers echoed financial moves Jones made almost a decade earlier, when divorce proceedings jeopardized his fortune, according to sealed court records from the divorce case obtained by The Post.

Infowars has made Jones a wealthy man, to a degree that has become apparent only because of the Sandy Hook litigation. In August testimony, an expert hired by the Sandy Hook families estimated Jones’s net worth at between $135 million and $270 million. Jones has disputed the plaintiffs’ estimations of his wealth.

“I don’t have all this money they’ve made up,” he said recently.

The supplement business tied to PQPR is the engine of Jones’s fortune, according to financial records Jones submitted in bankruptcy, often generating 2,000 to 3,000 orders a day, according to court testimony. Among the offerings are Survival Shield X-3 iodine spray, DNA Force Plus capsules and Super Male Vitality dietary supplement.

Of the $65 million in income Free Speech Systems had in 2021, the vast majority came from supplement sales, according to those records.

Berkowitz said his clients may be willing to settle with Jones for less money if it meant Jones would end his broadcasting career.

“If he wants to agree to some sort of terms that hold him accountable for all he’s done, we’ll be open to listening,” Berkowitz said. “Whether that means walking away from public life, to paying Sandy Hook families in full, the Sandy Hook families are not going to stop until Jones is held accountable.”

Jones, 48, has said he will keep fighting no matter what.

“They want us off air, that’s their goal,” he said during one show last month. “You’ve got my commitment. I’m not backing down.”

– – –

Jones grew up in Texas, first in Dallas and then in Austin. He has said his early thinking was shaped when, as a high school student, he read the book “None Dare Call it a Conspiracy” by a member of the far-right John Birch Society. Jones was 19 in 1993 when federal agents raided the Branch Davidians’ compound in Waco, north of Austin, leading to a prolonged standoff that ended with 76 dead. He went to Austin Community College for a time but left after growing bored, he told the Austin-American Statesman.

He told the newspaper that his anger toward big government stemmed from problems his father and his grandparents had with the IRS. “That’s where the venom comes from with me,” he said.

Jones started his broadcasting career with a public access TV show in Austin in the early 1990s. Several years later, a local FM radio station gave him a show after his father agreed to sponsor it, according to an accounting expert Jones hired in bankruptcy filings.

By the late 1990s, dozens of stations nationwide carried his show.

On air, Jones called the Branch Davidians victims of “a government coverup of its violation of the First Amendment,” and he asked listeners to send donations to help the sect build a new church and memorial. He wore a pin to the 1999 groundbreaking that said “You burn it, we build it,” according to the Associated Press. He was 25.

Jones railed against the government, the media and what he called the New World Order. He claimed that major world events were not what they seemed – and often that they were manufactured crises, staged to serve as pretexts to accomplish the goals of a secret cabal of globalists and multinational corporations.

In 1999, Jones registered the site infowars.com. As the internet era took off, he launched a subscription-only streaming video service and began selling videos, books and T-shirts, according to bankruptcy records. In 2007 he incorporated Free Speech Systems and created a series of other companies that held intellectual property and film rights, splitting ownership with his then-wife, Kelly, whom he had met at the public access station.

According to records obtained by The Post, in 2009 Free Speech Systems took in $6.2 million in revenue, including $2.6 million in merchandise sales, $1.6 million in advertising and $1.2 million from his streaming video site.

A few years later, Jones’s business was booming, but his marriage was failing.

In the fall of 2013 – two months before Kelly filed for divorce – Jones and his father created a series of companies, including PQPR, which they said in depositions were aimed at protecting Jones from legal liability as he grew his business. PQPR was owned by two other companies, which in turn were owned by Jones or his parents, a representative of Free Speech Systems said in a deposition filed in the bankruptcy case.

PQPR was worth $4.4 million in 2014, according to an accountant Jones hired in the divorce case, records show. Accountants working for Kelly Jones said it was worth as much as $6.2 million.

Alex Jones recounted during a June deposition in one of the defamation cases that they created the companies after he spoke with attorneys familiar with the Food and Drug Administration, the federal agency that regulates dietary supplements. “For liability protection issues, you know, it’s good to have a separate company that then does all of the compliance, buys the products, does all of that,” he said.

Jones’s father said in a deposition filed in the divorce case that Jones recruited him to leave dentistry in order to help professionalize operations and protect the company from liability. “He wanted to be sure that the entities that had been created were up and running properly, that they were legally constituted, that they were doing business as they were supposed to do,” he said, according to a court transcript.

Jones’s ex-wife has alleged that he created the companies as the couple was headed to divorce in order to protect his money, much as the Sandy Hook plaintiffs now accuse him. “Our marriage was absolutely terrible at that time. We were in negotiations for us to break up,” she said in an interview with The Post. “So he did that to hide his assets for when we broke up.”

Records from the divorce case are sealed. It was not clear from the documents obtained by The Post if the court ever directly examined that allegation.

Before the divorce, Kelly was part owner of the main Infowars company and several original affiliates, holding stakes ranging from 49.5 percent to 51 percent, according to records from the divorce case. A 2015 divorce rendition grants her no interest in PQPR or in what were then the newly created companies. Her name does not appear on any of their registration documents.

Those companies all have a stake in Jones’s biggest revenue source: The supplements that he promotes as a way for viewers to improve their health and keep his show running. The supplement sales dramatically boosted his business, according to bankruptcy filings and former employees.

The profit margin on supplements ranges from between three and five times their cost, far more than most of the products he sells, according to the filings. Free Speech Systems often collects $70 million to $80 million annually, according to the accounting expert Jones hired, and it took in more than $500 million in revenue from 2012 to 2022.

Josh Owens, who worked as a video editor at Infowars from 2013 to 2017, said he helped Jones with his first advertisement for an iodine supplement. “Everything changed after that,” he said. “It snowballed after that. It was pretty quickly creating new products, selling new products.”

– – –

In 2018, three years after his divorce was finalized, Sandy Hook families filed a series of lawsuits against Jones. They recounted how he had claimed that the parents were “crisis actors” and that the event was staged to further gun-control efforts.

Jones sought to have the cases thrown out. The day before an appeals court rejected his motion to have one of the cases dismissed, Jones signed a promissory note to PQPR for $29.6 million on Aug. 13, 2020. He also agreed to provide all of his company’s assets and revenue as collateral for the debt to PQPR, according to a contract Jones and his father signed.

On Sept. 27, 2021, a trial court in Texas ruled that Jones had violated the rules of the discovery process by failing to turn records over to the plaintiffs. Four days later, Jones signed an agreement to send PQPR $11,000 per day to cover the alleged debt outlined in the promissory note. On Nov. 10, Jones signed a secondary promissory note saying, in effect, that he had discovered another unpaid debt to PQPR, this time for $25.3 million.

Jones was also taking money out of the company for himself, records from the court cases show. By the end of 2021, he had withdrawn $61.9 million, according to the records. Jones’s attorneys have said in court that the withdrawals occurred over 15 years, and that half that amount was used to pay taxes. The plaintiffs’ attorneys have suggested the withdrawals may have been meant to prevent Sandy Hook families from accessing the money.

In February of this year, Jones transferred ownership of his Austin home – appraised at $2.8 million – into his wife’s name, according to county property records.

His personal trainer, Patrick Riley, in March created a logistics company, Blue Asension Logistics, to pack and ship supplements and other merchandise ordered by Infowars fans. The company hired nearly all of its employees from Infowars and uses the same Infowars warehouse, rent-free, to fulfill the orders, according to Riley’s testimony in the bankruptcy case. Jones agreed to pay him $400,000 upfront and then $105,000 per week, according to bankruptcy records.

Riley did not respond to voice mails seeking comment. He testified that he is the sole owner of the company.

An attorney for the Sandy Hook families, Marty Brimmage, said “this is not an arms-length transaction,” during an Aug. 12 hearing. “It isn’t even close.”

Battaglia argued that, while Riley may be friends with Jones, his business was independent. “Does Mr. Riley have a relationship with Mr. Jones? Absolutely. Is he an insider? No,” Battaglia said in the hearing.

In May and June, Free Speech Systems made six payments totaling $240,000 to a company managed by Jones’s sister, Marleigh Jones Rivera, according to bankruptcy records. The records do not specify who owns the company or the nature of its business.

Marleigh Jones Rivera did not respond to requests for comment.

On Nov. 10, the Connecticut judge temporarily blocked Jones from accessing the company’s money beyond what he needs for “ordinary expenses.”

The bankruptcy judge in Texas, Christopher M. Lopez, is expected to determine whether Jones engaged in fraudulent tactics designed to wall off assets from creditors. If the court finds that he did, the money that has been paid out or committed as debt could be divvied among creditors, said Georgetown University law professor Adam J. Levitin, an expert in corporate bankruptcy.

Levitin said the most likely scenario may be that Free Speech Systems chooses to liquidate, which would likely mean Jones forgoing the rights to all his films, brands and intellectual property, the Infowars name included. “There is nothing beyond a real Hail Mary route for him to avoid liability at this point,” he said.

In one of the defamation courts, Jones apologized to the Sandy Hook families and said he now believes the killings did occur. On his show, he remains defiant.

“I don’t lose sleep at night about giving them a billion dollars,” he said at a news conference he held in Connecticut in October. “They just misrepresent how much money I have. It’s a total fraud.”