A Texas judge refused Monday to put a limit on how much a forensic accountant may be paid while investigating what lawyers for Sandy Hook families say is a “fraudulent” bankruptcy claim.
Alex Jones’ company, Free Speech Systems, filed for bankruptcy before any of civil judgments were handed down in favor of the Sandy Hook families who he defamed when he claimed the 2012 shooting was a “hoax.” Jones himself filed for personal bankruptcy in early December following judgments totaling nearly $1.5 billion. The families are creditors in the bankruptcy cases.
The debt on which Free Speech Systems’ bankruptcy was initially based was $54 million ostensibly owed to a company called PQPR, which is controlled by Jones and members of his family. Jones and Free Speech Systems primarily make money through the sale of health supplements, and he claims that after he was “deplatformed” by major social media outlets that those supplements were almost impossible for him to obtain, except from PQPR.
Lawyers for the Sandy Hook families argued that the debt was “fraudulent,” as attorney Avi Moshenberg explained.
“We 100 percent believe it is a fraudulent transfer,” Moshenberg said following a Monday hearing in federal bankruptcy court.
The judge in the case, Christopher Lopez, authorized a trustee to investigate that $54 million debt, as Moshenberg explained: “The judge acknowledged that there’s a lot of red flags swirling around it, ordered the subchapter five trustee to investigate it.”
That trustee has asked to employ a forensic accounting firm, M3, to go examine the debt. On Monday, PQPR asked the judge to put a cap on how much M3 can be paid.
“They want to infringe on the investigation,” Moshenberg said. “They want to injure the investigation.”
PQPR’s argument was that fees will balloon out of control. “We’re in favor of the investigation,” PQPR attorney Steve Lemmon said during the Monday hearing. “At the outset we proposed that up to $100,000 be spent on this.”
Ha Minh Nguyen, an attorney representing the trustee in the case, said putting a cap on the amount M3 can get paid could throw the results of the investigation into question.
“The optics are just not good for there to be a cap placed at the front end at the time of their engagement,” she said.
When asked by Lopez how the investigation was proceeding, Nguyen said “the trustee and her counsel have looked at a large number of things,” but that not every document requested has yet been produced.
“We have a lot of pieces of data. There is still a lot of information that is financial in nature that has not yet been produced or has been produced just now during this hearing,” she said.
Nguyen said M3 has been unable to complete their investigation“because of large gaps in the data that didn’t fit in because we don’t yet have all of the supporting data or the raw data that is behind the summaries that have been provided.”
The fee for the accounting firm is to be paid by Free Speech Systems, and Lemmon argued that the company does not have the cash flow to allow too high a cost.
While Free Speech Systems does have $1.8 million in revenue, Lemmon argued that the company also has almost $1.36 million in unpaid bills.
“M3’s been on the job for about 60 days,” Lemmon told the court. “We’ve asked but we haven’t been able to find out what M3’s cost are so far incurred.”
“I’m not going to say it’s irresponsible to write them a blank check,” Lemmon said, but argued that it is reasonable to expect “some sort of budget, some sort of cap, some sort of estimate so that everybody can know what they’re dealing with here.”
Lopez did not agree. Refusing to set a cap on forensic fees, the judge decided instead, as Moshenberg explained, to follow a more common procedure.
“Just as any other professional in a bankruptcy, when you apply to get paid, your fee is paid, the court will decide after a hearing whether the fees you’re seeking are reasonable,” Moshenberg said.
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