The production company of right-wing radio host Alex Jones can reorganize itself as a small business even though Jones owes $1.4 billion to the families of Sandy Hook school shooting victims, a Texas judge ruled Monday.
US Bankruptcy Judge Christopher M. Lopez agreed with Jones’ company, Free Speech Systems, which argued that it met the test as a small business when it filed for bankruptcy in July. The families and the US Trustee argued that Free Speech lost eligibility when Jones filed a related, personal bankruptcy a few months later.
The ruling means Free Speech, based in Austin, Texas, can retain the advantages of the small business bankruptcy rules, including the ability of Jones to keep ownership of the company. The families also won’t have the right to vote down a repayment plan they don’t like.
Jones is locked in legal battles with families of the school shooting victims, who have sued him for inflammatory comments he has made about the 2012 massacre. Jones has lost cases in Connecticut and Texas related to the shooting. The families are trying to collect about $1.4 billion from Jones.
Free Speech filed bankruptcy in July in a second attempt by companies controlled by Jones to force Sandy Hook families to resolve their fight in bankruptcy. Companies that owe less than $7.5 million in debt can use special rules designed to help small, owner-operated businesses clear debts without having to shut down, or turn over their equity.
Because Jones owns Free Speech, the small business designation should have been revoked when he filed his own bankruptcy case and it became clear he owed at least $1.4 billion to the families, Kyle J. Kimpler, a lawyer for the families, said in court. Lopez disagreed and ruled the $1.4 billion debt didn’t count toward the Free Speech debt limit because Jones’s case was filed months later.
The ruling happened three days after lawyers for Free Speech informed Lopez that Jones and an employee of the company had worked together to increase the radio personality’s salary beyond a bankruptcy court limit.
After he was asked about the payments, Jones agreed to return the money, Free Speech lawyer Raymond W. Battaglia said in court. The employee set up a business that funneled about $157,000 to Jones, according to court records.
Lopez said he found the payments “troubling.” He said he would take no immediate action against Jones. The payments began flowing to Jones a few weeks after the judge had limited how much money Free Speech could pay Jones, Lopez said in court.
“I hope it’s not a pattern,” he said.
The case is Free Speech Systems LLC, 22-60043, U.S. Bankruptcy Court for the Southern District of Texas.