Feds back Sandy Hook families in legal fight with Alex Jones, InfoWars

Families of students and adults killed in the 2012 attack at Sandy Hook Elementary have gained a key ally in their legal fight against Austin-based conspiracy theorist Alex Jones — the U.S. Department of Justice.

On Friday, a Justice Department official joined the families' fight, urging U.S. Bankruptcy Judge Christopher Lopez to dismiss the federal bankruptcy filing by three companies linked to Jones and his InfoWars media system so the Sandy Hook defamation cases can return to state court for jury trials to determine how much Jones must pay in damage awards.

Jones wants to use the federal bankruptcy system to pay the Sandy Hook family members after state courts in Austin and Connecticut found that he defamed them by labeling the mass shooting, which left 20 children and six adults dead, a hoax meant to fuel a government campaign to limit gun rights.

The families oppose the bankruptcy move, saying it is an improper attempt to limit Jones' financial exposure.

More importantly, they say, the lawsuits are not about a passive division of assets but are, instead, attempts to hold Jones accountable for the heartache — and harassment from his followers — that his words produced.

In a court filing, Kevin Epstein, a U.S. trustee for the Justice Department, accused Jones of misusing the bankruptcy system to shield assets held by him and his main company, Free Speech Systems, and to minimize the amount of money he will have to pay the Sandy Hook families.

More: Report: Alex Jones seeks immunity to testify on Jan. 6 Capitol attack

"The strategy employed here ... is a novel and dangerous tactic that is abusive and undermines the integrity of the bankruptcy system," wrote Epstein, who oversees the bankruptcy system in the Western and Southern Districts of Texas for the department.

"These are classic bad faith filings for two primary reasons: these cases serve no valid bankruptcy purpose and were filed to gain a tactical advantage in the Sandy Hook lawsuits," Epstein added, noting that three Jones-owned business that hold little or no assets — InfoW LLC (formerly known as InfoWars LLC), IWHealth and Prison Planet TV — sought bankruptcy protection while Jones and Free Speech Systems did not.

The situation, lawyers for the Connecticut families added, lets Jones enjoy the benefits of bankruptcy without having to make financial or business disclosures.

Judge sets hearing on Alex Jones bankruptcy filing dismissal

In a Friday afternoon status conference in his Houston courtroom, Lopez said he will consider requests to dismiss the bankruptcy filings submitted by Epstein and the Sandy Hook families at a May 27 hearing.

"Parties should prepare to go late. We're just going to go until we're done," the judge said, adding a promise to rule as quickly as possible.

"I am aware a lot is riding on this decision. It may be that day, or I may take some time, depending on what the evidence is," Lopez said.

Lawyers for Jones and Free Speech Systems disputed claims that the bankruptcies were filed in bad faith.

"I heard a lot of emotion. I understand it," lawyer Ray Battaglia told the judge, adding that the bankruptcy route was taken to ensure that assets will be equitably distributed.

"If the desire here is to find a mechanism to pay people for their legitimate claims, that's what this program proposes," he said. "There's been a lot said by other lawyers about bad faith, and that's not how I come here today. I came here trying to pay the claims that someone tells me are the appropriate claims."

More: Alex Jones hit with $1 million for violating court orders in Sandy Hook lawsuits

The alternative is to deplete assets by spending millions of dollars for trials in Austin and Connecticut, Battaglia said, adding, "As I understand all the facts that were presented to me, this will go to zero pretty quickly."

But in a court filing, lawyers for the Sandy Hook families argued that bankruptcy is being used to "force the victims to the settlement table in a disadvantaged position" with a plan they will have no vote in approving or rejecting.

They also objected to Jones turning to bankruptcy on April 18, one week before the first trial was to begin in Austin, leading to a postponement.

"Jones reached back into his bag of tricks and litigation tactics in a further effort to avoid facing justice," the lawyers argued in a motion to dismiss the bankruptcy filings. The families "are victims of Alex Jones and his entities’ intentional efforts to spread falsehoods and conspiracy theories while earning millions of dollars from the suffering of others."

Alex Jones claims 'dubious' $54M debt as he attempts to limit payout to Sandy Hook litigants

Bankruptcy documents show that Jones hopes to limit his liability to about $10 million, roughly $500,000 per litigant, but acknowledge that "additional consideration may be negotiated over the course of the bankruptcy case."

In March, before the bankruptcy proceedings began, 13 family members of children and adults killed at the school in Newtown, Conn., rejected Jones' offer of $120,000 per person to settle their lawsuits in Connecticut, calling it a "transparent and desperate attempt to escape a public reckoning."

The Connecticut cases are set for trial in August. The Austin trial that was postponed last week has not been reset, while a second Sandy Hook trial is scheduled, at least for now, for June.

More: Judge reluctantly delays Alex Jones trial in Sandy Hook case, criticizes his lawyers

The bankruptcy documents also provided additional details on the source of the $10 million, which would be paid into a litigation settlement trust:

• $7 million from Jones and Free Speech Systems, with $2 million paid up front and $250,000 paid quarterly for five years.

• $2 million in royalties from the sale of Youngevity products — primarily dietary supplements and books — on the InfoWars website over five years.

• $725,000 that was added to the trust from the recent sale of Jones' home.

An additional $800,000 would pay for four months of fees to lawyers and the bankruptcy's chief restructuring officer.

Court documents in the Texas cases show that the InfoWars online store sold more than $165 million in herbal supplements, videos and other products in three years starting in 2016. In addition, Jones listed more than $6.2 million in assets, including three properties worth about $2.35 million plus about $458,000 in the bank. He also said he owned $206,000 in cryptocurrency, $150,000 worth of vehicles and an exchange trust with $3.1 million from a November home sale.

But in a separate lawsuit filed in Travis County in early April, several Sandy Hook parents accused Jones of hiding assets by fraudulently diverting millions of dollars to himself and shell companies.

The lawsuit alleged that the illegal transfers included $18 million paid directly to Jones, on top of an annual salary that exceeds $600,000, from 2018-21 — payments that began the same year the parents sued him for defamation.

Jones also listed a "dubious" $54 million debt owed to PQPR Holdings, a company registered in Nevada that is owned "directly or indirectly by Jones, his parents and his children through an alphabet soup of shell entities," the lawsuit alleged.

That lawsuit is still in the early stages.

This article originally appeared on Austin American-Statesman: DOJ says Alex Jones, InfoWars filing 'dangerous' in Sandy Hook case