Three years ago this spring, three companies controlled by right-wing radio host Alex Jones filed for Chapter 11 bankruptcy protection in Victoria, Texas. Nearly a decade had passed since the former cable access show host had begun espousing his view that the massacre of first graders perpetrated by a deranged youth with enormous eyes at Sandy Hook Elementary School in Newtown, Connecticut, was in fact an elaborate con orchestrated by shadowy elites to manufacture consent for stricter gun laws.
One of Jones’s disciples had demanded that Lenny Pozner exhume the body of his dead six-year-old child to “prove to the world” that he wasn’t simply a professional crisis actor. Pozner had to move seven different times after the tragedy to escape taunts from Jones’s followers. So he, his former wife, and another dad who had lost a son in the carnage sued Jones for defamation. Jones clung stubbornly to his denialist narrative, refusing to hand over relevant emails, text messages, or financial transactions that might have made the disinformation campaign make sense. At one point, Jones’s lawyers had accidentally sent two years’ of their client’s unfiltered text messages to Pozner’s lawyers, but the texts were not terribly illuminating; mostly, says one source who pored over them, “they confirm that he’s crazy.”
But filing for Chapter 11 bankruptcy was an unusually sane move for Jones. Jury selection in one of his defamation cases was slated to start the following week, and he’d pissed off the judge enough that she’d likely do all she could to help the plaintiff collect. So Jones retreated to an old playbook: deny, delay, declare bankruptcy.
“This bankruptcy was filed to protect Alex Jones … from having to face trial on Monday,” said an attorney representing a group of defamed families. “Good faith implies honest intent and genuine desire on the part of the petitioner to use the statutory process to effect a plan of reorganization, and not merely as a device to serve some sinister or unworthy purpose. And let me tell you, I think we’ve got a sinister and unworthy purpose here.”
A Houston-based attorney representing nine other families piped up. “With all due respect to the Court, why are we in Victoria?” he asked rhetorically. More than a dozen lawyers were packed into a drab government building two and a half hours from Houston or Austin, in a working-class town notable mainly for its 199-year-old Catholic church and the surfeit of industrial pollution left behind by an assortment of chemical plants and a shuttered aluminum smelter. Jones had chosen to file for bankruptcy protection from a shared office space in this unremarkable city, 126 miles from the Infowars studio.
Something, as Jones might say, did not smell right. And it was technically illegal, of course; the federal code explains clearly that the venue of a bankruptcy must be the filer’s “principal place of business,” for example. You’d expect the judge to take notice; after all, Jones had yet to meet a judge he didn’t antagonize.
But you never knew what to expect from a bankruptcy judge.
ONE-JUDGE COURTHOUSES ARE MAGNETS for judge shopping. The Wisconsin Institute for Law & Liberty has backed three lawsuits in Amarillo, Texas, where the only federal judge is die-hard Second Amendment absolutist Matthew Kacsmaryk. A co-working space in White Plains, New York, was famously filled with fake corporate tenants, all vying to get Chapter 11 filings before the famously “debtor friendly” Judge Robert Drain. And Drain’s imminent retirement in June 2022 sent big corporate debtors stampeding for Houston, where a “complex case” designation guaranteed a filer would get one of just two judges, both of whom had reputations for debtor coziness.
But the lone bankruptcy judge in the Alex Jones case in Victoria was a lanky, soft-spoken, self-effacing man in his late forties named Christopher Manuel Lopez, about whom no one knew much of anything.
That would soon change. Three days after the Jones hearing, according to an invitation published in The Wall Street Journal, Lopez was one of two guests of honor at a private cocktail and dinner party at Le Bernardin, the legendary Michelin three-star seafood restaurant in Midtown Manhattan, where the tasting menu starts at $325 a head. The host was Mohsin Meghji, a former Arthur Andersen executive who had become a ubiquitous restructuring mercenary after the accounting firm failed after the 2002 Enron meltdown. The other guest of honor was Judge David Jones, the most respected and feared bankruptcy judge in America.
Companies coming to the Houston courtroom were attempting flagrant cash grabs rather than anything resembling a fresh start.
Jones had tapped Lopez, a former salaried partner at the powerful corporate law firm Weil Gotshal, as the replacement for his best friend and retiring mentor Marvin Isgur, with whom he had founded the complex case panel. They were an odd couple: Jones a central-casting ugly-but-powerful white guy with a steak-house build, Lopez a lanky former college athlete with a contemplative vibe that leads everyone to point out that he spent a year at Yale Divinity School, usually in the course of puzzling over some inscrutable ruling he has just made.
At the time, Meghji was somehow serving as chief restructuring officer of a bankrupt oil exploration firm and a soon-to-be distressed biotech firm, as well as the chief financial adviser to the creditors committee of a bankrupt luxury retailer and two soon-to-file trading partners of cryptocurrency Ponzi FTX. He billed bankrupt companies $1,350 an hour and kept every penny of that fee, while also earning cash flipping distressed assets he encountered in his extensive travels through the bankruptcy system.
But Judge Jones’s productivity put Meghji’s to shame. He presided over tens of thousands of bankruptcies, 39 of them involving more than $1 billion in debt, between 2016 and 2023, a caseload that dwarfed any other judge’s except Isgur, who handled 34 mega-cases over the same time period. In his off-hours, Jones mediated disputes between creditors in colleagues’ bankruptcies, taught night classes to bankruptcy lawyers throughout Texas, and offered special guidance to younger judges like Lopez, who were still learning the ropes.
The thing was, Jones had haters. The bankruptcy world is cozy and incestuous, and everyone knew Jones gave special treatment to high-prestige firms like Weil Gotshal, Latham & Watkins, Akin Gump, and in particular Kirkland & Ellis, which filed 49 Chapter 11s in Houston after he personally lobbied senior partners to educate them on the district’s advantages. Everyone could see from the number of cases that Jones had some sort of extra-special relationship with Kirkland and its preferred partner firm, Jackson Walker, which invariably teamed up to act as the bigger firm’s “local counsel” on cases, even though Kirkland had 200 Houston-based lawyers of its own. And everyone who had been around for any length of time had heard rumors that Jones gave ultra-extra special treatment to a blond Jackson Walker partner named Liz Freeman with whom he had, Jones’s case manager would ultimately reveal in a deposition, been romantically linked for at least ten years.
This revelation, eventually brought to wider attention by a dogged plaintiff named Michael Van Deelen, would embroil Jones and Freeman—and, apparently, Meghji—in an FBI investigation, upend thousands of bankruptcy filings, and become the consuming preoccupation of distressed-debt journalists. But in summer 2022, this open secret, which Van Deelen had revealed in a 2021 court filing that had been instantaneously sealed by Isgur, then essentially resealed by two other Houston judges, had not yet reached the public eye, and the lawyers representing Sandy Hook parents were heartened to learn Freeman would be working as co-counsel to the DOJ-appointed trustee in the Alex Jones bankruptcies, charged with investigating the internal conflicts between the conspiracy-peddler and his labyrinthine empire of insiders posing as creditors. “We were pretty excited when we saw her name, because she had a reputation for positive outcomes in this court,” says a lawyer who worked on the case.
What the attorneys didn’t realize was that Freeman’s presence on a small-business case did not portend well for her reputation. Behind the scenes, the details of her relationship with Judge Jones were coming out. Freeman had agreed to quietly “separate” from Jackson Walker by the end of the year; she was parked at this small-business case before then.
And in kind of a paradox wrapped inside a microcosm waving a false flag, Alex Jones was inducting himself into a vast real-life conspiracy, in which global elites from Sweden to Siberia to San Antonio were descending upon Houston and its even more permissive satellite courts like Victoria and Corpus Christi, where a clique of enterprising judges were building a real-life sanctuary city for elite crimes, from poisoning workers to abusing altar boys to grand larceny to spewing hate speech in pursuit of selling turmeric gummies and “Trust No One” hoodies.
For years, the volatile talk show host operated in court like a man totally immune to consequences, routinely changing lawyers, calling in sick to depositions, and barely attempting to comply with discovery orders. But maybe he understood something that his ideological enemies did not: that courts of law, like laws themselves, are for lemmings, losers, and the lumpen proletariat. Americans have been deprived of their constitutional right to sue corporations that break the law and harm them, while the appointed guardians of the systems have waved it all through. The bankruptcy system’s functionaries are elite crisis actors, making fake arguments about fake distressed companies and taking home real money. The reason this horror show has escaped the ire of Alex Jones, who has no problem railing against the U.S. justice system, is because he’s benefited from it.
Tyler Sizemore/Hearst Connecticut Media via AP
Alex Jones is questioned by attorney Chris Mattei during testimony at the Sandy Hook defamation damages trial at Connecticut Superior Court in Waterbury, Connecticut, September 22, 2022.
BANKRUPTCY IS IN THEORY RESERVED for entities experiencing financial crisis that cannot continue to service their debt. Chapter 11 reorganization is supposed to help bankrupt companies fairly discharge some portion, so that they can emerge and operate sustainably. But the Chapter 11 bankruptcies the Houston court had been attracting since Freeman joined Jackson Walker were a little different. Companies coming to the Houston courtroom, from auto parts distributors to old-fashioned mutual funds to Scandinavian battery-makers, were attempting flagrant cash grabs rather than anything resembling a fresh start.
The classic bankruptcy scheme is some variation on a Mafia bust-out: siphoning all the assets of a company into secret shell companies, putting the hollowed-out husk into bankruptcy protection, and giving a big middle finger to creditors. That’s what the Sackler family did when they began desperately transferring billions of dollars out of the OxyContin pharmaceutical empire in 2007; what billionaire “activist investor” Carl Icahn did when his appointed board members started transferring coal power plants owned by the electricity provider Dynegy into secret subsidiaries in 2011, what Apollo and TPG tried to do with Caesars Palace in 2015. And it’s what Alex Jones appears to have been trying to do after the defamation suits in 2018, when he began furiously transferring as much as $11,000 per day out of Infowars.
In all the famous cases I’ve cited, the perpetrator got caught, which is why most bankruptcy abuses these days tend to involve backroom deals to bribe some creditors to throw others under the bus. A particularly notable case involves Serta Simmons, the mattress conglomerate that is on something like its 12th private equity owner. Like most private equity–owned companies, Serta had billions of dollars of debt amassed by a succession of owners who never tired of taking out new loans solely to line their own pockets, and it was losing market share to online competitors. In 2020, on the verge of default, Serta contacted mutual funds that owned some $1.3 billion of its debt and asked what it would take to secure a lifeline. The mutual funds asked for something they’d seen in previous private equity deals: Serta could carve out its “intellectual property”—brand names, logos, and the foam bedding structure patents it had sued Casper for infringing upon in 2017—and hand over shares in that business, in exchange for the extra liquidity. Apollo sued upon learning of this deal, but when Serta filed for bankruptcy protection anyway and got its fancy Weil Gotshal lawyers in front of Judge Jones, he happily approved it.
In 2023, the private equity owner of Robertshaw Controls, an insolvent HVAC components manufacturer, reached out to other private equity firms that owned large portions of its debt and offered generous privileges for a new cash advance. A hedge fund that had been toiling for months to negotiate a similar arrangement immediately sued. Within three months, Robertshaw had filed for Chapter 11 protection in Houston. “Absolutely shameless play here … you do know Jones isn’t around anymore to Serta whoop you out of this right?” posted the bankruptcy attorney Kevin Eckhardt, a editor with the distressed-debt trade journal Octus, upon news of the filing.
But other bankruptcies call to mind something Mo Meghji, in a 2016 deposition he gave during litigation with an ex-business partner, termed the “solvent debtor strategy.” The energy contractor McDermott International filed in January 2020 despite reporting nearly $700 million in cash on its balance sheet and just $400 million in annual interest expenses two months earlier. JCPenney filed in May 2020 despite having a quarter-billion dollars cash on its balance sheet, just $3.8 billion in debt on $10.7 billion in annual revenue, and no principal due before midsummer 2022. Chesapeake Energy filed the following month despite having ample cash flow and improving profit margins. The oil exploration services firm Valaris filed in August despite having nearly $200 million and virtually no secured debt. And the family-owned tugboat operator Bouchard Transportation Company filed in September due to problems described in its filing as “general industry headwinds,” despite having just $190 million in secured debt on an estimated billion dollars in physical assets.
All of these companies filed in Houston on the advice of Kirkland & Ellis and Jackson Walker; all but Valaris, which went to Isgur, were overseen by Judge Jones; all resulted in extraordinary wealth transfers toward a bunch of hedge funds, investment banks, restructuring firms, and law firms at the expense of workers, small-time vendors and counterparties, pension funds, the IRS, and one Morton Bouchard, who lent $40 million to his family business only to find himself ousted from its operations completely after he dared question the millions of dollars in fees all the experts were billing to it.
Some of the details of these alleged schemes, as laid out in court filings pieced together by a few of their more vigilant victims, are downright bonkers. One JCPenney bondholder claimed that a group of mall developers and hedge fund managers ended up getting assets worth as much as $8 billion for less than $1 billion in cash. Last year, two Berkeley bankruptcy law professors calculated that the annualized interest rate on the loan these entities made to keep JCPenney afloat was 545 percent, an especially awe-inspiring figure when you consider that the company didn’t seem to need the liquidity, as its stores ended up wildly overperforming Kirkland’s gloomy forecasts within weeks of the Chapter 11 filing. The investment bank Lazard billed $23 million to the estate for facilitating the eventual sale, despite having conducted neither a formal valuation of the company’s assets nor an even rudimentary auction.
How’d they get away with it? We now know that Freeman had filed the Chapter 11 in Corpus Christi specifically so Jones would be automatically assigned the case, on the grounds that Jackson Walker “can’t afford a process hawk” presiding over the retailer’s reorganization, as Freeman put it in a text. “Jones has been softening up for this for a month,” she added. “We are keeping this down loooooooowww.”
Although Isgur was the “process hawk” Freeman was trying to avoid in the JCPenney case, the Valaris case suggests he too had a soft spot for elite bankruptcy’s crisis actors. Lazard estimated that the value of Valaris’s $14 billion in offshore drilling equipment and infrastructure had been impaired by more than 90 percent and proceeded to sell off assets for pennies on the dollar, wiping out all the equity shareholders except for one hedge fund that got $300 million for agreeing to go along with the disorderly unwind. According to an adversarial filing to the bankruptcy court, once oil prices surged following Russia’s invasion of Ukraine, the Valaris estate sold off, for roughly half its $50 million value, a specialized jack-up rig used specifically for Arctic drilling to a Russian state-controlled enterprise, chaired by a man often described in media accounts as “Putin’s personal bodyguard,” in seemingly direct violation of U.S. sanctions.
The rush of filings by companies that weren’t actually insolvent was closely followed by another wave of filings by companies that weren’t actually companies. 4E Brands, which filed February 2022 in Laredo to secure Jones as a judge, is a holding company for 7,402 pallets of hand sanitizer manufactured by the $20 billion consumer goods conglomerate Kimberly-Clark, until they were recalled in 2020 for being tainted with methanol, as listed in wrongful death and personal injury claims that had resulted from the contamination. Honx, Inc., which filed in April 2022 before Isgur—who in turn appointed Jones the case’s mediator—was a holding entity for lawsuits filed by 910 cancer-stricken former workers and neighbors of a Virgin Islands Hess oil refinery that was shut down in 1998 after local officials learned it contained millions of pounds of asbestos insulation. And Tehum Care Services, which filed in Lopez’s court but with critical mediation assistance from Jones in February 2023, was the shell that resulted from the decision of a massive prison contractor to transfer all of its prison contracts to a new entity called YesCare to shed 600 negligence and malpractice lawsuits—represented by the newly independent Law Office of Liz Freeman.
ONE OF THE MORE EGREGIOUS RECENT bad-faith bankruptcies is the case of the New Orleans Archdiocese, where child predators had run so rampant that the FBI issued a search warrant last spring demanding every single file, email, and communiqué the Church and its associated parishes had ever kept on the topic. Though current archbishop Gregory Aymond chairs a “Committee for the Protection of Children and Young People” within the Conference of Catholic Bishops, the evidence that has trickled out thus far speaks to a stubborn resolve to keeping a lid on pedophile priest revelations, and the local establishment has broadly sided with Team Damage Control over the Church’s hundreds of victims.
In 2019, attorneys representing former altar boy victims subpoenaed a cache of documents that revealed a startling new addition to the ranks of local institutions that had conspired in the cover-up: the New Orleans Saints, whose owner Gayle Benson is a close friend of Aymond. The Saints had begun handling the archdiocese’s crisis communications in 2018, shortly after Benson had taken ownership of the team. The Saints and the archdiocese quickly moved to seal their communications from public view; the Associated Press sued to unseal them, and a “special master” was appointed to mediate the dispute in late winter 2020. Then the courtrooms shut down in response to the first wave of COVID-19 infections. By the time judges and attorneys had taken their operations online, the archdiocese had pulled the ultimate crisis communications checkmate, filing for Chapter 11 protection on May 1, 2020, staying all pending litigation against the Church and all institutions and individuals accused of conspiring with it.
Victims’ attorneys motioned to dismiss the bankruptcy, arguing that it was fraudulent, given that the Vatican’s own “finance vicar” Father Robert Carr had admitted to the creditors’ committee that the archdiocese was not insolvent. Plaintiffs said that the Church’s estimate of “more than $50 million” in assets had been drastically understated by the fact that 211 individual real estate assets had been listed as having “undetermined” value. They argued the Church was simply exploiting the bankruptcy code to further delay discovery in 34 pending priest abuse lawsuits and avoid a deposition of the archbishop that had been scheduled just two weeks after the filing.
Judge Meredith Grabill, a protégé of Judge Jones, would have none of it. In one early hearing, she told lawyer Richard Trahant, one of the attorneys who had unearthed the Saints emails, that she had destroyed the sealed documents he had filed to bolster their case.
Jill Bleed/AP Photo
Judge Lopez eventually blocked the sale of Infowars to The Onion, citing concerns about the process.
Then in 2022, the New Orleans Times-Picayune published a story exposing that a local priest had left his post as chaplain of Brother Martin High School in light of its headmaster learning he had confessed to sexually assaulting a 17-year-old girl in the 1990s; Aymond had transferred him to the school five years after he had admitted the woman’s accusation was true. Trahant, whose cousin was headmaster, readily admitted to tipping him off in hopes of saving a future victim from being groomed. Grabill seized on the opportunity to make an example of Trahant, ordering the U.S. trustee to conduct a rigorous secret investigation of the “breach,” then using its (sealed) findings as a pretext for kicking all four of his clients off the creditors’ committee and fining him an astonishing $400,000. During a status hearing, Grabill acknowledged that she had been emboldened to purge Trahant’s team from the bankruptcy proceedings after discussing it with Isgur and Jones.
Grabill would later hire the ubiquitous restructuring insider Mo Meghji to come up with a series of recommendations on how to induce the survivors to make a deal with the archdiocese. “He came to town, camped out at the Four Seasons, went on a ‘listening tour,’ and issued a 35-page report on the ‘animosity among the parties’ for which he charged $10,000 a page,” former creditors’ committee chairman James Adams, a client of Trahant’s who met with Meghji, recalled to the Prospect, adding that the victims were repeatedly reminded that such charges represented a substantial discount on such professional’s customary charges. Shortly afterward, the archdiocese offered to settle claims with more than 500 sexual assault victims for $62.5 million, some $12.5 million short of the price tag for its recently launched renovation of St. Louis Cathedral.
Adams, a regional bank executive who endured abuse as a ten-year-old altar boy, described his encounters with what he termed the “upside-down world of bankruptcy court” as an awakening. “The cultural environment [is] unlike anything I’ve ever seen, unlike any kind of civil or criminal court,” he said. “I guess it might be reasonable to shield genuine trade secrets from the public but this is the Catholic Church, these aren’t trade secrets … And then there’s this little niche circuit of professionals that go around the country representing abuse victims in bankruptcy court, and they know all about their limitations and they aren’t particularly willing to think outside the box because they don’t want to be labeled as a troublemaker before the little niche group of judges and debtor’s attorneys that do these kinds of cases. And they certainly have no interest in examining any of the evidence, because the crimes are all the same to them, and the cover-ups are all the same.”
The Saints emails were ultimately released this week, five years after the AP sued to get them. It wasn’t the bankruptcy court’s call, but a flub by archdiocese attorneys, who had apparently attempted to hedge the risk that Grabill might dismiss Chapter 11 by filing motions to remove many of the abuse cases they were facing to federal court, where institutional defendants generally face a more laissez-faire reception. In one of those motions to remove, Church lawyers had appended three caches of Saints emails with no corresponding motions to seal. The emails weren’t accessible on Pacer, and the federal clerk initially balked at Trahant’s request to obtain them. But they had never been legally sealed, so after conferring with all the relevant parties someone grudgingly sent Trahant the documents late last year in a Dropbox file. He decided to wait for Super Bowl week to alert the local media.
KIRKLAND & ELLIS PIONEERED the practice of sloughing off unwanted abuse obligations in bankruptcy court with Patriot Coal, a spin-off into which the coal miner Peabody Energy had transferred billions of dollars in pension obligations, massive cleanup costs and fines associated with its mountaintop removal operations, along with a few token cursed mines in Appalachia. Peabody’s counsel Jones Day later refined the trick by using a then-obscure Texas “divisional merger” statute to “divide” Johnson & Johnson into two parts, the $340 billion consumer goods colossus, and “LTL Management LLC,” an entity containing solely its talc-based baby powder business, which ceased to exist when the company finally started producing its signature baby powder exclusively with cornstarch. In 2022, Kirkland borrowed the move and “divided” off from the venerable consumer giant 3M a spinoff called “Aearo Technologies” containing a defunct business that had supplied the U.S. military with defective ear plugs that had led to hearing loss in more than 160,000 veterans.
The move became known as the “Texas Two-Step,” and it worked by requiring participants in the bankruptcy plan to release the parent companies from liability as a condition of providing the financing that would bankroll settlements. Most bankruptcy experts felt pretty certain the Texas Two-Step would ultimately be outlawed, either by Congress or by the Supreme Court. But in the meantime, the fees rolled in; by late 2023, Jones Day had billed $178 million on LTL alone, all while their clients exploited their bankruptcy privileges to effectively freeze the cases against them.
Alex Jones’s variation on the dance was something of a stretch. His shell company in Victoria had filed under a bankruptcy designation called Subchapter 5, a fairly recent addition to the bankruptcy code designed to give small businesses cheaper access to Chapter 11 and more leverage over creditors. Subchapter V bankruptcies give court-appointed trustees latitude to cram down debt discharges, don’t require companies to fund creditors’ committees, and are overall far likelier to succeed than small-business Chapter 11s. They’re also limited to businesses with less than $3.5 million in debt, though the threshold was raised to $7.5 million temporarily during the pandemic.
The problem for Jones was that Infowars far exceeded that debt threshold, thanks entirely to Jones’s own efforts. In 2020, just three weeks after the Connecticut Supreme Court ruled to uphold sanctions against Jones and allow the defamation case to proceed, a Nevada-incorporated entity jointly owned by Jones and his father (confusingly also named David Jones, like the judge) filed a statement claiming Infowars owed it $29.6 million. Then in November 2021, just three days after another Connecticut judge imposed so-called “death penalty” sanctions against Jones in the same case, the Nevada company filed another statement claiming an additional $25.3 million debt owed it by Infowars.
So Infowars decisively did not qualify for Subchapter V. Nor would any other Alex Jones–connected entity once the juries ruled on his defamation cases. The Remington Arms Company, the rollup of gun manufacturers that had produced the AR-15 used in the Sandy Hook killing spree, had agreed to settle their own product liability lawsuit with the families for $73 million, a formidable sum for a company that had not only filed for bankruptcy twice over the past five years, but enjoyed the unique liability shield Congress passed in 2005 to protect gun manufacturers in association with crimes committed with their products.
“Death penalty” sanctions are much rarer than the death penalty itself; judges levy them only when a defendant in a civil case proves so uncooperative and contemptuous of the discovery process that he has essentially forfeited the right to defend himself. Remarkably—for as stubbornly as Jones had clung to his conviction that Sandy Hook was a psyop, he was even more stubborn about resisting the efforts of lawyers and judges to understand why he had done any of it—his refusal to hand over any discovery materials was so egregious he earned death penalty sanctions from judges in Texas and Connecticut, which in practice meant his victims had “won,” and the ensuing trials would not focus on whether he’d defamed them but how much money he would be ordered to pay them for their pain and suffering.
By filing for bankruptcy protection before they determined a number, Jones figured he could get out ahead of the jury awards by settling on what he viewed as a fair settlement: $750,000, minus his own bankruptcy lawyer’s fees, to settle all the cases, as long as his victims agreed not to sue any of his other companies.
The juries would end up putting the figure closer to $1.5 billion.
David J. Phillip/AP Photo
Jones speaks outside the federal courthouse after a bankruptcy hearing, June 14, 2024, in Houston.
JUDGE JONES’S RELATIONSHIP WITH Liz Freeman was eventually revealed, despite the best efforts of four judges, dozens of lawyers, and a slew of crisis communications firms to suppress it. Judge Jones hired David Boies to represent him in a racketeering lawsuit Bouchard filed against Jones, Freeman, and the rest of the complex cases junta, and a few other screwed-over creditors have attempted to exploit the scandal to reopen long-confirmed bankruptcy plans.
But for the most part, the aftershocks of Jones’s resignation have focused, along with the ongoing U.S. trustee investigation into the matter, on the quotidian topic of the hourly fees Freeman and her firm Jackson Walker charged, as opposed to the more systemic problem of what exactly Jackson Walker clients got from Judge Jones in exchange for those fees, at the inevitable expense of all the other stakeholders in the bankruptcies over which he presided. In one of the scandal’s more demoralizing moments, the West Texas judge to whom Van Deelen’s lawsuit was ultimately transferred dismissed his case, reasoning that while he had been the victim of a “sprawling tapestry of ethical lapses by major players in the nation’s bankruptcy system,” he hadn’t really proven that he would have been any materially better off in any other bankruptcy court. Van Deelen and his attorneys had pieced together a narrative about a group of insiders who’d conspired to rig a system designed to preserve jobs and communities into something self-evidently unfair. An anonymous attorney in Chicago had provided a letter detailing a supposed promise Jones and Marvin Isgur had made to Kirkland bankruptcy chief and complex cases advisory board member James Sprayregen, that if he began routing cases in Houston he would be “pleased with the result.” But wasn’t that the implicit promise of any bankruptcy judge who was anyone anymore?
Isgur, for his part, issued a shock ruling in June in the bankruptcy of a private equity–controlled aviation services firm that a Serta-like backroom transaction it had conducted with certain creditors was in fact illegal and would need to be unwound, and wrote a letter to the court in September urging sanctions against Jackson Walker for having “defiled the very temple of justice” when it elected not to disclose the “rekindled” Freeman-Jones relationship. Observers wondered if Isgur was attempting to put “the nail in the coffin of the Southern District of Texas as the destination of choice” for distressed companies trying to get away with funny business. “I feel like Isgur just wants to kill the complex cases panel once and for all,” a veteran bankruptcy attorney told the Prospect. In a deposition, Jones said he hadn’t spoken to his old friend since the stories broke; asked whether he had known about him and Freeman, he pled the fifth.
It fell to Lopez to recognize the inevitable opportunity in crisis. “We’re going to see this through,” he promised a bankruptcy conference the day after Judge Jones’s resignation.
And he has. While the complex cases workload fell off considerably, Lopez did all he could to maintain the court’s “friendly” franchise, simultaneously presiding over 380 cases while constantly reeling in new ones: the disorderly unwind of the large hospital chain Steward Health Care, the Serta-like disaster Robertshaw, a shell company called Red River Talc representing the third iteration of Johnson & Johnson’s twice-dismissed Texas Two-Step, the prison health care provider Wellpath (which seeks, naturally, to cram lowball settlements on more than a thousand wrongful death and malpractice plaintiffs), and a Swedish debt collector called Intrum AB with no connection to the United States whatsoever.
“This kind of case is becoming routine, especially in the Southern District of Texas,” Cliff White, the former director of the U.S. Trustee Program and a leading critic of the breakdown in bankruptcy “norms,” told The Deal Pipeline of the Intrum filing in November. He added, wryly: “One can get resolution of a large Chapter 11 case at least 16 times faster than the U.S. Trustee can on its motions to disgorge fees in the former Judge Jones matter.” Unlike with Jones, no one suspects Lopez is somehow personally corrupt, but no one takes much comfort in that either. “I feel like he thinks he’s the Godfather,” a Houston bankruptcy attorney told the Prospect. “Like, he’s feeding all of us.”
And just as it was at the height of Judge Jones, the scoundrels seem to win just about every fight. When an ad hoc group representing well over 500 patients (and loved ones of) who had been killed or irretrievably maimed in Steward’s “Third World” (in the characterization of Louisiana health inspectors) hospitals pleaded with the judge to appoint an official committee of tort claimants, Judge Lopez sided with the hedge funds. When creditor Eric Lyndell Moore finally got a court date to present his evidence on JCPenney, Lopez walked out of the room. When a group of ovarian cancer patients sickened by Johnson & Johnson baby powder asked the judge to dismiss the Red River Talc bankruptcy on grounds that Johnson & Johnson had essentially colluded with an ambulance-chasing law firm to dilute the creditor pool by recruiting fake victims who would be paid $1,500 to vote in favor of the plan, Red River Talc won that battle.
And when the hedge funds controlling Steward’s disastrous unwind conspired with the company’s predatory landlord to “gift” a western Pennsylvania hospital to a shell company affiliated with a trio of documented health care marauders with no funding whatsoever in lieu of two competing bidders who had spent the past six months scrambling to come up with an arbitrary $50 million, Lopez voiced elation: “I simply could not be happier to sign these orders,” he told an assembled videoconference in early January. “I literally wanted to throw up listening to him talk like they were all George Bailey or something,” a financial analyst told me the next day when I asked how the hearing went.
Alex Jones was initially the exception, in part due to his singular repugnance, in part because the families had more elite legal counsel. Long ago, some of the most prestigious Wall Street firms—Paul Weiss, Akin Gump, Willkie Farr—took on the Sandy Hook families as pro bono clients. And during the nearly three years in bankruptcy court, Lopez mostly sided with the spirit, as opposed to the loopholes, of the bankruptcy code, dismissing the first Chapter 11 filing right away, reluctantly dismissing Jones’s second Chapter 11 over the summer following two years during which Jones had happily burned $90,000 a month on fine dining and vacations, appointing a Chapter 7 trustee to liquidate Jones’s assets on behalf of the creditors (which is something the Purdue Pharma bankruptcy judge should have done with the Sackler family), and denying Jones’s bid to discharge his $1.5 billion in jury awards, on grounds that the conduct that had gotten him there was “willful or malicious,” and in his case, both.
More amazingly still, the lawyers hit upon an ingenious solution to the ethical dilemma of having their fortunes aligned with the financial success of the person they most loathed: They would forgo some of the transaction’s anticipated proceeds to sell Infowars’ intellectual property to The Onion, which would repurpose it as a parody conspiracy site. Alex Jones would have to rebuild from scratch, which was not exactly as good as $1.5 billion, but it at least seemed fair.
Yet something in Judge Lopez could not, in the end, abide the justice of it all. In a series of endless hearings on the proposed sale, he picked and prodded at the minutiae of the process that had led his appointed trustee Christopher Murray to award The Onion the winning bid. He did not legally have to pass judgment on that process at all: Four months earlier, he had granted Murray 100 percent discretion to conduct the liquidation as he saw fit. And Lord knows he had presided over far more dubious asset transfers. But something bothered him, for some reason, about The Onion buying Infowars.
“I think Judge Lopez didn’t like the way the deal was structured for a company that was bringing in $500,000 a week,” attorney-podcaster and Alex Jones bankruptcy chronicler Liz Dye told the Prospect. “I think a $3 million bid would have made his ass itch, but a $1.5 million bid was just scandalous.” More jaded SDTX watchers suggested it was simpler than that. “His knee-jerk reaction is, Jones is the debtor. All he wants to do is what judges in big Chapter 11 cases want to do, and believe is their mission, which is to broker a settlement among the parties,” said a bankruptcy attorney who has closely observed the Jones bankruptcy but is not involved in it.
It’s also possible Lopez was simply unnerved by the broader vibe shift; Jones had at the last minute fired his main bankruptcy attorney in favor of Shelby Jordan, who sued to block the Onion sale on grounds that the Sandy Hook families were engaged in “a systematic effort to confuse Mr. Jones’s personal public following with messages espousing gun control,” promising that whichever judge “accepts this … Frankenstein bid … will be subjected to ridicule nationwide and perhaps worldwide.” Jordan’s motion, which he would soon follow up with another likening his client’s predicament to that of the NAACP following a boycott it had orchestrated in Jim Crow Mississippi, was logically and legally farcical, but that seemed almost beside the point. In a hearing on the merits, Lopez more than once seemed to be hung up on an outstanding dispute between the estate, the creditors’ committee, and PQPR, the fake entity run by Alex Jones’s dad which claimed preposterously that Infowars owed it $53 million (and which hadn’t even objected to the Onion sale). “No one should be comfortable with the results of this auction,” Lopez intoned at a grilling of Murray.
In the end, Lopez unwound the sale, citing how it would fail to provide maximum value for the creditors, even though the creditors involved in the deal were fully on board, and the creditors who weren’t would receive a higher payout if it went forward. “All right, ladies and gentlemen, we can celebrate the judge doing the right thing with the most ridiculous fraudulent auction known in human history,” Jones exulted on his Infowars show, which was still in his hands only because of the rejected sale.
Immediately, resistance media heaved with speculation that Lopez had been bought off by the bad guys, or that he would soon be seen rolling out of the courthouse in a “shiny new Cybertruck,” as someone who clearly does not live in a city with many Cybertrucks opined on Bluesky. But that speculation was simply uninformed. Dye and her co-host at Law and Chaos, a liberal law podcast that has covered the Alex Jones bankruptcies obsessively over the past year, had to counsel listeners to take off their “tinfoil hats” for just a moment.
But when Judge Lopez convened the court yesterday, it seemed like the tinfoil hatters had a point. An expected all-day evidentiary hearing ended in just 20 minutes, with Lopez canceling a settlement that would have paid out the Sandy Hook families, which nobody objected to except Alex Jones. Lopez didn’t even take evidence prepared for the hearing, or listen to arguments from any party in the case, before rendering his decision. The asset sale of InfoWars to The Onion has been fully canceled, with Lopez ruling that he would only allow an cash sale of Jones’ entire company, which is saddled with nearly $1 billion in nondischargeable debt. That’s something no sane person would ever buy. (That Lopez demanded a cash sale is rich, given the outlandish credit bid he waved through that gifted JCPenney to its landlords.) It was a total win for Jones, a devastating less for the families, and another day at the office for Lopez and his reflexive obeisance to companies looking to shirk their legal responsibilities.
As one attorney in the Infowars case who also represents malpractice and wrongful death plaintiffs in a litany of other cases currently before the Houston bankruptcy court groans:
“Every time anything happens in Alex Jones it just gets so much attention, but every other case in this court is so much more important.”
