Marc Schwartz testified that he signed on to take over as Chief Restructuring Officer for the company in June and now controls all bank accounts, payroll and hiring decisions. Schwartz testified that Jones withdrew about $62 million from the company over 14 years and testified that $30 million of those withdrawals were paid to the IRS.
Schwartz also testified during the hearing, which lasted more than six hours, that Infowars received about $9 million in cryptocurrency donations and that “they went directly to Mr. Jones.”
Schwartz said during his testimony that Free Speech Systems should be allowed to use cash it has on hand to pay vendors, saying otherwise it would have to close.
“If we can’t pay the major suppliers, then we will shut down,” Schwartz said. “The company is in a situation right now where there’s not a lot of breathing room.”
U.S. Bankruptcy Judge Christopher Lopez said Wednesday that he would not allow more withdrawals to proceed and that he found some of Schwartz’s testimony “disturbing.”
Court documents filed Friday as part of Free Speech Systems’ bankruptcy showed the company has estimated assets between $10 million and $50 million and estimated liabilities between $50 million and $100 million. An attorney for Free Speech Systems said at Wednesday’s hearing that the company has about $1.3 million in cash.
Schwartz emphasized the importance of being able to pay vendors who allow the company to broadcast and sell products online, saying that when Jones is not on the air discussing the products he sells, the company sees a 30 percent drop in sales.
“If we can’t broadcast, we can’t sell,” Schwartz said.
Schwartz testified that Free Speech Systems’ management structure was not set up the way a successful business should be run.
“There’s Alex and then there’s everyone else,” Schwartz testified.
Schwartz said the audits were, as far as he could tell after taking control of the company, “nonexistent,” that the people responsible for keeping the company’s books did not have accounting degrees and that financial reports had not been submitted to at least 18 months when he took over.
Attorneys argued for Jones’ salary under the bankruptcy plan, saying documents showed Jones’ pre-bankruptcy salary was $625,000 a year and under a restructuring plan, it would rise to about $1.3 million. Schwartz said Jones’ salary could be considered reasonable because of his value to the company.
“Who is more valuable? Nobody,” Schwartz said. Lopez approved a lower salary for Jones, about $20,000 every other week.
When asked how much the company had spent on legal fees related to the Sandy Hook lawsuits, Schwartz said company records show at least $4.5 million has been spent between 2018 and 2021, but that he doesn’t believe that number is exact.
Schwartz also testified that Jones had been using an American Express card associated with the company to regularly pay personal expenses, including cleaning fees, for the past 18 months. The card had charges of $300,000 a month, but Schwartz said the accounting staff did not write down what the charges were for.
“We can’t tell you whether it’s electricity, entertainment or electronic supplies for the production studio,” Schwartz said.
Lopez said he would not authorize payment of the current $172,000 American Express bill.
Schwartz said he didn’t know who Jones was before he was hired, and that he doesn’t agree with many of Jones’ views, but occasionally consults with him on business-related matters.
Three smaller companies associated with Jones filed for bankruptcy earlier this year, briefly halting lawsuits against Jones. But the families suing him dropped those companies from their lawsuits so the cases could proceed against only Jones and Free Speech Systems. Shortly thereafter, the companies exited bankruptcy protection.
