Marc Schwartz testified he signed a contract 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 dollars from the company over 14 years, and testified that $30 million of those withdrawals was paid to the IRS.
Schwartz also testified during the hearing, which ran for 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 be able to pay vendors, saying otherwise it will have to shut down.
“If we can’t pay the critical vendors then we will be shut down,” Schwartz said. “The company’s in a situation right now where there’s not a whole lot of breathing room.”
US Bankruptcy Judge Christopher Lopez said Wednesday he would not permit more withdrawals moving forward and that he found some of Schwartz’s testimony “troubling.”
Court documents filed Friday as part of Free Speech Systems’ bankruptcy showed the company has between $10 million and $50 million in estimated assets and between $50 million and $100 million in estimated liabilities. An attorney for Free Speech Systems said at the hearing Wednesday that the company has about $1.3 million cash on hand.
Schwartz stressed the importance of being able to pay vendors that allow the company to broadcast and sell products online, saying that when Jones is not on the air discussing products he sells, the company sees a 30% drop in sales.
“If we can’t broadcast, we can’t sell,” Schwartz said.
Schwartz testified the management structure of Free Speech Systems was not set up the way a successful business should be managed.
“There is Alex and then there is everybody else,” Schwartz testified.
Schwartz said accounting controls were, as far as he could tell after taking control of the company, “nonexistent,” that the people responsible for maintaining the company’s books did not have accounting degrees and that there had been no financial reports produced in at least 18 months when he took over.
Lawyers homed in on Jones’ salary under the bankruptcy plan, saying documents showed Jones’ salary before the bankruptcy was $625,000 a year, and under a restructuring plan, it would amount 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 authorized a lower salary for Jones to be paid, of about $20,000 every other week.
When asked how much the company had spent on legal expenses related to the Sandy Hook lawsuits, Schwartz said company records show at least $4.5 million have been spent between 2018 and 2021, but that he does not believe that number is accurate.
Schwartz also testified that Jones used a company-associated American Express card to pay for personal expenses, including housekeeping charges, regularly in the past 18 months. The card had $300,000 a month in charges, but Schwartz said accounting staff did not label what the charges were for.
“We can’t tell you whether it’s for electricity, entertainment or electronic supplies for the production studio,” Schwartz said.
Lopez said he would not authorize the current American Express bill of about $172,000 to be paid.
Schwartz said he didn’t know who Jones was before being hired, and that he doesn’t agree with many of Jones’ views but occasionally consults with him on matters involving the business.
Three smaller companies tied to Jones declared bankruptcy earlier this year, briefly pausing the suits against Jones. But the families suing him dropped those companies from their lawsuits so that the cases could move forward against only Jones and Free Speech Systems. Shortly after, the companies exited bankruptcy protection.