American court hearing recordings and interviews - Alex Jones bankruptcy hearing August 23, 2023, Southern District of Texas bankruptcy case # 22-33553

Episode Date: October 22, 2023

official hearing audio

Okay, good afternoon. This is Judge Lopez. I'm going to call the 230 case of Alexander Jones on an emergency motion. Let me take appearances in the courtroom and then I will turn to folks on the phone. There's about 18 people on the line. I just ask that you please keep your phone on mute until you're ready to speak. Just monitor yourselves. I'm going to try to avoid enabling the mute feature. Mr. Patterson, good afternoon. Good afternoon. Johnny Patterson here on behalf of Elevated Solutions. Okay, good afternoon. And Ms. Goode is here with me. Good afternoon, Ms. Goode. Okay, who wishes to make an appearance on behalf of the committee? Ms. Porter, are you making it appear?

Yes. Good afternoon, Your Honor. Catherine Porter from Aiken on behalf of the committee. Okay. Anyone else wish to make an appearance? This is John Young from Crow and Dunlevy on behalf of Senator Ash, Under Jones. Okay. Good afternoon.

All righty. Ms. Porter filed a motion. When do I turn it over to you? Or you, the committee did, I should say. Thank you. Thank you, Your Honor. The committee did file a motion. I think this dispute is quite simple.

As you will recall, we were before the court on June 8th on the ESG's motion to squash discovery directed to ESG by the committee. And our counter motions are compelled. And we held a hearing on the committee's request. From our perspective, that hearing answered the question that we are here asking again today, which is whether or not bank accounts should be produced to the committee, and if so, whether there should be redactions for transactions with counterparties that were identified as counterparties that are relevant to business with the debtor and or FSA.

So that is an issue on which we've reached an impasse with EST, and we respectfully asked that the court, confirm what we believe was already ordered, which is that those bank accounts could be produced to the committee without redaction. We're happy for them to have whatever appropriate confidentiality designations ESG would like, and we are likewise happy for other transactions that have nothing to do with the counterparties, FSS, or the debtor to be redacted, but we do think transactions with the counterparties ought to be visible to the committee. And then secondly, we would like the court to

assistance in setting a date to complete this production as we have been unable to reach an agreement with ESG's counsel for a date of the state production. And that has necessitated delaying depositions more than once. Got it. And you are seeking end of the month, essentially, right? Correct. But we are flexible on this point. I'm happy, as made it clear, to ESG's counsel several times, I'm happy to come to an agreement

on a date that worked for ESG and to work the deposition around that date, but we don't want to find ourselves in a position for the third time where we have an agreed date, which has to move, we don't have documents, it presents complications, as I'm sure you can imagine. All right, thank you. Let me hear from ESG.

I'll start off. It hasn't been three times. It's been once, and they canceled it and moved it at their record. So production is complete. We have been rolling documents out, but as I explained to the committee, you know, they have put this production request on a man who runs a business, has a family, has to travel, it's a burden, but we've rolled it out,

and all that's remaining is these bank statements. And I think that there is a fundamental misunderstanding that there is a fundamental misunderstanding, by the committee about how these transactions work, but they're demanding unredacted bank statements. You didn't order that last time. In fact, last time you said that we could redact if we wanted to. We've provided every financial transaction that ESG has had with either debtor Jones or debtor FSS.

They have that. They've had it. They're unhappy with it because they think that they, in their mind, created something that's just not there. But now they want all these other transactions from ESG that have, they don't have anything to do with the debtors. How do we know, and I'll tell you what, how do we know that someone didn't do a transaction with company X, but it was really intended for it to benefit? Like, don't people get a chance to look at that and make a determination on their own? I'm coming up with

the roundabout. So say, I don't want to do a direct transaction with Jones, but I did a transaction with X, but then somehow it benefits Jones because Jones gets the money on the back end. Okay. The way you, that's easy. You go get production from Jones and see where his money's coming from. You're not going to get that for me, even if it exists, right? But I get to ask you questions about it, right, in a deposition. 100%.

But not if they're redacted. I don't understand. That's where I'm confused. But even under your scenario, Judge, the money went to X, right? How do you get to Alex Jones from X? all we know is But it's discovery. I wrote a check to X.

But I have a contract that shows I owe X $25. It's discovery. Why don't, why do people then, why do you have to do all that? Why can't I ask it for both? Where does it end,

Judge? It doesn't. My guy is not a debtor. It turns over, yeah, but he's a party in interest and a very important litigation. If there were some connection,

Judge, number one. There doesn't have to be a connection, Mr. Pires. I don't understand the point. No, it doesn't have to. Rule 26.

requires some connection, Judge. You can't go out. Are you telling me that you can't investigate potential transactions with third parties subject to confidentiality on a fishing expedition to determine whether there is something that's truly discoverable? I'm saying you can't go into my business, a non-debtor, and say, give me all your financial transactions. I want to see your bank accounts.

I don't think that's what they're asking for. I think that's not what she has for. It is. That's not what I heard. She said she wants unredacted bank statements. And I said, I'm not going to give them. relating to transactions to F? This part, isn't it just limited to the debtor's transactions with either FSS or the counterparties?

Correct. How is that unlimited? The conversations, we're here today because she said, we have provided her copies, not of the bank statements, copies of the instruments of each transaction with the debtor. Right? And she says, we want unredacted bank statements. And I said, I don't have to give you unredacted bank statements. You even said, we could redact.

And she said, well, I don't want them if they're redacted because they're meaningless. That's why we're here. And so. Go ahead. I'm confused why this really got to me. I am too, because I'm giving them every. You're not giving bank statements. I haven't given a bank statements.

I gave him copies of the actual checks, wire. transfers, money orders, whatever they were, I gave them actual copies of those, of the transaction, right? Ms. Porter, what more are you looking for? What we have are a smattering of transaction records, of a discrete transactions, fully with the debtor from ESC. What we're missing is the picture with the counterparties. and we've asked for complete bank records that are not redacted as to the counterparties

so that we can have an understanding of how the transaction, in what larger business framework we can view the discrete transaction information that's been provided. We've received, we haven't received the bank account statements. All we've received is single line items that say one transaction occurred on a given day, a smattering of them, and they have no context for us. We are asking for the bank account statements to be unredacted solely as the debtor, FSS, and the counterparties. And these counterparties are not developed through a fishing expedition. They are identified on an email from ESG to the debtor council saying these are the counterparties we are working with related to the debtor.

Isn't this a 2004 exam, is it correct? Correct. So how does Rule 26 kick in, Mr. Patterson? Well, I guess the suggestion otherwise is that there's no limit. No, I'm not saying that, but I'm asking you mentioned Rule 26. If you're going to go under 2004, it's more limited because it has to relate to the debtor, right? 2004 is even more limited, and I'll read it to you, but it says in 2004 the debtor's financial transactions. Let's read it.

Let's read it together. Which part do you want to point me say? Scope. I mean, there is a definition in the scope of a 2004. It may relate only to the acts, conduct, or property, or the liabilities and financial condition of the debtor, or to any matter which may affect the administration under Chapter 12 or 13. But she's referring to emails, and she's asking for bank statements that relate to emails. This is all about Jones, isn't it?

No. It's not what she's asking for, Judge, and maybe that's – I mean, they come with no witness, they come with no exhibits, and so it's hard for you. I don't think it's hard. I think the 2004 is super broad, and you get to ask, and it's not governed by the federal rules of civil procedure, I think you get to ask questions that relate to the financial transactions and liability of financial transactions of the debtor. And that means sometimes you get to ask questions of other parties to determine, to try to get to the bottom of that. But I do agree that's subject to confidentiality and it's subject to a bunch of. And so I got to tell them everyone I do business with because they just took a list.

I've given them every contract that I've had. I'm sorry? I do think you have to give the bank statements. No, I think the question is the scope of the bank statements and what they do. I think, I think you do. And so what do I get to redact?

Because at the last hearing, you said, you're free to redact. If it didn't relate to the debtors. And so. If I may, would I have proposed to Mr. Patterson is that any transaction with a counterparty

that is not on the list that we identified, well, that EST originally identified and that we repeated in our 2004 request, any transaction with a counterparty not on that list can be redacted, and any personal transactions

to the extent that those are reflected in the corporate bank account statements could also be redacted. We're not inquiring about BSG's personal financial matters, Mr. Delafio, but that transactions involving FSS, the debtor, and the identified counterparties would be revealed. That was our suggestion. How's that a reasonable, Mr. Patterson?

Because their list is broader than even the contracts we have and produced, right? And so, and they're making the assumption that the only business we did with this supposed counterparty related to the debtor, which may not be true. But don't they get to then ask questions and determine which ones they are? They get to ask questions, Judge, right? And as we were talking before, we didn't quite finish the 2004. But 2004 has no provision for production of documents. Zero.

2004 doesn't even allow. It doesn't disallow. But there is nothing in 2004 that provides for production of documents except in conjunction with the actual examination. And they're viewing these things separately. We've more than happy told them multiple times. We will walk you through all of these things. Ask the questions.

We will answer. Right? But to put my guy through this expense and this time... Talking about two years of bank statements, Mr. Patterson, aren't we? That's the burden that we're talking about. Yes. 24 months of bank statements? Multiple bank statements and redaction.

It's going to pay me to redact. Or you can just submit it and turn his own. You don't have to. You don't have to. And why? I'm not saying you should. He's willing to do that. Because he gets to choose how he wants to do it.

But that doesn't mean that the expense matters. But the expense doesn't matter to the UCC. It matters to my guy. He's trying to run a business. He's trying to survive. And he's gotten caught up in this mess. and now to explain to him, yeah, your bank statements, your business bank statements are the business of this UCC. Personally, I can't explain that to him.

I can explain they get to see what you've done with the debtors. And he's produced the contracts, the emails, the correspondence, he's even given them background on his business, formation documents. I mean, this is getting out of hand. So let's finish our thought. 2004 doesn't mention it, right? But you can always, 26 doesn't apply, but 45 would apply, right? No. Okay.

We'll just disagree with that then. Okay. I think you can always subpoena. I think you can always subpoena with the 2004. I just think you can. Okay. Not here to argue with you on that one because I don't think it's an issue, but because we've agreed.

But I think, but. How many counter parties are we talking about, Ms. Porter? 16. And why do you need all 16? Because each of these identified by EST to the debtor's counsel as a counterparty that was relevant to FSS and or the debtor that they were doing business with.

Mr. PesC identified these as the counterparties that are relevant to FSS and Alex Jones. What's the response to that, Mr. Pratt? Quite frankly, I don't know what she's talking about. There has been an email, but I can tell you, we have provided, take a step back. ESG, unlike the debtors in this case, ESG did no deal without a written contract, with all of their parties. We've produced every contract.

Now, if they want to limit it to that, to the real counterparties, I disagree, but it's closer, I think. But to have this random list of six, I don't know who the 16 are. They were listed in the subpoena, I think. Where did you get the 16 from, Ms. Porter? I'm looking at it. So I apologize. I thought that this was already ordered,

and so I feel like we're revisiting the topic of the prior hearing. But I'm looking at an email and it comes to business and as evidence is helpful. No, no, no. I just want to know where you got it from. It was an email that was written by Joey Delaccio to Vicki, Triver, Counsel to the Debtor, that lists the counterparties with SSS and Alex Jones. And the email is dated January 14, 2023. Right.

And possible, although I'm not looking at the email. Number one, my client wrote it before I was involved, so the use of the word counterparties is probably misleading because the vast majority of these relationships were done, and I'm trying to figure out how to explain them. But so... You've finally broken loose from work. Three friends, one tea time, and then the text. Honey, there's water in the basement.

Not exactly how you pictured your Saturday. That's when you call us, Cincinnati Insurance. We always answer the call because real protection means showing up, even when things are in the rough. Cincinnati Insurance. Let us make your bad day better. Find an agent at CINFIN.com. Another third part, a company called CMC, Walt Sissick, he may have appeared in this, but he has a company out in California. And he goes out and contacts, for example, my pill. All right.

I don't know if that's one or not. I'm making it as an example. And he says, look, I might can get you on to advertise on the free speech website or on Alex Jones radio show. And they go, okay, and they make a deal, all right? My Pillow and CMC make a deal. CMC has, that's not what CMC does is actual get them on the website or the radio. Cicic calls Delisio, my client, ESG, and says, hey, this guy's interested. Can you make it happen?

Right? And Joey says, I can for this particular transaction. Let's have a contract, CMC and ESG, enter into a contract separate from he's not a party with my pillow, right? He's with CMC. and once he has a deal with CMC that says, if I'm able to, I get this much money, whatever it is. Then he takes that deal to FSS or Alex Jones, right,

and tries to, you know, say he gets a banner put on the free speech website and he gets paid per click, all right? And he makes that deal with FSS. His counterparty is CMC. That's who his deal is with, right? and the UCC is under assuming that my pillow is his counterparty. And it's not.

ESG may have another deal with my pillow, with some other client, but to say, give me your bank statements related to my pillow, in that instance would have nothing to do with the debtors, but they're saying they're entitled to see it. You see what I'm saying? And so don't you get to ask the questions, Don't you get to see it and then ask the question to see if there is?

If not, you're just redacting and one will never be able to ask the question. Why don't they ask the questions and figure out how it works before they give us this discovery? I think you then get to subpoena and then show up at a 2004 and then ask questions based on the subpoena. That's fine because I'm just telling you, they're saying counterparty my pillow and in that circumstance, I'm going to produce nothing because my pillow is not our counterpoint. I think you're going to produce what I got it. it was before your client, but I think if your client identified 16 people, I think that's a fair basis to then seek documents based on them, don't you think?

You can seek them, and I'm telling you, if my pillow, in my example that I gave you, is identified as a counterparty, he's going to say, I have no financial transaction with my pillow. Zero. You get nothing, right? That's what I'm trying to tell it. The committee and the court. I'm just telling you, so it sounds like you're going to have to reduce it. unredacted bank statements if that's the answer.

Under attorney's eyes only, because we're not going to play this. We're not going to go around. We're not judge. That's what I'm trying to tell you. I don't want to play a game. Oh, I'm not saying you do it. But they're pressing. I'm not saying you are. They're pressing an issue that doesn't make sense and they won't understand that. I think they get to ask the question. I don't think you get to explain it. I think they get to see the documents and they get to

ask your client's questions. Your client gets to answer the question. That's fine. And And I will tell you, I don't think there are any more documents responsive based upon what they're pressing. If they're saying counterparties, and here's the list of your counterparties, he only has about three, legally three, maybe two counterparties. Right? Because he doesn't do these deals with my pillow and whatever else they are. I don't even remember the list. He doesn't do deals with him.

That's right. someone else will then go do a deal with someone else. Right. And so as a counterparty, my pillow is not a counterparty. And if that's, they want those financial documents, I'm going to say none. And if that's the way they want to press it, that's fine. But that's the answer and that's accurate. Don't you get to then ask the question to see if there was something?

And I'm not saying, I'm not implying it one way or the other. Don't you get to look at all the documents and then ask questions to see if there was something else going on? Sometimes. Sometimes. Yes. But isn't that the purpose of discovery to then rule those questions out and then you have testimony? Generally, discovery isn't, discovery is to flesh out what you suspect or know, not to dig into someone and try to find something, especially a third party. Not find something.

You do get to ask questions to see if there is something there is that it's discoverable, right? Of course. I beg them, ask questions. Let him explain it to you. But then you get to look at documents too. If they're related to those things in 2004, which these would not. I just disagree. Okay.

Look, Judge. No, I know you're not. I just disagree. I think you get to look at them, but I do think there needs to be confidentiality as part of this. I do agree that from one perspective, you know, things have a funny way of finding it. where outside of closely viewed. And I think that would be really, I want to make sure that there are appropriate guardrails in place.

You know, this can't, I don't want this going outside of attorney, you know, kind of the appropriate to where you can see what you need and you can get the question, the answers that you need. But if somebody's going to turn over, you know, this case is, you know, maybe a lot of people, other people interested in. for other reasons and it can't get out. That's what I may. On top of that, he's not getting paid, my client,

from this estate and from the other estate. I think that's a fair point, too. You know, they owe him over half a million dollars, post-petition. You know about the Jones State or FSA? Jones on the platinum contract and FSS is holding up funds held by SISIC of about a half a million dollar total. some of that belongs to FSS. But, yeah, I mean, it's, you know, it's a high-stakes game of what I call extortion.

It's not the legal extortion. No, I know what you mean. But, you know, they're holding him up. He's owed a ton of money. He's a small business. And they're causing him to go through this cost and expense when all they need to do is ask some questions to understand the nature of the business, and it's going to make more sense. but we will go through this exercise.

And if you're ordering me, and I want to make sure, you're ordering me to produce 24 months of unreadacted bank statements. Subject to appropriate confidentiality, I am. Well, with an order that it won't leave their office, because if it does, it's a problem. Yeah, I think it's attorney's eyes only, right? Ms. Porter, the network? We would ask for it to be professional's eyes only.

A professional's eyes only. And I would say attorneys unless they have a reason. If they have a reason to send it to a professional? I think the professional. I think the, well, who are you limiting it to? Taneo and Nardello are both advisors to the committee who have been helping us to analyze bank statements and bank transactions. And I think that they're input as well. Intimately involved in the diligence, right?

Taneo. Okay. I think that's fair. And I would like to state that there is no, to the extent that they even have to. to be said, there's no extortion going on. This is not in any way linked to payment that may or may not be due to Mr. Gillesio that has, we have absolutely nothing to do with that. Okay. Okay. All right. Thank you. I'll get something on the docket. Thank you. Thank you. May I also ask for a completion date? Yeah, I think it's complete except with respect to bank statements. So why don't I do this?

Let me just take a look. Today is the 23rd, August. Let's see. Is September 1 doable? Realistic? That's next Friday. No one way I think about it. September 4th is Labor Day.

That's what I'm trying to avoid. I think so. I mean, I guess this, and I should have brought this up, but this brings up, there are bank statements that are closed when he purchased ESG. from Mr. Jones's dad or brother or someone.

I don't know. We provided all those documents. There were bank statements, bank accounts in existence at that time that he no longer has access to. And so he's not going to pay to go get those. The bank accounts he's using today, he will produce up to 24 months. But if they're expecting him to go,

old bank accounts, they can subpoena those. Right, that's right. So, why don't we go back 24 months on the active accounts, and if you need more, then somebody just come back and let me know. Your Honor, I would ask that if there are any bank account statements that are difficult for CSG or Deliscio to access on their own, that they authorize us to get them for him. We will work with him and to facilitate the burden

and, you know, help with the expense in that regard. I think that's all that problem. They know how to use a subpoenas, Judge. They don't need our permission. In other words, but is it already reing requests that that's the real question, I'd have to go back and look. It seems to me that the request was broad enough to include old bank accounts

that he's not using the ESG before it was Mr. Delisio's ESG utilized. It's just in the back of my mind. I don't have specific, but I seem to recall and talking to Mr. Delisio about that. And so he has, my understanding is he has two bank accounts. One is just for, it's a product account on the deal he's doing with Mr. Jones, and then he has his general operating account, which the other deals run through, is my recollection. but we can do active accounts, but to ask him to go get old bank,

they know the bank accounts, they can just go subpoena them at the same cost as us. It's going to cost us money. It will cost a lot more effort on our behalf. She's a subpoena rather than to work cooperatively with ESG, and I do believe that these are very important bank account statements that they come from this period because we're talking about a time when ESP was owned by the debtor's father,

And I think that the interrelationship is important for obvious reasons. So I would ask that if there are bank account statements that are closed that follow them in the 24-month period, the EFC be ordered to provide them to us, and the committee will offer to do whatever is helpful in terms of reaching out to the bank, facilitating that process, making it happen, but that EFC not be excused from producing those. That goes beyond the very definition of production, which is give me what you have. I think to the extent that he's got him in his possession, if they're there in his possession, if he has copies of old stuff, I think he's got to produce it. But I think to the extent that he doesn't, I think that would exceed the scope of what I think he's required to do,

which is to go further out. In other words, I think that's different. If he's not, I think that one goes a little bit out. But I do think he's got to produce active accounts in terms of what he has now. And if he's got copies of old bank statements that are there, or if it's just as easy, Mr. Patterson, to just go get the news, you know. In other words, if it's just a matter of kind of flipping something on in printing, I think that's a little different than.

If he has, for example, and I don't know, if he had electronic copies of old bank statements on his computer, yes, he would print them off. That's where I'm going. Yes. Okay. And I will find out. I will ask him if he has those or paper copies in his files. He will obviously, that's production.

But the makes any dozen. Let me ask you, just so we're kind of playing hypotheticals. What's the, he doesn't have, he hasn't active. well, I should say if he has access to an account, maybe he doesn't, but he has access to an account, and it's just as simple as easy as getting it from the active account. What's your view on that? Look, if he can sit at his computer and print off the statement, that's where I'm going. If it requires more, if he's got to go to a bank and start asking someone to reactivate to go do all that of the stuff,

then I think that's the subpoena. Right. If the account is closed, he's obviously not going to have. Agreed. So, yes, if he can sit and... Yeah, we're all on the same page. If he can sit on his computer and sit around and print it or get that way, but if it's closed and he's got to go and ask the bank to go do something,

you know, they give him access, then I think that goes outside of the bounds, and he doesn't have to do it. He will do that, okay. All right, let's shoot for... Go ahead. I want to shoot for September 1st. Let's just want to set the date. That's a Friday.

That Monday is Labor Day, so I'm just trying to avoid that. Ms. Porter. Thank you, Your Honor. I would request that any bank accounts that are not being produced on the basis that they're closed, we at least identify to the committee so that we know the universe. That's an interrogatory. Yeah, I think that's just a simple rock, right? You can just, well, why do they need a rock?

I think they... To identify? That would be answering a question. I have to respond to the request, which I have, but to then... say, tell me what you're not. Again, we're beyond the objection, you know, identification of withholding documents.

Beyond that, but so now we're just saying. No, no. I guess it's, I view the world a little different. Maybe Ms. Porter may have disagreed with this, but I think he gets to produce what he has, and then you get to show up at a 2004, and he gets to ask questions. Or you get to, then I agree. Then you get to

submit more formal discovery if there is something there that I think. But at 2004, the purpose is produce documents that are in your position and then you can go get an examination. That may be an examination question if you know. I think that goes outside of the scope. But to the extent, I think we've got to kind of play this by the book. I believe that Mr. Gillesio is obligated to produce documents that are in his possession custody and control, which means

where he has the practical ability to obtain the documents. And in this case, the owner of the account, the prior owner, the owner of the prior account, the ESG has the practical ability to obtain these statements. In fact, they are the only ones who really have the authority to obtain these statements after the subpoena. So I understand it's a burden question, and they're asking to be excused from the burden, and I would suggest that they identify for us documents they are not producing on the base burden, specifically by account number.

That's my suggestion. If the court does not agree with that pass forward, I certainly understand, but that's how I've used. No, I got it. I'm really hoping that this kind of works itself out, and people aren't playing ops and they have to show up a month, six weeks later to it, 2004, to then figure out a bank account, to then continue.

I don't want to get involved in this. I think there's a way to do this where everybody can at least find out what the bank accounts or where they're located and what banks they were. This can proceed. I think there's a way to do this. But what you're asking me is that you're going to have to show up in October to come figure out where that is. The answer is no. And if it does get there, we're all, we've all, something has gone drastically wrong from there.

It's a simple question. It's just a way to figure that out. All right. Thank you very much. Have a good day. Thank you.