Judge says far-right US news outlet filed bankruptcy in bad faith

https://www.theguardian.com/us-news/article/2024/jul/25/gateway-pundit-bankruptcy-filing

Version 0 of 1.

Bankruptcy judge dismisses case filed by Gateway Pundit, which faces defamation cases over false election claims

A judge dismissed a bankruptcy case filed by the Gateway Pundit on Wednesday, saying the far-right outlet did not file the case in good faith.

The ruling from US bankruptcy judge Mindy Mora in the southern district of Florida comes as the outlet faces significant defamation cases from two Georgia election workers and a former Dominion Voting Systems employee who say the site spread false claims about them after the 2020 election.

Calling the site’s assets “eye-catching”, Mora noted that they were 22 times the size of its liabilities. The company reported nearly $3.1m in revenue in 2023.

“TGP remains both balance sheet and cash flow solvent. There is no present financial distress, no looming foreclosure sale, no prospect of a market crash. There is only the State Court Litigation in which TGP must defend itself. That’s not a basis for bankruptcy relief; it’s the justice system in operation,” Mora wrote.

The proceedings had also revealed that the company may have been operating in Florida for three years without a proper business license and could owe back taxes to the state, Mora wrote in her 28-page ruling.

The Gateway Pundit declared bankruptcy on 24 April saying it was doing so as a litigation strategy in the defamation cases filed against it. Filing for bankruptcy pauses all civil proceedings against a business. The bankruptcy dismissal means the defamation cases can probably continue.

The bankruptcy filing came as lawyers representing Ruby Freeman and Shaye Moss, the two election workers, were completing discovery in their defamation case and had informed the company it intended to take depositions of the Gateway Pundit founder Jim Hoft and his twin brother, Joe Hoft, who is a contributor.

“This is a common tool for reorganization and to consolidate litigation when attacks are coming from all sides. It allows TGP to consolidate this lawfare in one court for ultimate resolution,” Jim Hoft wrote at the time.

“While we greatly appreciate the Judge’s careful consideration of the facts of this case, we believe some of the findings are not supported by the existing law or underlying circumstances presented at the hearing or otherwise contained within the record. The Debtor continues to consider its options and will move forward in its legal and business path,” Bart Houston, a lawyer representing the company, said in a statement.

The defamation cases are being closely watched because they are testing whether US libel law can be an effective tool to combat misinformation. The collateral bankruptcy cases are seen as an effort to try to avoid accountability for lying. A judge earlier this month also dismissed a bankruptcy case filed by Rudy Giuliani, who was ordered to pay the two Georgia election workers $148.1m for defaming them last year.

After the 2020 election, the Gateway Pundit published several articles falsely saying that Ruby Freeman and her daughter Shaye Moss, both election workers in Fulton county, Georgia, were involved in a plot to scan ballots multiple times and steal the election. The claims were immediately debunked and both women have been cleared of any wrongdoing.

The false claims were amplified by Giuliani and other Trump allies and became central to their efforts to overturn the election results. When Trump called Georgia’s top election official and asked him “to find 11,780 votes”, he mentioned Freeman by name.

Both women have detailed the extensive harassment they faced. They fled their homes, and say to this day they are afraid to appear in public alone.

“We are pleased that the court today saw through the Gateway Pundit’s transparent attempt to abuse the bankruptcy process to avoid accountability and granted our motion to dismiss the bankruptcy case,” said Brittany Williams, a lawyer with the non-profit group Protect Democracy, which represents both women. “We will continue to work to ensure that no abuse of the legal system further delays justice for Ms Freeman and Ms Moss.”

Eric Coomer, the former director of product strategy and security for Dominion Voting Systems, sued both the Trump campaign and the Gateway Pundit for defamation after he was falsely accused of rigging the election against Trump.

The site denies publishing libelous claims. During a press conference last week in Milwaukee, Jim Hoft continued to falsely accuse Freeman and Moss of fraud. “We have not found a single item that came back and we’re like ‘Oh gosh, this is horrible, we really screwed up.” Nothing. Everything we reported originally we stand by,” he said.

The company had acknowledged it had money to pay its debts, but made an unusual argument during the bankruptcy proceedings. Lawyers said the company had used about $700,000 of its $2m insurance policy so far and expected to exhaust the whole amount, at which point its legal costs would start to deplete the company’s assets. Mora didn’t buy that argument. “It remains to be seen whether TGP will ever suffer cash flow insolvency,” she wrote.

The bankruptcy proceedings also offered unique insight into the company’s finances.

The company disclosed, for example, that it had made a $799,000 loan to Hoft in order to purchase a condominium in Florida. There was no paperwork for the loan, however, and there was no interest rate or maturity date. The company also had no documentation regarding a $21,000 loan it made to Hoft’s twin brother, Joe, who is also a contractor to the site. Within 90 days of filing for bankruptcy, the site also paid Jim Hoft’s husband more than $33,000 for work for the site. The company also purchased a 2021 Porsche Cayenne for Jim Hoft that he keeps at his home in Missouri.

Mora also noted that more than half of the company’s liquid assets were in retirement investment accounts held by Jim Hoft. She suggested that creditors could eventually make a claim on the more than $1.1m in those accounts because it had listed them as part of the bankruptcy estate.