6:00: Morning News

Second company owned by Justice steps up to pay $1.23 million contempt sanction

CHARLESTON, W.Va. — A second company in the business empire run by Gov. Jim Justice and his family has stepped in to pay a $1.23 million civil contempt sanction on behalf of Justice Energy Company.

In a joint status report filed today on deadline set by U.S. District Judge Irene Berger, Bluestone Resources promises to pay in three installments of $410,000 each.

The first installment is due June 17, the second is due Sept. 16 and the third is due Nov. 15.

This would avoid an alternate outcome, described in a motion Wednesday, to pierce the corporate veil and hold the governor and his son responsible for the debt.

An executive with Bluestone Energy Group issued a statement expressing thanks for the proposed agreement, calling the fine excessive and blaming the prior Russian-based owner of the company for getting in this position in the first place.

Joint Status Report (Text)

Last week, U.S. District Judge Irene Berger issued an order giving Justice Energy Company until today to describe how it would pay the civil contempt sanction of $1.23 million.

On Wednesday, federal prosecutors who were intervening in the case filed a motion to pierce the corporate veil of Justice Energy, calling it a shell company and saying the Justice family members who control it — Justice and his son Jay, who is president — would need to be held financially responsible.

A May 31 memo from U.S. Attorney Mike Stuart to lawyers for Justice alluded to the deadline and his intention to pierce the corporate veil. Stuart advised immediate  payment of the $1.23 million to avoid that outcome.

Stuart wrote that he believes it would be in the best interest of Justice Energy and related companies “that the contempt sanction be paid immediately or that a payment plan be submitted to the court that is properly secured and will meet the Court’s criteria set forth in the order entered yesterday.”

Today’s joint status report submitted by Stuart and approved by representatives of Justice Energy could achieve that if Berger signs off.

Bluestone specifies that the payments should not be considered an admission of its own liability, although it would be legally obligated to make the payments.

Bluestone Resources is listed among the many assets on Governor Justice’s most recent financial disclosure form. 

The West Virginia Secretary of State’s Office lists Bluestone Resources with a Raleigh County address but doesn’t name any officers. That site says the organization is incorporated in Delaware.

The Division of Corporations in Delaware has two listings for Bluestone Resources, both of which are labeled “this is not a statement of good standing.”

The status of the more recently incorporated Bluestone Resources indicates that is because it has delinquent taxes listed as of March 2, 2019.

Justice Energy lists James C. Justice III,  also known as Jay, as president. The other director is Jillean Justice, the governor’s daughter. And the treasurer is James T. Miller, a financial officer in various Justice businesses.

The U.S. Attorney’s Office, after examining the finances of Justice Energy, concluded that it has no real independent and separate corporate existence. The prosecutors, acting as intervenors to collect the money, concluded that Governor Justice and Jay Justice would need to be held financially responsible.

This proposed settlement would avoid that.

The case first filed Nov. 6, 2013, was only for $148,496.14. James River Equipment alleged that Justice Energy failed to pay for parts, equipment and service.

But Justice Energy failed to pay and its representatives failed to appear at a series of hearings.

This was at a time when the company was still owned by the Russian Energy company Mechel OAO. Justice had sold to Mechel in May 2009 for $568 million and then bought it back in 2015 for $5 million.

As the struggle continued for James River to receive the judgment, the company in late 2015 filed a motion for contempt.

That motion also included a request to “pierce the corporate veil” of Justice Energy and to imprison its corporate officers and directors until the payment was made.

At the time, Berger declined to go that far.

“The Court notes that piercing any corporate veil is an extraordinary remedy, and unnecessary at this point to achieve the plaintiff’s intended results in this case,” Berger wrote in a Jan. 5, 2016, order.

But the judge did grant the contempt motion and ordered Justice Energy to be fined $30,000 a day until it could demonstrate compliance with the earlier order.

By Feb. 26, 2016, as Justice was warming up for the Democratic primary race for governor, the situation had barely improved.

But the two parties had worked out a payment plan, and Berger agreed. 

She ordered the judgment of $1,230,000, representing the total amount of the sanction from her earlier order.

Justice’s companies appealed the case, but on August 17, 2018, the Fourth Circuit Court of Appeals affirmed Berger’s rulings.

This past Jan. 31, Berger granted a motion for federal prosecutors to intervene and conduct discovery of Justice Energy’s assets.

In a joint status update filed April 19, both parties indicated that process was concluding.

Noting the lack of payment so far, Berger last week ordered the parties to submit a proposal no later than June 6 “to inform the court as to the date by which the payment will be made in full or proposing a schedule of payments, to be completed no later than Jan. 1, 2020, for the court’s review.”

Late this afternoon, Bluestone Energy Group chief operating officer Tom Lusk issued a statement summing up much of that tangled history.

“We are grateful to U.S. Attorney Mike Stuart for recognizing that our negotiations with his office have resulted in the debt with James River Equipment being satisfied, even though we think this sanction was excessive for what was, at bottom, a $180,000 dispute,” Lusk said.

“Despite this disproportional penalty, the Justice Family has once again stepped up to pay an obligation, not of their making, that resulted from the inattention of the Russian lawyer hired by the Russian company.”

More News

First Warner-Tennant debate scheduled for Thursday
Secretary of State Mac Warner and former Secretary of State Natalie Tennant will take part in the first of three debates on Thursday.
August 12, 2020 - 10:37 pm
Justice extends Monongalia County bar order
The order keeping bars closed will be in effect until Aug. 20.
August 12, 2020 - 9:36 pm
WVU's Beckley and Keyser campuses get ready for fall semester
Two West Virginia University affiliates are getting ready for the fall semester, starting with testing for the coronavirus.
August 12, 2020 - 7:59 pm
WVDE names Homberg to lead West Virginia Schools for the Deaf and the Blind
Previous candidate had left the position a few days after accepting it.
August 12, 2020 - 5:56 pm