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Bank sued by Justice calls allegations false and says it will collect its money

The longtime banking partner being sued by Gov. Jim Justice and his companies says the allegations in the lawsuit are false and misleading — and that it intends to collect the money the Justices were loaned.

Carter Bank & Trust made the filing Monday as a statement to shareholders.

“The allegations in the lawsuit regarding negotiations between the parties are false and misleading,” the bank wrote. “Banks have an obligation to their shareholders and the financial system to collect in full all amounts that are due and owing to them. Carter Bank is no different from any other bank in this regard.”

Justice and his companies sued the Martinsville, Va.,-based bank this month over millions of dollars in loans. The lawsuit indicates the Justice companies have $368 million of outstanding loans with Carter Bank.

That followed a separate Justice lawsuit against another lender, Greensill Capital, earlier this spring. The Justice’s have $700 million in debt with that company, also personally guaranteed. 

Carter Bank is pushing back.

“As with all its customers, Carter Bank expects to be repaid by the Justice Entities all amounts due and owing in full in a timely manner as agreed-upon in the various loan documents existing between the parties,” the bank wrote.

“Carter Bank believes that it is fully secured on all loans it has outstanding to the Justice Entities. All those loans are also backed by personal guarantees from James C. Justice, II and his wife, Cathy Justice. A number of them are also backed by personal guarantees from James C. Justice, III, Mr. Justice’s son.”

Justice’s lawsuit filed in U.S. District Court for the Southern District of West Virginia attempts to hold Carter Bank liable for $421 million in damages to the Justice companies.

The lawsuit claims Justice’s companies once had a personal and relatively loose relationship with banker Worth Carter of Virginia until his 2017 death, but that new leaders at the bank instituted more and more restrictions in recent years, tightening cash flow for the family businesses.

Carter Bank agrees the financial relationship is longstanding. But the bank says it has been trying to bring the arrangement under control.

“Beginning approximately five years ago, Carter Bank began to reduce its credit exposure to the Justice Entities and repeatedly informed the Justice Entities of the bank’s goal of reducing its credit exposure to the Justice Entities,” the bank wrote.

“During the ensuing years and from time to time as matters arose, Carter Bank worked cooperatively with the Justice Entities in restructuring and/or extending various of these loans.”

The timeline of five years ago, corresponds with the death of founder Worth Carter in 2017. Justice’s lawsuit described a financial relationships built on trust, allowing deals to be sealed with a handshake.

But when Carter died, “the relationship abruptly and rapidly began to deteriorate.” The bank’s new managers began to place greater restrictions on Justice’s financial arrangements.

“This hostility came despite what was then an over 15-year mutually beneficial relationship during which the Justice Entities had consistently and timely serviced all debt owed to Carter Bank,” the Justice lawsuit states.

That time period also marked Justice’s election and first year as governor. Justice did not place most of his family’s network of businesses into a blind trust.

Early in his time in office,  he produced a letter to state employees saying he would like to pursue a blind trust but the process had been slowed by the complexity of his financial dealings.

“I want to put all of my assets in a blind trust; however, the process has been slowed down by the multitude of financial institutions that work with my family’s companies,” he wrote.

The governor’s most recent financial disclosure form with the state Ethics Commission still maintains that he has no debt that would affect his public office.

The bank contends that on more than a half dozen occasions the Justice companies executed agreements reaffirming the legality, validity and binding nature of  the terms of their loan obligations. Those were usually in connection with restructurings or extensions.

Carter Bank characterizes those agreements as releasing the lender from all claims and causes of action the Justice companies might have. The most recent, the bank says, was less than a year ago.

The Justice companies filed their lawsuit on Memorial Day. Carter Banks says that is no coincidence. It was the day before loans of two Justice companies matured and were due to be repaid in full.

“Carter Bank firmly believes that the Lawsuit reflects an effort by the Justice Entities to avoid repayment of their obligations in accordance with the agreed-upon terms in the various loan documents existing between the parties,” the bank wrote.

“Carter Bank will vigorously defend all claims asserted in the Lawsuit and expects to collect in full all amounts due and owing to it from the Justice Entities.”

The Justice lawsuit corroborates the timeline, describing increased tension over the past eight weeks when Carter Banks “stonewalled the Justice Entities’ financing of a substantial portion of the outstanding debt owed to Carter Bank with a new lender.”

Particularly at issue is a five-year loan on Greenbrier properties that came due June 1. The lawsuit contends the Justice companies started examining options to replace Carter Banks as a lender but that the bank refused to engage.

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