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In swirl of financial turmoil, Greenbrier Hotel Corp. is hit with million-dollar IRS lien

Greenbrier Hotel Corp. faces a federal IRS lien of at least $1.07 million, another troubling sign for Gov. Jim Justice’s business empire.

The Internal Revenue Service filed the lien this past March 8 in Greenbrier County. The federal tax agency appears to have activated a series of liens on Justice entities in March — with some like this one filed on the very same day Greensill Capital, the major lender for the Justices, filed bankruptcy.

The lien on The Greenbrier Hotel Corp. is coded as 941, the form for payment of employment taxes. The lien indicates the taxes date back to the 2018 filing period. The IRS may also go after additional penalties, interest and costs.

The document filed by the IRS notes that it represents the federal government’s ability to collect on property and rights to property. The IRS specifies that its process includes earlier notice and demands for payment before a lien is filed.

The Greenbrier Hotel Corp., representing the corporate entity that runs the historic resort in White Sulphur Springs, lists members of Governor Justice’s family as its top officers. The governor’s daughter, Jill, is the president. Jay Justice, the governor’s son, is a director. The secretary is Stephen Ball, an in-house attorney for the Justice companies.

The Greenbrier holds a special place in West Virginia’s history, laying claim as “America’s Resort” that has been visited by presidents but also enjoyed by the general public.

Jim Justice at The Greenbrier

To much acclaim, Justice’s family purchased the iconic Greenbrier out of bankruptcy in 2009. “I knew I just couldn’t mess this up,” Jim Justice told The Washington Post in a story that ran two years after the purchase. “I mean, the employees know where I live.”

Justice successfully ran for governor in 2016 by characterizing himself as a successful businessman who could translate that experience.  Forbes had named him as the state’s only billionaire, a title that was retracted this year over the financial troubles with the international financial services company Greensill.

This is the latest revelation indicating wide-ranging and significant financial turmoil with the Justice business holdings.

Greensill, which supplied more than $700 million in loans to the Justice companies, informed the Justice families March 1 that it had collapsed. Greensill filed bankruptcy March 8.

The IRS filed a lien amounting to more than $8 million on March 26 on property owned by Jill Justice. The bulk of the taxes owed were from 2009, the year the Russian company Mechel bought the Justice family’s coal operations, Bluestone Coal Corp., for $436 million in cash and 83.3 million Mechel preferred shares.

There are additional liens on Justice properties too.

Another lien against the Greenbrier Hotel Corporation was filed last month, June 22, in Greenbrier County. That one amounts to more than $395,000. It also reflects taxes from the 2018 filing period.

That lien also refers to the 941 form that businesses must file for employment taxes.

A lien relating to $80,000 in employment taxes was filed on The Greenbrier Clinic on March 8, the same day the million-dollar lien against Greenbrier Hotel Corp. was filed. The lien on The Greenbrier Clinic is for 2018 and 2019 taxes.

The internet site, The Tax Adviser, provides some guidance for those who face liens based on employment taxes. The guidance notes that the government may hold individuals responsible for the money. That may occur even when the business was conducted in the form of a corporation.

“Many people associated with a business may be found to be a responsible person, including corporate officers, treasurers, managers, and even bookkeepers, in certain circumstances.”

In cases where an employer willfully fails to pay employment taxes, the Justice Department may become involved with criminal penalties. “Usually, the IRS only prosecutes high-profile cases.”

U.S. Code 7202 covers “willful failure to collect or pay over tax.” The felony penalties include fines of no more than $10,000 or imprisonment of no more than five years.

In public comments in early June that came right after a federal court filing described major complications with refinancing loans for Greenbrier properties, Governor Justice characterized the finances for the historic hotel his family owns as stable.

The governor’s assessment grouped in Bluestone Resources, the umbrella company for his family’s coal holdings, which also have been the subject of recent high-profile financial turmoil.

“From the standpoint of the health of The Greenbrier, from the standpoint of the health of Bluestone, both are extremely, extremely healthy,” Justice said. “And they’re doing well.”

Another of Justice’s lenders, Carter Bank & Trust of Martinsville, Va., filed claims on $58 million from Jim and first lady Cathy Justice based on guarantees they signed. The July 6 claims kicked in after recent defaults of The Greenbrier Sporting Club and Oakhurst Club.

The financial problems have percolated over years but went into overdrive with the collapse of the lender Greensill last spring.

The Justice companies took out hundreds of millions of dollars in loans from Greensill Capital in 2018.  Greensill packaged such loans and sold them to investment funds managed by another international financial company, Credit Suisse.

Greensill declared bankruptcy this spring after Credit Suisse froze billions in funds. Credit Suisse is now pressing to recover lost investments and has has named Justice’s Bluestone Resources as one of three major borrowers from the Greensill funds.

Bluestone Resources, the coal company owned by the Justices, last week put out a statement signaling progress in talks with Credit Suisse over the millions of dollars in debt.

Bluestone said it has agreed to a framework with Credit Suisse to work on restructuring debt obligations following the insolvency of Bluestone’s main lender, Greensill Capital. Financial Times cited a source who described “more constructive conversations” but that the announcement by Bluestone “was a little premature” and no agreement has been signed.

The Wall Street Journal reported that strategies for making up the debt include boosting output at coal mines operated by Bluestone, revitalizing The Greenbrier Resort to bump up profitability and leveraging more profits from the Justice family’s landholdings. The Journal, citing unnamed sources, reported there are no plans to sell assets.

Last week, Justice urged observers to wait until all these financial issues have run their course before leaping to judgment.

“I’d just sit back and wait and wait for the final stuff to come out. If truth prevails, it’ll be a terrific outcome,” the governor said. “If bad stuff prevails it could be very, very difficult on our family.”

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