The financial tangle of Gov. Jim Justice’s family-owned companies just got another entanglement.
A trustee for one of Justice’s creditors filed a federal lawsuit against the family’s longtime banker, which has been trying to collect millions of dollars in debt.
So one big fish owed money by the Justice companies is taking on a regional fish also owed money by the governor and his family.
The claim, in a nutshell, is that Carter Bank & Trust put the Justices in a headlock to collect enormous debt. The Justices responded by transferring money from their financially-strapped Bluestone entities. Except Bluestone had gotten the money by borrowing millions of dollars from the international lender Greensill, which went bankrupt when Bluestone was too broke to pay.
Rather than suing the Justices over the mess, the GLAS Trust Company has filed against Carter “to recover $226.2 million from legally improper transfers made to Defendant Carter Bank & Trust.”
The lawsuit characterizes Jim Justice as “a resident and sitting governor of West Virginia” who “owns 60% of the ownership of Bluestone Entities.” The governor’s son Jay is described as the owner of the other 40 percent.
Even as his family’s companies have faced courthouse conflicts over debt, Justice has expressed pride that the businesses have never declared bankruptcy, contending that would have meant abandoning communities and employees. “Jim’s house will be fine,” the governor has said.
The new federal filing contends that other creditors, not just Greensill, have been stiffed as the Justice companies have been confronted by Carter debt terms. Those include First National Capital and Caroleng, representing the Russian mining company Mechel.
The lawsuit was filed in U.S. District Court for the Western District of Virginia, which is where Carter is based in Martinsville, Va.
Carter Bank just got the lawsuit and hasn’t yet responded in court, but the bank issued a statement Thursday afternoon in the form of a filing with the U.S. Securities and Exchange Commission
“The Company and Carter Bank strongly believe that the factual allegations in the Lawsuit regarding transactions involving Carter Bank are false and misleading, and the Company and Carter Bank vehemently object to GLAS’s attempt in the Lawsuit to question these repayments,” stated representatives for the bank.
“The Company and Carter Bank deny the allegations contained in the Lawsuit and intend to defend vigorously all claims asserted in the Lawsuit. Based on information presently available to the Company and Carter Bank, the Company believes that Carter Bank has meritorious defenses to all allegations contained in the Lawsuit; however, because the Lawsuit is in its early stages, no prediction can be made as to the ultimate outcome thereof.”
Carter has been trying to collect on $300 million in personally-guaranteed loans by the Justices, recently won a local court decision and announced auction of the Greenbrier Sporting Club early next month to collect at least a portion of the debt.
When the governor was asked this month about Carter Bank’s efforts to collect, he alluded to another shoe dropping. “All I would say is stay tuned, watch what’s going to happen,” he said.
Justice had a friendly and beneficial relationship with founder Worth Carter until the banker’s 2017 death. The officials who then assumed responsibility for the bank instituted more rigid financial practices. At that point, the bank had extended more than $750 million in loans to the Justices.
The Justices around that time agreed to terms that included cross-default provisions, cross-collateralization and accelerated maturity dates.
Millions of dollars were paid down on the Carter debt, and the lawsuit contends the source was loaned money from Greensill.
Seeking more financing to support its metallurgical coal properties, Justice’s Bluestone in 2018 entered a supply chain financing agreement with Greensill UK. Over time, Greensill advanced Bluestone more than $700 million.
The lawsuit contends the Justices used a portion of the money to pay off loans that Bluestone owed to Carter — and then went farther by using the money borrowed in Bluestone’s name to pay down Carter debt by other branches of the Justice companies.
“With the property of their other businesses, as well as their own personal finances on the line, the Bluestone owners chose to use the funds advanced by Greensill UK — in addition to the legitimate use of repaying Bluestone Resources’ own debt to Carter Bank — to repay hundreds of millions of dollars of Carter Bank debt on which the Bluestone Entities themselves were not obligated,” the new lawsuit contends.
The lawsuit claims Carter knew that the right hand of the Justice companies was paying debts owed by the right hand. And the lawsuit claims the bank knew Bluestone didn’t really have its own money to pay.
“It ignored these red flags and ‘forced’ the Justices to make these unlawful transfers anyway,” the lawsuit contends.
The payments to Carter, the lawsuit maintains, made it harder for Bluestone’s actual creditors to be repaid. After Bluestone informed Greensill in 2021 that it would not be able to continue paying back a receivables financing program, Greensill declared bankruptcy.
GLAS, the trustee, contends $700 million is still owed from the Bluestone debts to Greensill.
GLAS is asking for “judgment against Carter Bank in the amount, to be determined at trial, of the full amount of the actual fraudulent and/or voluntary (constructive fraudulent) conveyances by the Bluestone Entities to Carter Bank.” The plaintiff is also asking for any other relief that the court deems appropriate.