A trustee for a bankrupt international financier holding hundreds of millions of dollars of debt by the companies owned by Gov. Jim Justice and his family has agreed to the dismissal of a federal lawsuit against the family’s longtime banker, which also has claims on hundreds of millions of dollars in debt.
One giant creditor sued the other early this year.
The claim, in a nutshell, was 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 — representing the interests of Greensill’s investors — filed against Carter “to recover $226.2 million from legally improper transfers made to Defendant Carter Bank & Trust.”
This week, a very short filing in federal court said that both GLAS Trust and Carter agree that the lawsuit should be dismissed with prejudice, meaning it is not only no longer under consideration by the court system but that its claims can’t be brought back up.
Carter, a publicly-held bank headquartered in Martinsville, Va., put out a statement in the form of a filing with the U.S. Securities and Exchange Commission to elaborate on the dismissal of the lawsuit.
“Pursuant to a confidential agreement, Carter Bank has obtained a voluntary stipulation of dismissal of the GLAS Trust Lawsuit with ‘with prejudice.’ This means the GLAS Trust may not bring any more future action in any court based on the facts alleged in the GLAS Trust Lawsuit,” wrote representatives of the bank.
“Moreover, in connection with the dismissal of the GLAS Trust lawsuit, GLAS Trust and certain affiliates and parties on whose behalf it is acting have executed a release that waives any and all causes of action that they might claim to have against Carter Bank.”
The Carter Bank statement then described the action in terms of a milestone on the debt claims:
“The dismissal of the GLAS Trust Lawsuit ends all pending litigation brought against Carter Bank in connection with its lending relationship with James C. Justice II, and the entities with which he has an interest (the ‘Justice Entities’). Also in connection with the dismissal of the GLAS Trust Lawsuit, the Justice Entities have executed documents reaffirming the legality, validity and binding nature of all loan documents they have executed in favor of Carter Bank.”
Each entity holds an enormous amount of Justice debt.
The Justice business network and Carter Bank on and off have been in conflict over $300 million in defaulted, personally guaranteed loans. Earlier this summer, the Justices and Carter Bank announced a resolution. The debt was still on the books but with revised terms that included “a pathway of curtailment and payoff.” Carter Bank’s statement said the loan balance had been reduced from $301.9 million as of the end of the 1st quarter to a balance of about $294.1 million as of June 20.
Carter Bank described the continued Justice debt in its 2nd quarter report to shareholders, saying financial results continue to be significantly affected by placing loans to the bank’s largest lending relationship, the Justice businesses, in nonaccrual status in 2023. “Interest income has been negatively impacted by $48.4 million in the aggregate since placement of these loans on nonaccrual status during the second quarter of 2023,” the bank concluded in its own recent financial report.
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.
Millions of dollars were paid down on the Carter debt, and the lawsuit filed by GLAS contended 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 contended 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.
The lawsuit claimed Carter knew that the right hand of the Justice companies was paying debts owed by the right hand. And the lawsuit claimed the bank knew Bluestone didn’t really have its own money to pay.
The payments to Carter, the lawsuit maintained, made it harder for Bluestone’s actual creditors to be repaid. After Bluestone informed Greensill that it would not be able to continue paying back a receivables financing program, Greensill went belly up.
Greensill declared bankruptcy after the international financial giant Credit Suisse froze billions in funds. Credit Suisse then began pressing to recover lost investments and has named Justice’s Bluestone Resources as one of three major borrowers from the Greensill funds.
Two years ago, Credit Suisse announced an agreement, with an element of securing the future for Bluestone’s mining operations, alluding to the possibility of a future sale. Since then, the Swiss bank group UBS has completed acquisition of Credit Suisse.
GLAS, the trustee, contended $700 million is still owed from the Bluestone debts to Greensill.
GLAS asked 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 had also asked for any other relief deemed appropriate by the court.
Now, though, those claims are dismissed.