NEW YORK — Gov. Jim Justice could be stuck repaying nearly $700 million in loans that coal companies owned by his family took from Greensill Capital, The Wall Street Journal reported.
Justice personally guaranteed the loans, the news agency reported. Greensill Capital, nod a defunct business, sold the loans to investment funds managed by Credit Suisse Group.
Credit Suisse Group says Bluestone Resources owes nearly $700 million and Justice and his wife guaranteed the loans.
On June 1, Justice confirmed he is personally liable for the debt, saying the loans are “a burden on our family beyond belief, and we’ll have to deal with it."
“It’s tough, it is really tough," Justice said during Tuesday's bi-weekly COVID-19 press briefings. “We didn’t have one earthly clue” about the problems that would follow borrowing the money. But, he also said he isn't "going to let Greensill just get by with doing bad stuff."
Bluestone Resources filed a lawsuit against Greensill in March regarding the loans. On May 24, District Judge Jesse Furman filed an order to show cause.
"The complaint in this case was filed with the court on March 15, 2021 ... but the docket does not reflect that the complaint has been served on the Defendants," Furman wrote. "Accordingly, plaintiffs are advised that they must file proof of service on defendants no later than June 14, 2021, and if they fail to do so, they are hereby ORDERED to communicate with the court, in writing, as to why they failed to serve the summons and complaint within the 90 days prescribed by Rule 4(m) of the Federal Rules of Civil Procedure."
Furman gave Bluestone until June 21 to show cause and if no communication is received, the court will dismiss the lawsuit.
The lawsuit was filed against Greensill Capital, Lex Greensill and Roland Hartley-Urquhart alleging breach of contract, breach of covenant of good faith and fair dealing, fraud, breach of fiduciary duties, aiding and abetting breaches of fiduciary duties and committing civil conspiracy in connection with an unlawful and intentional scheme against the plaintiffs, according to a complaint filed March 15 in U.S. District Court for the Southern District of New York.
Justice, his wife, Cathy Justice, son James Justice III, Bluestone Resources, Bluestone Coal Sales Corporation and Blackstone Energy alleged they began a business relationship with Greensill in May 2018 and the defendants perpetrated a continuous and profitable fraud on the plaintiffs.
"Over the course of that period, defendant Greensill Capital advanced $850 million to Bluestone, of which approximately $108 million was paid directly in cashback to Greensill Capital in the form of fees and Greensill Capital received at least another $100 million in prospect equity value through warrants," the complaint states. "Greensill Capital was only able to perpetrate its fraud on plaintiffs by inducing plaintiffs to believe that they had found a long-term financing partner to support plaintiffs’ efforts to rehabilitate and relaunch their newly acquired Bluestone business – a business that had been severely neglected and mismanaged under prior ownership."
The plaintiffs claim the defendants acknowledged and agreed that the enterprise financing was intended to be a long-term financing partnership and in so doing induced the plaintiffs to increase their exposure to and dependency on Greensill Capital, resulting in a greater and greater financial benefit to the defendants.
In a federal lawsuit filed in March, Bluestone said it didn't expected to begin repaying the Greensill loans until at least 2023. Bluestone alleges Greensill committed fraud with its lending practices. The Justice family had been using the loans to rebuild Bluestone after buying the company back from a Russian company in 2015.
Earlier this year, Justice was dropped from Forbes' list of billionaires. His estimated net worth now is $450 million, down from $1.2 billion in April 2020. His family owns dozens of coal companies, farms and other businesses, including The Greenbrier resort.
The plaintiffs are seeking compensatory and punitive damages. They are represented by James L. Bromley and Benjamin S. Beller of Sullivan & Cromwell.
U.S. District Court for the Southern District of New York case number: 1:21-cv-02253
