The GLAS Trust Co. LLC has filed suit seeking to recover $226.2 million from Martinsville-based Carter Bank & Trust.
The lawsuit, filed Monday with the U.S. District Court for the Western District of Virginia, claims the money is from “legally improper transfers” made to Carter Bank from Bluestone Resources Inc., Bluestone Coal Sales Corp., Blackstone Energy, Ltd. and related Bluestone entities.
GLAS claims the Bluestone operations satisfied debts to Carter Bank for which the companies were not legally liable and paid with financing from Greensill Capital.
GLAS names itself as the note trustee for the source of the financing through notes purchased by investors.
The action relates to the ongoing efforts by Carter Bank to collect debts from West Virginia Gov. Jim Justice, his family and family businesses, including the Bluestone entities.
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The lawsuit makes clear that while GLAS believes the Bluestone entities are entitled to pay debt they may owe Carter Bank, the transfer of money to settle personal debt by the Justice family is improper. The suit states that Justice, his wife Cathy, and his son James Justice III own a network of more than 100 companies that range from coal mining to hospitality to agriculture.
GLAS alleges the Bluestone entities transferred money they did not owe on three occasions. The company claims on Sept. 28, 2018, Bluestone paid $8.6 million above what it owed Carter Bank and on Dec. 13, 2018, there was a transfer of approximately $179 million to Carter Bank to settle several other Justice entities. Finally, GLAS claims sometime between the first and last payment, another $38.6 million was paid by Bluestone to the Justices, who, in turn, paid Carter Bank to satisfy secured loans.
As a result, the insolvent Bluestone entities received nothing of value in exchange for the transfers and “sank deeper into insolvency,” the suit claims.
GLAS claims that Carter Bank knew it was receiving money from companies that were not obligated to pay back the loans, but still accepted the money. “It ignored these red flags and ‘forced’ the Justices to make these unlawful transfers anyway,” the lawsuit alleges. “That was a great result for Carter Bank, but a bad (and unlawful) result for the actual creditors of the Bluestone Entities, such as the Noteholders on whose behalf GLAS, as Note Trustee, brings this complaint.”
GLAS accuses Carter Bank of fraudulent conveyance of funds under state law. As a result, Bluestone quit making payments to Greensill in March, 2021, forcing Greensill into bankruptcy, and the noteholders stopped receiving payments due on their notes. Currently, GLAS maintains at least $700 million is due it by Bluestone.
A complaint seeking an injunction on behalf of the Justice’s Greenbrier Sporting Club in White Sulphur Springs was filed Feb. 7 in Greenbrier County Circuit Court attempting to halt Carter Bank’s plans to auction off land and recover more than $300 million on defaulted business loans by the Justice family.
The complaint asks the court to delay the auction until it hears claims by the Justice family against Carter Bank. A federal lawsuit filed by the Justice companies in November against Carter Bank is still pending.
The Justice family claims that Carter Bank “blocked or sabotaged” the attempts by the family to seek financing with other lenders.
“Banks have an obligation to their shareholders and the financial system to collect in full all amounts that are due and owing to them,” the bank stated in a filing in January with the U.S. Securities and Exchange Commission.
A published legal notice in the Feb. 6 edition of the Charleston Gazette-Mail by Carter Bank has set March 5 as the date when land at Greenbrier will be auctioned outside the courthouse of Greenbrier County in Lewisburg.
Justice, the two-term Republican governor of West Virginia, who is running for the U.S. Senate seat currently held by Democrat Joe Manchin, on Feb. 7 described the latest developments with Carter Bank “beyond belief terrible.”
