A federal judge in Delaware has ordered a company owned by Gov. Jim Justice and his family to be sold because of a tangle of debts.
U.S. District Judge Richard G. Andrews issued the order last weekend.
The order sets in motion a forced sale of Bluestone Minerals, a holding company within the judges' extensive business network. Bluestone Minerals' stock is to be “sold to satisfy the judgment” in a form proposed by the parties to the lawsuit within 30 days of the order.
Bluestone Minerals is significant in that it is just one of the companies under Justice's umbrella. As a holding company under parent company Bluestone Resources, which operates primarily as a coal company, Bluestone Minerals represents the entire value of the other assets under Justice's umbrella, including National Resources Corp., Bluestone Coal Sales Corp., Nufaq Mining Corp., Frontier Coal Corp. and Kentucky Fuel Corp.
The big question is, what economic value do they have?
The company, which is suing over debts and trying to liquidate the Justice family's assets, has described the family-owned business as “in a financially distressed position.” The judge's filing said the initial sale order requires notifying creditors in other debt disputes with the Justice family and appointing a third-party financial receiver to take control of the company until the shares in Bluestone Minerals are ultimately sold.
The issues have come to light as Justice, a two-term Republican governor who gained early political fame for his business acumen as West Virginia's only billionaire, is in the final stages of a campaign for the U.S. Senate.
A financial dispute has been simmering in court and is now heating up. A few months ago, a judge ordered federal marshals to take control of the assets to repay the debt. That order required the Justice Department companies to respond within 20 days, but the judge said there had been no response for four months and has now ruled against them.
The move is aimed at paying off at least some of the debt owed to Caroleng Investments Limited, the same company that successfully sought a forced sale of Department of Justice-owned helicopters to repay debts earlier this year.
Each move — first the helicopter liquidation and now the possible seizure of the business — is part of a dispute between Justice's Bluestone Resources and Caroleng Investments, which represents Russian mining company Mechel, which bought and sold assets to Justice several years ago.
“Our job is to get our client paid the judgment, so we're going to be looking at all of Bluestone's assets to satisfy that judgment,” said Zachary Mazur, an attorney with the Saracek Law Firm in New York who is representing Carolength.
This saga has been unfolding for years, but the most recent incident occurred last week, when Carolength's lawyers filed a motion seeking enforcement action against Justice Business.
After no response to his earlier warning shots, Carolength sought judgment against both companies.
“Mr. Carolength also has the right to immediately compel the sale of Bluestone Resources' shares in BMI subsidiaries to satisfy the outstanding judgments,” Mr. Carolength's lawyers wrote, referring to Bluestone Minerals.
According to Carolength's filings, the shares of Bluestone Minerals are owned by parent company Bluestone Resources, whose organizational chart submitted as evidence in the lawsuit shows that Gov. James C. Justice II owns 60 percent of Bluestone's stock, and his son, James C. Justice III, known as Jay, owns 40 percent.
Carolength's filing said Bluestone Minerals' shares should be placed into the hands of a third-party financial receiver with the aim of winding up the assets and preserving the value of BMI for the benefit of Bluestone Resources' creditors.
“Instead, BMI's stock should be offered for sale by the U.S. Marshals Service or its designee, with the proceeds to be used to pay Carolength and other creditors pursuant to the liens and Delaware law.”
That means the governor of West Virginia is a majority owner who could see a federal court strip him of his stake in his family business and sell it off.
Carolength's complaint notes that, and then goes on to say about Bluestone's further massive debts: “The company is part of a group of companies controlled by current West Virginia Governor Jim Justice II and his family.
“The Bluestone business is in financial difficulty and Mr. Carolength understands that Bluestone Resources' subsidiaries are in a precarious financial position due to years of mismanagement. By some estimates, Bluestone Resources and its affiliates may owe more than $1 billion to various creditors.”
That refers to GLAS Trust Company, a successor to the now-bankrupt Greensill UK, which Bluestone claims owes the company at least $700 million for defaulting on its debt. Carter Bank & Trust, the longtime backer of Virginia-based Justice Bank, is trying to collect on about $300 million in debt.
Carolength claims it is owed more than $10 million and growing, a situation that dates back to Justice's dealings with Carolength's parent company, Russian mining company Mechel.
Mr. Justice sold his family's coal assets to Mr. Meshel in May 2009 for $436 million in cash and 83.3 million Meshel preferred shares. Mr. Justice then bought Bluestone back for $5 million in 2015. The mine had been closed under Mr. Meshel's watch but was reopened by Mr. Justice.
The agreement to buy back Bluestone's assets included provisions to continue paying the Russian mining company $3 per ton in royalties on coal extracted, as well as a percentage of future sales. In court filings, Carolength alleged that Bluestone is withholding royalty payments.
Meshel first filed a debt lawsuit with a three-person arbitration panel from the International Chamber of Commerce, which arbitrated the dispute in Paris, France, in October 2019, two years into Governor Justice's first term. The arbitration panel awarded him $8.4 million plus $1.7 million in pre-award interest. Meshel's representatives say the debt continues to grow.
Carolength is acting on behalf of Mechel on a 2021 Federal Court order enforcing an arbitration award, but recovery under the judgment is being challenged.
Now, Carolength's lawyers say they want to ensure Bluestone's assets are preserved so they can collect on what is owed.
“Given Bluestone Resources' mismanagement and Carolength's effective seizure of all of its shares in its subsidiary BMI, it is both logical and necessary for the court to appoint a temporary receiver in the course of the share sale,” Carolength's lawyers wrote.
“The receiver's job should be to preserve the value of the BMI as much as possible in order to maximise the sale price.”
