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Companies Sue West Virginia Governor’s Family Companies Over Debts But Find Empty Bank Accounts

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West Virginia Gov. Jim Justice. Photo: Jesse Wright/West Virginia Public Broadcasting

The Justice family companies’ difficulties paying taxes over the years are well documented. But tax collectors haven’t been the only ones trying to recover debts from companies once operated by West Virginia Gov. Jim Justice and now in control of his family.

A review of court documents by the Ohio Valley ReSource found at least five cases in which judges ruled that Justice family companies failed to pay suppliers for goods or services. When compelled by courts to pay, the companies either refused or failed to meet agreed upon payments.

These cases, dating back to 2013, include a failure to pay for a range of common coal industry needs, such as parts for mining equipment, coal barge services, insurance, and the royalties due to mineral property owners. The debts the Justice family companies owed in these cases ranged from just under $150,000 to a little more than $3 million.

In all five cases the courts authorized U.S. Marshals to seize assets from the Justice family companies’ bank accounts in order to recover the debts. However, in some cases officials discovered the bank accounts were empty or closed.

National Union Insurance

One recent case involves a contract dispute between an insurance company and Southern Coal Corp., one of the Justice family companies. Southern Coal operates 33 mines and has a coal mining capacity of 7.2 million tons, according to Bloomberg.

Based in New York, National Union Fire Insurance Company provided workers compensation, general liability, and auto insurance policies for Southern Coal from 2009 to 2014.

According to court documents, after coverage ended, National Union audited Southern Coal’s books and found the company owed roughly $2.7 million. In March 2014, Stephen W. Ball, vice president of operations for Southern Coal, issued a promissory note to National Union. The document spelled out how much the company would pay and set up a payment plan.

The note also said if Southern Coal defaulted, the unpaid principal and interest would become due and National Union could collect attorney fees.

Court records show the company made several payments, but then stopped, defaulting on almost $560,000. This July, a judge in the U.S. District Court for the Southern District of West Virginia issued a writ of execution, a legal method by which judgment may be enforced and collected.

A court document shows the judge authorized U.S. Marshals to recover debts owed by Southern Coal.

Rick Shearer is a Kansas City-based attorney who represents National Union. In an email exchange, Shearer said the U.S. Marshal’s office checked out each of the bank accounts listed.

“Those entities responded that any accounts of Southern Coal were closed or now have a zero balance, or they were no longer holding any Southern Coal assets,” he said.

Shearer said he has even reached out to other lawyers who have litigated similar cases against Justice family companies seeking advice on how best to recover debts.

Turns out, National Union is not the first company to run into this problem.

A timeline drawn from court documents shows key events in National Union’s lawsuit against Southern Coal. Credit: Alexandra Kanik/Ohio Valley ReSource

Empty Accounts

The Ohio Valley ReSource found five examples of ongoing or closed lawsuits where a judge issued a writ of execution to collect judgments against Justice family companies.

This summer, Georgia-based paper company WestRock got a writ of execution and writ of summons to recover about $1 million owed by two Justice family companies, Southern Coal and Kentucky Fuel Corp. The companies have been battling for years over a coal contract for a paper mill in Florida. The parties settled, but after making three payments, Southern Coal defaulted.

As in the National Union case, court records filed last month show the U.S. Marshal for the Southern District found nothing in the three accounts listed for the Justice family companies.

Another example dates back to 2013. In March of that year Thomas Lampert agreed to sell his interest in the Three Marie Mine located in the Slab Fork District of Raleigh County, West Virginia, to Tams Management Inc., a Justice family company owned by Southern Coal.

James C. Justice III, left, watches his father’s inauguration as governor. He has assumed control of some Justice family companies. Photo: West Virginia Governor’s Office

The agreement included a $2 million royalty payment, which Tams failed to pay. Lampert sued for breach of contract and a judge in the U.S. District Court for the Southern District of West Virginia sided with him. After the company refused to pay, presiding judge Irene Berger ordered Tams in July, 2016, to post an appeal bond for $2.6 million. Every day the company was late, the court ordered they pay a $1,000 fine. It took a month for the company to post the bond.

After Tams and Southern Coal lost an appeal to the 4th U.S. Circuit Court, Lampert was able to collect on the bond.

Other cases include disputes over coal barging services and a case involving roughly $150,000 in mining equipment, service and parts. In that 2013 case, the Virginia-based James River Equipment company sued Justice Energy Company Inc. Two years after being ordered to pay the debt, and after repeatedly failing to show up for court hearings, Judge Berger held Justice Energy in contempt of court to a tune of $30,000 per day.

Justice Energy lost an appeal of the $1.23 million in civil contempt fines in 4th U.S. Circuit Court of Appeals last month 

In that case, Justice Energy had also agreed to a payment plan, but stopped making payments after just two. In all cases, the court issued a writ of execution tapping into the bank accounts of the Justice family companies.

Not Bankrupt

John Prescott, professor of business administration and director of the Organization and Entrepreneurship Area at the University of Pittsburgh’s business school, said that it is not uncommon for companies experiencing financial difficulties, especially smaller companies, to sometimes find themselves in court over contract breaches with suppliers.

He said there are many reasons this might happen, including cash flow problems or poor management. If there is no dominant supplier of a service or good, he said, the company may have many other options to consider, and it may decide that whatever hit the company reputation might take from failing to pay would be minimal.

Lawyers who have represented suppliers in the lawsuits against the Justice family companies say those companies repeatedly engage in this type of behavior despite sometimes severe reprimands from the court.

Over the course of the coal industry’s history, boom and bust cycles have sent many coal companies into bankruptcy and others have struggled to pay their bills. The industry’s recent downturn triggered a wave of mining company bankruptcies.

In a November 2015 interview with the Charleston Gazette-Mail, Gov. Justice said he could have declared bankruptcy, but chose not to.

“Just bankrupt those companies and life’s good and you just move on,” he said. “Wouldn’t that have been an easy fix? That isn’t what we did. That’s what a lot of people are doing.”

Patrick McGinley is an environmental lawyer and faculty member at West Virginia University’s College of Law who has studied and written about the coal industry for 40 years. McGinley said the pattern of behavior laid out in these court cases may indicate the companies should be in bankruptcy.

“The Justice companies haven’t gone bankrupt, but they’re not paying their bills,” he said. “It’s not clear what’s going on except the impact of not paying taxes, not paying suppliers, not reclaiming land — that’s serious and that impacts people through the region.”

Unpaid Taxes

In 2016 the Ohio Valley ReSource, its partner stations, and NPR reported on millions of dollars in overdue taxes owed by the companies that Gov. Justice operated before he was elected. The Justice family companies, many now operated by the governor’s son, have since repaid some of those taxes owed in West Virginia but still owe taxes in other states, including Kentucky, Tennessee, and Virginia.

In an August news conference, Justice said back taxes owed in West Virginia by his family’s coal companies had been paid, but did not specify how much was owed or paid or if any of it had been part of a settlement. Rural counties in several other states are still owed taxes and fines that total in the millions, and county officials say they have been forced to take extraordinary measures to collect.

Zach Weignberg looks at the tally of property taxes that Jim Justice owes to Knott County, Kentucky. Photo: Benny Becker

For example, in Tazewell County, Virginia, County Treasurer David Larimer worked with the county sheriff to seize equipment at a Justice family mine this spring. The sale of two massive Caterpillar trucks raised enough money to cover all but about $150,000 of the more than $800,000 debt, he said.

Justice family coal companies also have a history of mine safety violations. The October, 2016, report by NPR showed Justice companies also owed more than $2 million in overdue mine safety violation fines.

McGinley added that in a contracted industry, Justice family companies are significant players, which means when they don’t pay debts the impact on other contracting companies is also significant.

“It’s especially important at a time when the industry is on a decline and there are fewer jobs and the profit margin for suppliers is much smaller,” he said. “For the remaining companies in the business, failure to pay your bills can be devastating.”

The Ohio Valley ReSource repeatedly reached out to the Justice Family Corporation and lawyer Billy Shelton who has represented their business interests. Shelton said he had no comment and the companies did not respond to several phone calls and emails.

From Businessman To Governor

Before he was governor, Justice was president and CEO of more than 100 companies, according to his official state biography. Upon his election, Justice, who is a billionaire, transferred control of many of those companies to his family members, including his son and daughter.

A review of business filings with the West Virginia Secretary of State’s office show, for example, his son, James C. Justice III, is listed as the director and president of Southern Coal and his daughter, Jillean Justice, is listed as an officer.

When asked at an event in Parkersburg, West Virginia, shortly after the writ of execution was issued in the WestRock paper mill case Gov. Justice said he was unaware of the action.

“I don’t know a thing in the world about it,” he said. “I really don’t.”

Gov. Justice takes the oath of office as his son James C. Justice III (center) looks on. Photo: West Virginia Governor’s Office

However, the governor’s most recent financial disclosure form filed in January with the West Virginia Office of Ethics raises some questions about what connections Justice maintains to the family companies. The form lists more than 100 companies in the section for “business and/or property interests.”

Scott Amey, general counsel for the Project on Government Oversight, a nonpartisan government watchdog, reviewed Justice’s financial disclosure form. Amey said it appears Justice has an active interest in those companies. Southern Coal, Kentucky Fuel, and Justice Energy Company are among those listed.

As of when he filed this form and signed it, he was saying that, yeah, he still had a business interest in all these companies and that that interest had a fair market value of $10,000 or more,” Amey said.

But he cautioned that from the form alone it’s impossible to characterize that interest.

“That could be the price of real estate, that could be a business license. I don’t know,” he said. “Maybe they’re not up and running anymore and he just owns the companies, owns the name, and he thinks they have $10,000 worth of value cause of the naming rights or something.”

The Ohio Valley ReSource asked Butch Antolini, the governor’s head of communications, for more information about Justice’s relationship with the businesses listed. He referred those questions to the Justice Family Corporation. Five calls to the number Antolini provided went unanswered and two email addresses that were provided bounced back.

This story was originally published by the Ohio Valley Resource

Politics

A High-Speed Internet Boondoggle is Now a Campaign Issue in Kentucky

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Gov. Matt Bevin is pictured in 2015. Photo: Jacob Ryan

Candidates for governor of both parties are using Kentucky’s long-delayed and over-budget statewide internet project to bash Gov. Matt Bevin, following a jointly published report by the Courier Journal and ProPublica.

KentuckyWired — a bipartisan plan pushed by former Democratic Gov. Steve Beshear and Republican Rep. Hal Rogers — promised to bring improved broadband internet connectivity to the state’s farthest corners. But it is years behind schedule and more than $100 million over budget.

Bevin’s Democratic opponents in the governor’s race laid blame with the current administration.

“The governor has damaged the project with his lack of commitment to keep it on schedule,” House Minority Leader Rocky Adkins, D-Sandy Hook, said in an emailed statement. “In fact, it will cost the state more to get out of the contract than if we continue. In order to go the last mile and complete this project, we need to look at successful models in other states and bring new partners to the table.”

Representatives for Bevin and his technology chief, Chuck Grindle, did not respond to multiple requests for comment on the report, which highlighted dissent in the Republican administration’s approach to salvaging the troubled KentuckyWired project.

Democratic candidate and former state Auditor Adam Edelen, who has made improved broadband connectivity part of his platform in the governor’s race, said in an emailed statement that Bevin “doesn’t care” enough to fix the project.

“As governor, I will prioritize building a real system to provide broadband to the hundreds of thousands of Kentuckians who still lack access, whether in the hills of eastern Kentucky or Southern and Western Jefferson County,” Edelen said. “It must be done through partnership between the public and private sector, but that doesn’t mean pushing a half-baked plan that leaves taxpayers holding the bag.”

The campaign manager for Attorney General Andy Beshear, the son of the former governor, called for “working together across party lines.”

“As governor, Andy’s first step will be evaluating the KentuckyWired program in a nonpartisan way focused on both its costs and potential benefits for our families,” campaign manager Eric Hyers said in an emailed statement. “From there, he can keep what’s working and change what isn’t.”

A spokeswoman for Rogers, however, issued an emailed statement last week defending Bevin’s stewardship.

“With any public-private project of this magnitude, delays and challenges are to be expected,” the statement said. “Since Gov. Bevin inherited this project, he has worked diligently to comb through the unexpected problems and carefully balanced rising expenses with future benefits.”

Wednesday’s Courier Journal-ProPublica report underscored warnings that Beshear administration officials received about likely roadblocks.

Despite these, KentuckyWired moved ahead with what experts have said is an unrealistic three-year construction schedule for the project that saw the state accept most of the risk for the public-private partnership.

In his statement, Rogers described KentuckyWired as the “only path” to affordable, high-speed internet for his constituents in eastern Kentucky.

But state Rep. Robert Goforth, R-East Bernstadt, a challenger to Bevin for the Republican Party’s nomination for governor, disagreed.

In an interview with the Courier Journal, Goforth said Bevin should have killed the project years ago. He said Bevin has much to learn from a broadband project in Jackson County, which Goforth represents.

The Kentucky-based nonprofit Peoples Rural Telephone Cooperative used federal stimulus money to bring high-speed fiber-optic lines within reach of every home and business in Jackson and Owsley counties, the Courier Journal and ProPublica reported.

“If Jackson County can do it, the rest of Kentucky should be able to follow their example and be able to duplicate what they have done to be able to provide the fastest internet service to one of the most rural communities in Kentucky,” Goforth said. “We can do this.”

State Rep. Lynn Bechler, R-Marion, described as “marvelous” the job Peoples Rural and other similar cooperatives and rural providers have done.

He said he wished the Peoples Rural model could be followed in his area of western Kentucky, where residents such as Christy Hardison say they pay upward of $120 a month for unreliable satellite internet service, the only available option.

Bechler, co-chairman of the Program Review and Investigations Committee, which is investigating KentuckyWired, reiterated his call for a halt to the project.

To solve the problem of poor rural broadband access, Bechler proposed the creation of a state incentive program to encourage more projects like the one in Jackson County.

Keith Gabbard, head of Peoples Rural, told the Courier Journal that a state-level program, similar to Tennessee’s new Broadband Accessibility Grants, would encourage rural providers like his to expand service.

“The state doesn’t have to build their own network that way,” Gabbard said. “People that have already been doing that work can do a little more of it and would have an incentive to expand into areas that, it appears, the bigger companies are not going to build fiber to.”

Meanwhile, a longtime KentuckyWired skeptic, state Sen. Chris McDaniel, R-Taylor Mill, said he’s still waiting for the first section of the state-owned network to operate.

The project’s overseers said in December that the first loop, an area that includes Frankfort, Lexington, Louisville and northern Kentucky, was nearly ready to be turned on.

Phillip Brown, then head of the state authority in charge of KentuckyWired, promised “very good news” in the first quarter of 2019.

“I’m still waiting to see the press release on that happening,” McDaniel told the Courier Journal. “This thing is a mess and it’s going to continue to be a mess. I don’t know where it ends.”

This article was produced in partnership with the Louisville Courier Journal, which is a member of the ProPublica Local Reporting Network. It was originally published by ProPublica.

This story is part of an ongoing investigation into what went wrong with KentuckyWired. Sign up for the Miswired newsletter to receive updates in this series as soon as they publish.

Reach reporter Alfred Miller at amiller@gannett.com or 502-582-7142. Follow him on Twitter. Support strong local journalism by subscribing today: courier-journal.com/subscribe.

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DOJ Files Suit Against W.Va. Governor’s Family Companies Over Mine Violation Debts

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West Virginia Governor Jim Justice at a bill signing ceremony in 2019. Photo: Jesse Wright/West Virginia Public Broadcasting

This article was originally published by the Ohio Valley ReSource.

The U.S. Department of Justice has filed a civil lawsuit against 23 coal companies owned by the family of West Virginia Gov. Jim Justice, seeking more than $4.7 million in unpaid fines and fees for mine safety and health violations.

The delinquent fines were brought to light by investigations by NPR and the Ohio Valley ReSource as the Justice companies’ overdue debts ballooned from just under $2 million in 2014 to more than $4 million in 2018.

The lawsuit was announced Tuesday by U.S. Attorney Thomas Cullen of the Western District of Virginia and David Zatezalo, the head of the Mine Safety and Health Administration, or MSHA.

In a news release, the DOJ said the 23 companies named in the lawsuit incurred nearly 2,300 mine safety and health violations over the last five years. According to a 2019 financial disclosure filed with the West Virginia Ethics Commission, all 23 companies are owned by the Justice family.

The civil complaint says the companies failed to pay nearly $4 million in penalties associated with those violations.

The DOJ said the Justice-owned companies ignored multiple demands by MSHA, the Department of Treasury, and the U.S. Attorney’s Office to pay the delinquent debts.

“As alleged in the complaint, the defendants racked up over 2,000 safety violations over a five-year period and have, to date, refused to comply with their legal obligations to pay the resulting financial penalties,” Cullen stated in the news release. “This is unacceptable, and, as indicated by this suit, we will hold them accountable.”  

“MSHA stands with the Department of Justice in seeking to hold mine operators responsible for the penalties they owe,” Zatezalo said in the same release. “Failure to pay penalties is unfair to miners who deserve safe workplaces, and to mine operators who play by the rules.”

Representatives for the Justice companies and the governor’s office did not immediately respond to a request for comment.

ReSource Investigation

Last month, an Ohio Valley ReSource analysis of federal mine safety data found that the Justice family companies owed $4.3 million in delinquent debt for mine safety violations. That meant the Justice companies had by far the highest delinquent mine safety debt in the U.S. mining industry. And it was also far more than the companies owed when Justice ran for governor in 2016, when he pledged to make good on such debts.

In 2016, an investigation by NPR, the ReSource and partner station West Virginia Public Broadcasting found that Justice’s mines owed $2.6 million in overdue mines safety fines, as well as millions more in unpaid tax debt.

Then-candidate Justice said those debts would be paid.

“When it all really boils right down to it we’re taking care of them,” Justice said at a rally announcing his gubernatorial bid. “We’ll absolutely y’know, take, make sure that every one of them is taken care of.”

This story was updated on May 8 at 4:30 p.m. to include additional information.

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Kentucky Aluminum Plant Investor Is Russian Company Formerly Under US Sanctions

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Craig Bouchard speaks at a Braidy Industries launch event as KY Gov. Matt Bevin (right) looks on.

This article was originally published by the Ohio Valley ReSource.

Russian aluminum company Rusal announced Monday it plans to invest in a new Kentucky aluminum mill to be built near Ashland in eastern Kentucky. The $200 million investment in Braidy Industries is Rusal’s first U.S. project since the Trump administration lifted U.S. sanctions placed against the company.

Rusal had been sanctioned by the U.S. government because its major controller, Russian oligarch Oleg Deripaska, who has close ties to Russian President Vladimir Putin, faces accusations of “a range of malign activity around the globe” by Russia, according to the U.S. Treasury Department. Those actions include interference in the 2016 U.S. presidential election and meddling in neighboring Ukraine.

Deripaska also has close business ties to former Trump campaign chair Paul Manafort, who has been convicted of tax evasion and money laundering. Deripaska is suing the U.S. to have sanctions against him removed.

The Trump administration released Rusal from sanctions in January after the company reduced the ownership stake held by Deripaska. Congressional Democrats attempted to block the White House decision and passed legislation in the House that would keep sanctions in place. However, the bill fell short in the Republican-controlled Senate, where Majority Leader Mitch McConnell of Kentucky accused Democrats of trying to “politicize” the sanctions.

Braidy Bunch

According to a press release, RUSAL will earn a 40 percent share in the factory’s profits, and Braidy will keep the remaining 60 percent. The plant has also received $15 million in direct investment from the state of Kentucky. Gov. Matt Bevin cut a deal to attract Braidy to the state with that public money and additional tax incentives totaling more than $10 million.

As part of his reelection bid, Bevin has pointed to the Braidy development as evidence of job creation in an economically struggling part of the state.

“This is a seed that has been in the ground, the germination so often seems invisible to people,” Bevin said at an event over the weekend in Martin County, Kentucky. “But good things have been happening.”

The project is expected to cost more than $1 billion and employ over 500 people.

The Ashland project will produce rolled aluminum for the American auto and aircraft markets, and is the type of project President Donald Trump hoped to support with his tariffs on aluminum imports.

Braidy Industries CEO Craig T. Bouchard discussed the partnership at the New York Stock Exchange Monday morning.

“We’re really lucky and honored to have them as our partner in Kentucky,” Bouchard said of Rusal, adding that his company had chosen to partner with Rusal for its record of environmentalism.

We are going to lead the world in highest quality, lowest cost, and the least use of carbon from start to finish in the manufacturing process, and we’re changing the world,” he said.

The Ashland aluminum mill would be the first such plant to be built in the U.S. in 37 years, according to industry sources. Final agreements among the partners are expected to be signed later this year.

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