Martinsville-based Carter Bank & Trust is being sued for $226.2 million plus interest over allegations that a company owned by West Virginia Gov. Jim Justice and his family repaid debt to the bank with borrowed money that should have gone to other creditors instead.
The lawsuit was filed Monday in the U.S. District Court for the Western District of Virginia by GLAS Trust Company LLC, a trustee in the bankruptcy of the lending firm Greensill UK.
In 2018, Bluestone Resources Inc. — a network of coal-mining companies operated by Jim Justice; his wife, Cathy; and their son, Jay — borrowed $780 million from Greensill UK and used about $59 million of it to repay debt owed to Carter Bank, the lawsuit states. But, the suit alleges, Carter Bank “forced” the Justices to also use that borrowed money to pay off debt not directly owed by Bluestone.
“Under pressure from their largest creditor, the Justices complied,” the suit states.
The Justices’ borrowing relationship with Carter Bank goes back to 2001, when Worth Carter Jr., who would later combine 10 banks to form Carter Bank & Trust, gave Jim Justice a $4.5 million real estate loan. At its peak in 2016, the loan portfolio that the Justices and their companies had with Carter Bank totaled around $775 million.
That figure stands at around $300 million today and is at the center of a yearslong dispute between the family and the bank.
This past spring, Carter Bank filed judgment claims against the Justices and some of their businesses to recoup the unpaid loans, which were due April 15, plus interest and attorneys’ fees. Last month a Martinsville judge denied the Justices’ request to set aside those judgment claims and take the case to trial instead.
The Justices — who have more than 100 coal, agricultural and hospitality businesses — allege that Carter Bank has violated federal regulations in its dealings with the family and prevented the family from working with other lenders so it can preserve millions of dollars in annual interest. They filed their own $1 billion federal lawsuit in November against the bank and its board of directors.
Carter Bank & Trust — a community bank with $4.5 billion in assets and more than 60 locations in Virginia and North Carolina — denies those allegations and has said it worked repeatedly and cooperatively with the Justices on their loans over the years but that the family and its companies are stalling on repaying what they owe. The bank has said that the loans were personally guaranteed by Jim and Cathy Justice, and that some were also guaranteed by Jay Justice, who runs many of the family’s businesses.
Jim Justice, a Republican who has served as West Virginia’s governor since 2017, is running for the U.S. Senate seat being vacated by Democrat Joe Manchin.
The new federal lawsuit from GLAS Trust Company alleges that Carter Bank knew in 2018 that Bluestone Resources was making payments to satisfy debts owed by other Justice companies, not by Bluestone itself. These “fraudulent conveyances” hindered the ability of several other creditors of Bluestone to be repaid, the lawsuit states.
In 2021, Bluestone informed Greensill UK that it could no longer make repayments under their borrowing agreement, and Greensill later declared bankruptcy, according to the lawsuit.
Now, GLAS Trust Company’s lawsuit seeks $226.2 million plus interest from Carter Bank that the trustee claims was improperly paid to the bank and instead should be put toward what it says is a $700 million balance that Bluestone still owes its various creditors.
Carter Bank & Trust had not filed a response to the lawsuit as of Thursday afternoon.
Sporting club warns of ‘downward spiral’ if auction proceeds
Meanwhile, a private club tied to the Justices has filed a new motion seeking to prevent Carter Bank & Trust from auctioning club property next month, arguing that selling off the club’s assets would jeopardize its future.
The Greenbrier Sporting Club’s request for a preliminary injunction, filed Wednesday afternoon, follows a Feb. 7 lawsuit that aims to stop the March 5 auction of the club’s golf course, two lodges and dozens of lots owned by the club’s development company.
Carter Bank, which extended the club a line of credit secured by a deed of trust on the club property, has scheduled the auction as it works to recover the approximately $300 million in unpaid loans from the Justices.
In 2009, Justice acquired the resort and assumed control of the club, and in 2015 he used it to secure a line of credit from the bank, the motion states. Carter Bank later increased that line of credit from $25 million to $250 million and expanded it to encompass the debts of multiple Justice-owned companies.
The private equity club offers memberships to owners of real estate around The Greenbrier, a luxury resort owned by Justice in White Sulphur Springs, West Virginia. In its motion, the club and its development company argue that halting the auction is in the public interest because selling the club’s “unique and irreplaceable” assets would jeopardize the businesses and nearly 200 jobs.
“Sporting Club members, as a group, will spend much less time in Greenbrier County, and their spending at local businesses will fall drastically,” according to the motion filed in Greenbrier County Circuit Court. “Many of them will, in all likelihood, look to sell their Sporting Club residences, risking a downward spiral of reputation and property values that would hobble the Sporting Club permanently.”
An auction would ultimately deprive the county of tax revenue, harm the resort and damage the local economy to an extent that would be “difficult or impossible to repair,” the motion states.
In its motion, the sporting club argues that the property should not be sold because the Justices’ own $1 billion federal lawsuit against Carter Bank will result in damages awarded to the Justices that will more than offset what the family and its companies owe.
“The attempted sale is nothing more than a race to strip Plaintiffs of their assets (in a hastily scheduled auction on the courthouse steps that likely would bring pennies on the dollar) before their claims against the bank can be adjudicated,” the motion states.
The club also argues that the deed of trust that secures the credit line is invalid because it states that it only secures up to $250 million while the Justices’ debts exceed $300 million, and West Virginia law forbids debt secured by a credit line deed of trust from exceeding the amount of security stated in the deed.
A notice advertising next month’s auction was published in the Charleston Gazette-Mail newspaper on Feb. 6, following Martinsville Chief Circuit Judge G. Carter Greer’s Jan. 22 denial of the Justices’ request to set the bank’s judgment claims and the bank’s subsequent statement that it would “aggressively” pursue repayment.