Lawsuit over Justice companies’ payments to Carter Bank & Trust is settled

A federal lawsuit that had sought more than $226 million from Martinsville-based Carter Bank & Trust over debt payments from some of West Virginia Gov. Jim Justice’s family businesses was dismissed Wednesday after a settlement was reached.

The lawsuit was filed in February by GLAS Trust Company LLC, which said it represented investors who backed financing that the now-insolvent lender Greensill UK extended to a network of coal-mining companies owned by the West Virginia governor and his son, Jay Justice.

The lawsuit alleged that after Bluestone Resources borrowed hundreds of millions of dollars from Greensill UK, Carter Bank “forced” the Justices to repay debt not directly owed by Bluestone, hindering the repayment of other Bluestone creditors such as those represented by GLAS. The bank called the allegations “false and misleading.”

In a statement filed Wednesday with the U.S. Securities and Exchange Commission, Carter Bank & Trust’s parent company, Carter Bankshares Inc. (NASDAQ: CARE), said that after the settlement was reached, the lawsuit was dismissed with prejudice, which means GLAS Trust cannot bring another suit against the bank based on the same allegations.

“The dismissal of the GLAS Trust Lawsuit ends all pending litigation brought against Carter Bank in connection with its lending relationship with James C. Justice, II and the entities in which he has an interest (the ‘Justice Entities’),” the bank said. “Also in connection with the dismissal of the GLAS Trust Lawsuit, the Justice Entities have executed documents reaffirming the legality, validity and binding nature of all loan documents they have executed in favor of Carter Bank.”

Jim Justice; his wife, Cathy; and Jay Justice personally guaranteed their loans from Carter Bank & Trust, which total nearly $300 million, down from a peak of about $775 million in 2016. The Justices and their companies are collectively the bank’s largest borrowers.

The loan portfolio has been the focus of legal clashes for years, with the Justices accusing the bank of hindering its ability to repay and the bank arguing that the Justices have been stalling on paying what they owe.

In June, the Justices and the bank announced that they had reached an accord over repaying the loans and that the Justices had paid the balance down to $294.1 million as of June 20. In July, the bank told investors that the saga had cost it more than $48 million in interest income.

Wednesday’s statement from Carter Bankshares said that the terms of the settlement with GLAS Trust are confidential but that the bank company will provide information about the settlement’s financial impact when it reports earnings for the quarter that ends Sept. 30.

A joint filing about the lawsuit’s dismissal entered in the U.S. District Court for the Western District of Virginia notes that “each party shall bear its own costs and attorneys’ fees.”

Carter Bank & Trust is a community bank with $4.5 billion in assets and more than 60 locations in Virginia and North Carolina.

Jim Justice, West Virginia’s Republican governor since 2017, is running for the U.S. Senate seat being vacated by former Democrat Joe Manchin. The Justice family has more than 100 coal, agricultural and hospitality businesses and owns the luxury Greenbrier resort in West Virginia.

GLAS Trust’s lawsuit alleged that in 2018, Bluestone Resources borrowed $780 million from Greensill UK and used $59 million of it to repay debt that Bluestone owed to Carter Bank. Then, the lawsuit alleged, Carter Bank pressured the Justice family to pay off $226.2 million in other debt.

In 2021, the financially struggling Bluestone told Greensill UK that it could no longer make repayments under their borrowing agreement. Greensill filed for insolvency protection later that year, according to the lawsuit.

The lawsuit sought $226.2 million plus interest from Carter Bank to put toward the approximately $700 million that GLAS Trust said Bluestone still owed to the other creditors that GLAS Trust represented. It alleged that Carter Bank knew that the Justices used that money to pay off debt not directly owed by Bluestone, even as the other creditors wanted their repayment.

Carter Bank responded that it received the money “as part of routine refinance and payment transactions in good faith and in the ordinary course” and that it was not involved in any financing arrangement between Greensill and Bluestone Resources and its affiliated companies.

Although Wednesday’s settlement ends the last outstanding legal battle involving the Justices’ loans with Carter Bank, the family’s finances are still the center of other pending matters.

In one lawsuit, a group of federal agencies accuses nearly two dozen Justice family-owned coal companies of falling behind on paying the remaining balance of approximately $579,000 out of about $5 million owed in connection with mine safety fines dating back to 2014.

Earlier this month, the coal companies said in a filing in U.S. District Court for the Western District of Virginia that they are unable to make the payments. The federal government responded earlier this week by arguing that the companies offered no proof of their financial difficulties, and it asked a judge to hold the companies in civil contempt.

Also earlier this month, the Justices announced they had worked out a deal to avert a foreclosure auction of The Greenbrier Hotel until at least late October. The luxury hotel, which Jim Justice bought out of bankruptcy in 2009, had been set for auction this week after a creditor said the hotel company had defaulted on a loan.

Before Carter Bank and the Justices reached the agreement over the $300 million loan portfolio that was announced in June, the bank had moved to auction property at the hotel’s associated Greenbrier Sporting Club. The Justices sued to block the auction, and it was put on hold .

Jim Justice has said that he has little involvement in the daily operations of his family businesses and that his children, Jay and Jill Justice, manage them. The West Virginia governor also has said that his family companies’ finances receive too much scrutiny and that their debts eventually are taken care of.

“To be brutally honest, I would tell you that we’ve gone through our bumps, that’s for sure, and we’ve gotten behind, but we’ve someway, somehow, always caught up,” Justice said during a regular administration briefing last week, in response to a reporter’s question . “I don’t know many businesses that don’t have great times and some tough times.”

The post Lawsuit over Justice companies’ payments to Carter Bank & Trust is settled appeared first on Cardinal News .