Martinsville-based Carter Bank & Trust is denying what it calls “false and misleading” allegations in a federal lawsuit seeking $226.2 million plus interest from the bank related to debt payments from West Virginia Gov. Jim Justice, his family and their businesses.
The lawsuit was filed Feb. 12 in the U.S. District Court for the Western District of Virginia by GLAS Trust Company LLC, which says it represents investors who backed financing that the now-insolvent lender Greensill UK extended to Bluestone Resources, a network of coal-mining companies operated by Jim Justice; his wife, Cathy; and their son, Jay.
The lawsuit alleges that after Bluestone borrowed money 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 Company [Carter Bankshares Inc., the bank’s holding company] and Carter Bank strongly believe that the factual allegations in the Lawsuit regarding transactions involving Carter Bank are false and misleading, and the Company and Carter Bank vehemently object to GLAS’s attempt in the Lawsuit to question these repayments,” Carter Bank said in a filing last week with the U.S. Securities and Exchange Commission.
“The Company and Carter Bank deny the allegations contained in the Lawsuit and intend to defend vigorously all claims asserted in the Lawsuit.”
Carter Bank & Trust (NASDAQ:CARES) is a community bank with $4.5 billion in assets and more than 60 locations in Virginia and North Carolina. The bank has not yet filed a response to the lawsuit in federal court but said its SEC filing is intended to “provide further clarity.”
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 Justice family has more than 100 coal, agricultural and hospitality businesses.
The lawsuit claims 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, “under pressure from their largest creditor,” the Justices paid off $226.2 million in other debt, the lawsuit alleges.
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 seeks the $226.2 million from Carter Bank to put toward the approximately $700 million balance that it says Bluestone still owes to its creditors. It alleges that Carter Bank knew that the money was being used to pay off debt not directly owed by Bluestone even as other creditors were seeking their own repayment.
In its SEC filing, Carter Bank & Trust said that it received the money from the Justices “as part of routine refinance and payment transactions in good faith and in the ordinary course, as repayment of amounts owed to Carter Bank.”
“Neither the Company [Carter Bankshares Inc.] nor Carter Bank was a party to any financing arrangement between Greensill and the Bluestone Entities,” the bank said, referring to Bluestone Resources and its affiliated companies.
The Justices currently have outstanding loans totaling about $300 million with Carter Bank & Trust, down from a peak of about $775 million in 2016. The Justices’ borrowing has been the focus of a yearslong dispute, with the family and the bank clashing in court over the past-due loans.
The Justices are also suing Carter Bank and its board of directors for $1 billion, alleging violations of federal regulations and breaches of contract. The bank denies those accusations and says the Justices are stalling on repaying what they owe.
The bank said in its SEC filing that the Justices and their companies created an indemnity agreement under which the Justices would protect Carter Bank from damages and liabilities incurred by claims such as those in the GLAS Trust Company lawsuit.
The bank notes that agreement is supported by “substantial pledged collateral,” including entities such as the luxury Greenbrier Resort in West Virginia and the associated Greenbrier Sporting Club. Property at the club is the subject of a pending auction as the bank looks to recover its unpaid loans.
“The Company and Carter Bank intend to pursue vigorously all remedies afforded to Carter Bank under the Justice Indemnity Agreement,” the bank said.