Issues with Justice-owned companies detailed
CHARLESTON — In a new round of federal documents, attorneys for companies owned by Gov. Jim Justice claim that they don’t operate shell businesses.
These same filings reveal that while vendors, local, state, and federal government entities await payment of bills, taxes, and penalties, one Justice family member took money directly out of the business to pay for a wedding.
On Monday, attorneys for 12 Justice-owned businesses – including James C. Justice Companies, Bluestone Industries, Tams, and others – filed a motion to dismiss a complaint brought by Essar Steel Algoma, Inc. against Southern Coal Sales Corp. The attorneys argue that the other Justice-owned companies – the new defendants – should be excluded from the complaint.
“The New Defendants were added based on an allegation that they are alter egos of (Southern Coal Sales Corp.),” according to a memorandum of support written by Justice’s attorneys.
“Algoma formed an opinion that a group of twelve entities…were so connected to (Southern Coal Sales) as to actually be its alter egos – a theory no doubt driven by Algoma’s realization that any recovery from the sales company it contracted with…may be limited.”
Algoma alleges that Southern Coal Sales reneged on an agreement signed in 2015 and amended three times to supply coal to the Canadian steel manufacturer. Southern Coal Sales was to supply 780,000 tons of coal, or more than half of Algoma’s annual coal requirements. Southern Coal Sales only supplied 246,526 tons. Algoma paid more than $6.1 million for the deal and is asking for a $6.7 million judgement
The original suit was filed in U.S. Bankruptcy Court for the District of Vermont, then transferred in 2017 to the U.S. District Court for the Southern District of New York at the request of Southern Coal Sales. Gov. Justice and son Jay Justice were named as defendants at one point but dropped from the complaint by the court.
Algoma filed an amended complaint in 2018 going after other Justice-owned companies for the broken contract by Southern Coal Sales.
“(Southern Coal Sales) is an undercapitalized sister entity to and/or subsidiary of the [New Defendants], which exert complete dominion and control over and therefore operate over Southern Coal as its instrumentalities and alter egos,” attorneys for Algoma said in a previous filing.
An audit by a firm hired by Algoma alleges that all of Justice’s 123 companies ultimately act as one company. The coal and agricultural businesses are managed by Jay Justice while his father serves as governor, but Jim Justice still maintains some involvement as one of two shareholders.
According to the audit, Bluestone Energy Sales made 20 cash advances to Jay to pay for a 2016 wedding. The total cost of the advances was $632,451. Justice attorneys called these transactions normal.
“Intercompany loans and credit card payments, including loans made by Jay Justice, are typically (and appropriately) repaid from company revenues and have all been legitimately recorded in the relevant companies’ general ledgers,” the June 24 filing stated.
This is not the first time that action has been considered against Justice’s other businesses in order to pay a debt or judgement by another business. U.S. District Judge Irene Berger agreed at the end of May to let Justice-owned Bluestone Resources pay a civil contempt penalty owed by Justice Energy’s in three payments of $410,000 by the end of the year.
The U.S. Attorney’s Office in Charleston found several Justice-owned companies handling various aspects of Justice Energy’s operations. U.S. Attorney Mike Stuart called Justice Energy a shell company and had recommended piercing the corporate veil to go after the governor and his son directly for the contempt penalty until a deal was worked out.