Carter Bank & Trust, headquartered in Martinsville, Virginia, has successfully settled a significant federal lawsuit seeking over $226 million. The lawsuit, which stemmed from debt obligations of West Virginia Governor Jim Justice’s family businesses, was officially dismissed on Wednesday following the agreement.
The legal action was initiated in February by GLAS Trust Company LLC. Representing investors, GLAS Trust claimed financial backing for Greensill UK, a now-bankrupt lender. Greensill UK had extended financing to a network of coal-mining companies owned by Governor Justice and his son, Jay Justice.
The core of the lawsuit alleged that Carter Bank & Trust improperly pressured the Justice family to prioritize debt repayments to Carter Bank that were not directly related to Bluestone Resources’ borrowings. Bluestone Resources had borrowed heavily from Greensill UK. GLAS Trust argued this action by Carter Bank hindered Bluestone’s ability to repay its other creditors, including those represented by GLAS. Carter Bank & Trust refuted these claims, labeling them “false and misleading.”
In a formal statement to the U.S. Securities and Exchange Commission (SEC) on Wednesday, Carter Bankshares Inc. (NASDAQ: CARE), the parent company of Carter Bank & Trust, announced the lawsuit’s dismissal. The dismissal, crucially, was “with prejudice,” preventing GLAS Trust from filing another lawsuit against Carter Bank & Trust based on the same allegations.
According to Carter Bankshares, “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’).” Furthermore, as part of the settlement, the Justice Entities “executed documents reaffirming the legality, validity and binding nature of all loan documents they have executed in favor of Carter Bank.” This signifies a comprehensive resolution to the legal disputes between Carter Bank & Trust and the Justice family concerning these loans.
West Virginia Governor Jim Justice, whose family businesses were involved in a lawsuit against Carter Bank & Trust that has now been settled.
The financial relationship between Carter Bank & Trust and Jim Justice’s family is substantial. Jim Justice, his wife Cathy, and son Jay, have personally guaranteed loans from Carter Bank & Trust totaling close to $300 million. This figure is a reduction from a high of approximately $775 million in 2016. The Justices and their extensive business network are collectively Carter Bank & Trust’s largest borrowers.
This significant loan portfolio has been a source of contention and legal battles for several years. The Justices previously accused Carter Bank & Trust of impeding their repayment efforts. Conversely, Carter Bank & Trust has maintained that the Justices were delaying on their loan obligations.
In June, a preliminary resolution appeared when Carter Bank & Trust and the Justices announced an accord regarding the $300 million in loans. At that time, the Justices had reduced the outstanding balance to $294.1 million as of June 20. However, Carter Bank & Trust disclosed to investors in July that the ongoing dispute had cost the bank over $48 million in lost interest income.
While the terms of the settlement with GLAS Trust remain confidential, Carter Bankshares indicated in Wednesday’s statement that details regarding the financial impact of this settlement will be disclosed when the company announces its earnings for the quarter ending September 30.
Court documents related to the lawsuit’s dismissal, filed in the U.S. District Court for the Western District of Virginia, stipulate that “each party shall bear its own costs and attorneys’ fees.” This indicates a mutual agreement to conclude the litigation without further financial claims between the parties regarding legal expenses.
Carter Bank & Trust is a well-established community bank, boasting $4.5 billion in assets and operating over 60 branches across Virginia and North Carolina. Its resolution of this substantial lawsuit marks a significant step in resolving long-standing financial disputes.
Jim Justice, who has served as West Virginia’s Republican governor since 2017 and is currently campaigning for a U.S. Senate seat, leads a family with extensive business holdings. The Justice family’s portfolio includes over 100 businesses spanning coal, agriculture, and hospitality, notably including the luxury Greenbrier resort in West Virginia.
The lawsuit from GLAS Trust detailed that in 2018, Bluestone Resources secured a $780 million loan from Greensill UK. Of this amount, $59 million was used to settle existing debt owed by Bluestone to Carter Bank & Trust. Subsequently, GLAS Trust alleged that Carter Bank & Trust pressured the Justice family to repay $226.2 million in unrelated debt.
In 2021, Bluestone Resources, facing financial difficulties, informed Greensill UK of its inability to continue repayments under their loan agreement. Greensill UK subsequently filed for insolvency protection later that year, according to the lawsuit.
GLAS Trust’s lawsuit sought $226.2 million, plus accrued interest, from Carter Bank & Trust. This sum was intended to contribute towards the approximately $700 million that GLAS Trust claimed Bluestone still owed to creditors they represented. The lawsuit asserted that Carter Bank & Trust was aware that the funds it received from the Justice family were used to settle debts not directly related to Bluestone, at a time when other creditors were seeking repayment.
In its defense, Carter Bank & Trust stated that it received the funds “as part of routine refinance and payment transactions in good faith and in the ordinary course of business.” The bank also maintained it had no involvement in any financing arrangements between Greensill, Bluestone Resources, and associated companies.
While this settlement concludes the outstanding legal battle concerning the Justice family’s loans with Carter Bank & Trust, the Justice family’s financial situation remains under scrutiny in other legal contexts.
Notably, a separate lawsuit involving multiple federal agencies is ongoing against nearly two dozen Justice family-owned coal companies. This lawsuit concerns unpaid mine safety fines dating back to 2014, with an outstanding balance of approximately $579,000 from an initial debt of $5 million.
Earlier this month, the coal companies involved stated in a U.S. District Court filing in the Western District of Virginia that they were unable to meet these payment obligations. The federal government has since responded, arguing that the companies have not provided sufficient proof of financial distress and has requested the court to hold the companies in civil contempt.
Furthermore, earlier in August, the Justices announced an agreement to postpone a foreclosure auction of The Greenbrier Hotel until at least late October. The luxury hotel, acquired by Jim Justice out of bankruptcy in 2009, was facing auction due to loan default claims from a creditor.
Prior to the June agreement between Carter Bank & Trust and the Justices regarding the $300 million loan portfolio, Carter Bank & Trust had initiated steps to auction property associated with The Greenbrier’s Sporting Club. The Justices responded by filing a lawsuit to block the auction, which was subsequently put on hold.
Governor Jim Justice has publicly stated that his day-to-day involvement in his family’s businesses is limited, with his children, Jay and Jill Justice, managing operations. He has also commented on the heightened scrutiny of his family companies’ finances, asserting that their debts are ultimately resolved.
“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 recent administration briefing, addressing a reporter’s question. “I don’t know many businesses that don’t have great times and some tough times.”
