Carter Bank Denies ‘false And Misleading’ Claims In $226 Million Lawsuit Over Justice Debt Payments

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In response to a federal lawsuit seeking $226.2 million plus interest from the bank regarding debt payments from West Virginia Governor Jim Justice, his family, and their businesses, Martinsville-based Carter Bank & Trust is disputing what it refers to as “false and misleading” charges.

GLAS Trust Company LLC, claiming to represent investors who supported financing that the now-insolvent lender Greensill UK extended to Bluestone Resources, a network of coal-mining companies run by Jim Justice, his wife, Cathy, and their son, Jay, filed the lawsuit on February 12 in the U.S. District Court for the Western District of Virginia.

According to the lawsuit, Carter Bank “forced” the Justices to refund debt that wasn’t directly owed by Bluestone after Bluestone borrowed money from Greensill UK, obstructing the reimbursement of other creditors of Bluestone, including those represented by GLAS.

Carter Bank said in a filing last week with the U.S. Securities and Exchange Commission, “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.”

“The Company and Carter Bank intend to vigorously defend all claims asserted in the Lawsuit and deny the allegations contained in the Lawsuit.”

Community bank Carter Bank & Trust (NASDAQ: CARES) has over 60 locations throughout Virginia and North Carolina with $4.5 billion in assets. The bank stated that its SEC filing aims to “provide further clarity,” but it has not yet responded to the complaint in federal court.

Republican Jim Justice, who has been governor of West Virginia since 2017, is vying for Democratic candidate Joe Manchin’s U.S. Senate seat. Over 100 coal, agricultural, and hospitality firms are owned by the Justice family.

According to the lawsuit, Bluestone Resources borrowed $780 million from Greensill UK in 2018, of which $59 million was utilized to settle debt owed to Carter Bank. The lawsuit then claims that the Justices settled $226.2 million in additional debt “under pressure from their largest creditor.”

The insolvent Bluestone informed Greensill UK in 2021 that it was unable to fulfill its obligation to repay the loan. According to the lawsuit, Greensill sought for insolvency protection later that year.

The lawsuit claims that Bluestone still owes its creditors nearly $700 million, and it is seeking $226.2 million from Carter Bank to help with that remainder. It claims that even while other creditors were pursuing their own payback, Carter Bank was aware that the funds were being utilized to settle debt that wasn’t directly owed by Bluestone.

The Justices’ money was received by Carter Bank & Trust “as part of routine refinance and payment transactions in good faith and in the ordinary course, as repayment of amounts owed to Carter Bank,” the company stated in its SEC statement.

The bank stated, referring to Bluestone Resources and its connected businesses, that “neither the Company [Carter Bankshares Inc.] nor Carter Bank was a party to any financing arrangement between Greensill and the Bluestone Entities.”

The Justices’ outstanding loans with Carter Bank & Trust currently stand at over $300 million, having peaked at roughly $775 million in 2016. The Justices’ borrowing has been the subject of a protracted legal battle between the bank and the family over past-due loans.

In addition, the Justices have filed a $1 billion lawsuit against Carter Bank and its board of directors, claiming contract breaches and federal regulatory infractions. The bank disputes those claims and asserts that the Justices are delaying paying back their debt.

In its SEC filing, the bank stated that the Justices and their firms had established an indemnity arrangement whereby the Justices would defend Carter Bank against liabilities and damages resulting from lawsuits like the one against GLAS Trust Company.

The opulent Greenbrier Resort in West Virginia and the related Greenbrier Sporting Club are among the “substantial pledged collateral” that the bank notes supports the arrangement. As the bank attempts to recoup its overdue loans, property at the club comes up for auction.

Carter Bank stated that it and the company plan to aggressively seek all remedies available to Carter Bank under the terms of the Justice Indemnity Agreement.

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