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CHARLESTON -- Attorneys for a company owned by Gov. Jim Justice say the federal government can't seize a company helicopter to satisfy a court judgment because that same helicopter is collateral on other loans owned by the troubled business empire.
Attorneys for Justice-owned Bluestone Resources filed a motion Friday for a stay of a writ of execution filed last week in the U.S. District Court for the Western District of Virginia Abingdon Division that ordered U.S Marshals to seize a 2009 Bell Textron Canada Model 427 helicopter owned by the company.
The writ was sought last month by Caroleng Investments Ltd., a company based in the British Virgin Islands and the parent company of Russian mining and steel company Mechel. Justice sold his coal mining interests in Bluestone Resources to Mechel in 2009 for $578 million in cash and stock. Justice bought Bluestone Resources back in 2015 for $5 million.
Justice agreed to pay Caroleng Investments royalty payments as part of the deal to buy back the coal company from Mechel based on a per-ton of coal sold as well as a certain percentage of any future sales. But Caroleng Investments filed suit against Justice after his companies started withholding the royalty payments. Bluestone attorneys argued that the royalty payments were withheld because Caroleng was overpaid. Caroleng argued that its deal with Bluestone prohibited the company from holding back royalty payments.
The U.S. District Court for the District of Delaware issued a judgment in 2021 in favor of Caroleng Investments for $10.1 million, including $8.4 million in a final award and $1.7 million in pre-award interest. The court also set a 9% interest rate retroactive to May 13, 2020, as long as the amount remains unpaid.
Last week's writ ordered the marshals to seize all logs, records, accessories, parts and other materials. The writ gives the marshals 90 days to seize the asset, commands marshals to collect costs and expenses associated with the writ and to turn over net proceeds of the levied property to the U.S. Clerk of Courts. The writ also authorizes marshals to enter secured spaces by force if necessary to seize the helicopter.
Justice's attorneys, however, argue it is inappropriate for the helicopter to be seized because it is collateral in loans Bluestone has secured and that proceeds from the sale of the helicopter would have to go to the company's creditors, not Caroleng.
"If (Caroleng) is allowed to seize the helicopter, Bluestone's secured creditors, and therefore Bluestone, as well, will be irreparably harmed," wrote Bluestone attorney Aaron Houchens. "These creditors' rights and interests in the helicopter are superior to Caroleng's judgment lien, and there is no realistic prospect that the secured creditors could successfully pursue Caroleng in the (British Virgin Islands) or Mechel in Russia after the helicopter is liquidated.
"Because the helicopter is subject to security interests held by two Bluestone creditors, moreover, Bluestone is already contractually prohibited from disposing of it," Houchens continued. "Any proceeds from the liquidation of the helicopter, moreover, would properly flow to the secured creditors, not to Caroleng."
According to his U.S. Senate financial disclosure, Gov. Justice and his wife Cathy Justice reported between $37.5 million and $108.1 million in liabilities between lines of credit, promissory notes and judgments.
It's not clear what loans are being referred to in Friday's motion, but the Justices have several multi-million-dollar loan guarantees. Jim and Cathy Justice personally guaranteed Bluestone's loans to the now-defunct finance firm Greensill Capital for about $700 million combined beginning in 2018 for Bluestone Resources.
Bluestone made an offer with Credit Suisse last year to settle past loans to Greensill, offering Credit Suisse $300 million by refinancing the existing loans through a third-party lender. The company also offered Credit Suisse half of any proceeds from the future sale or initial public offering of Bluestone.
Loan guarantees by the Justices to Virginia-based Carter Bank and Trust total more than $300 million. The bank has tried to collect on its loans, seeking multiple confessed judgments in the Martinsville Circuit Court for multiple Justice-owned companies. Justice attorneys have been fighting those confessed judgements.
Bluestone attorneys are seeking the stay of last Thursday's writ of execution to notify its creditors to give them an opportunity to intervene or be heard. They are also seeking to transfer the case out of the U.S. District Court for the Western District of Virginia Abingdon Division to the Roanoke Division where the company is located.
Marshals were ordered to seize the helicopter at Roanoke-Blacksburg Regional Airport. But the same day the writ was issued, the helicopter was flown from Roanoke to Burlington, N.C.
Justice, nearing the end of his second term as governor of West Virginia, is a Republican candidate for the U.S. Senate for the seat held by Sen. Joe Manchin, D-W.Va.
Steven Allen Adams can be reached at sadams@newsandsentinel.com.