Feds recommend contempt penalty for Gov. Justice, son

CHARLESTON — Labeling the company a “shell,” federal investigators are recommending the courts ignore Justice Energy Co. and go directly after Gov. Jim Justice and his son instead.

The U.S. Attorney’s Office for the Southern District of West Virginia filed a motion Wednesday asking the court to enter an order allowing it to go directly after Justice and his son, Jay Justice, for a $1.2 million contempt fine.

The motion, referred to as piercing the corporate veil, would allow the court to go directly after Justice for a nearly six-year-old case brought by James River Equipment for more than $148,000 in coal mining parts and equipment that Justice Energy ordered, but never paid for.

In a letter to Justice’s attorneys, U.S. Attorney Mike Stuart came to the decision after depositions from Jay Justice; Stephen Ball, the vice president and general counsel for Justice Energy; and James Miller, vice president of operations for the Greenbrier Hotel Corp. Investigators also looked at financial information and inventory.

“While Justice Energy Co. Inc. may be a corporation, it is, in reality, an alter ego and shell controlled by the Justices through their other entities and has no real separate existence under the law,” Stuart said. “I believe that those who control Justice Energy Co. Inc. have a legal obligation and the ultimate legal responsibility to make sure that the contempt sanction is paid.”

According to investigators, Justice Energy is owned by James C. Justice Coal Group, which is owned by Bluestone Mineral, which is then owned by Bluestone Resources. That entity is owned by both Justice and Jay, who runs the coal, timber and agriculture business while his father serves as governor.

The officers for Justice Energy are Jay as president, Ball as vice president and Miller – the Greenbrier vice president – as secretary and treasurer. The company’s directors include Jay and Jill Justice, the governor’s daughter who controls the Greenbrier Resort and related companies for Justice. The only companies Justice has in a blind trust include a resort in Raleigh County and a resort in Virginia.

Justice Energy operates the Red Fox Mine in McDowell County with more than 30 employees, even though the company doesn’t own the mine. Bluestone Coal does. While Bluestone owns the mine permit, the reserves are owned by Rowland Land Co., which leases the surface to James C. Justice Cos. Another Justice company, Bluestone Coal Sales, sells the coal.

“An overview of (Justice Energy) finances shows a similar pattern of relying on Bluestone Resources and the Justices’ other subsidiaries in an effort to eschew responsibility for maintaining its own accounts and payroll,” according to a report from the U.S. Attorney’s Office.

Stuart recommended to U.S. District Judge Irene Berger that the contempt citation be immediately paid or that the Justices submit a payment plan to the court that will pay off the penalty by the Jan. 1 deadline set by the court last Thursday. Investigators believe that piercing the corporate veil is necessary to force the payment of the contempt penalty.

“The unaudited balance sheets provided by (Justice Energy) to the United States when it began assessing its ability to recover the contempt sanction show little to no available funds,” according to the report. “(Justice Energy) does not have any real substantive assets. JEC does not even own the Red Fox mine which it claims to be operating. The coal reserves are owned by other entities, as are the mining permits and the equipment used in its operations.”

Even though Jay Justice runs the day-to-day operations of the coal businesses, investigators put the blame square on both Gov. Justice and his son as the sole shareholders and decision makers for the spiderweb of business entities.

“(Governor) James C. Justice II and James C. Justice III (Jay), through their corporate and limited liability company entities by which they exercised control over (Justice Energy), made the decisions leading to the civil contempt sanction imposed by this Court,” according to the brief submitted by Stuart and Assistant U.S. Attorney Fred Westfall.

“The Justices have the ultimate decision-making authority over all of the activities of these entities, and their decisions led to the imposition of the civil contempt sanction imposed by the Court in this case,” they continued. “They are the alter egos of (Justice Energy) and should be held accountable for the civil contempt sanction…Otherwise, an injustice will be worked upon the Court.”

On May 30, Berger issued an order directing the U.S. Attorney’s Office and Justice Energy Company to submit a proposal to the court by today on when the company plans to pay its contempt penalty in full. The court issued an order Jan. 5, 2016, holding Justice Energy Company in contempt for refusing to pay James River Equipment. On Jan. 31, the U.S. Attorney’s Office was granted approval to start looking into Justice Energy’s assets.

A request for comment through Bluestone Energy Group was not immediately returned.


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