Justice company, federal officials reach agreement on penalty

CHARLESTON — One of the companies owned by Gov. Jim Justice is coming to the rescue of another company that faced an ultimatum Thursday to explain how it planned to pay a massive contempt penalty.

According to an order filed Thursday in U.S. District Court for the Southern District of West Virginia, Bluestone Resources will pay the $1.23 million civil contempt sanction against Justice Energy Company, both owned by Justice and managed by his son Jay.

Bluestone will pay the penalty in three installments of $410,000 on June 17, Sept. 16 and Nov. 15. The U.S. Attorney’s Office also agreed to withdraw a motion filed Wednesday asking the court to allow it to pierce the corporate veil and go directly after the Justices for the full amount. As part of Thursday’s agreement, federal official can refile that motion if Bluestone does not follow through with its payments.

While the agreement is not considered an admission of liability, it makes Bluestone liable to make the three $410,000 payments. Once the full amount is paid, the civil action against Justice Energy will be dismissed.

Justice Energy operates the Red Fox Mine in McDowell County close to the Virginia border. Bluestone Coal owns the permit to mine coal at Red Fox, while the reserves are owned by another company – Rowland Land Co. – that leases the surface rights to James C. Justice Cos., while Bluestone Coal Sales markets the coal mined at Red Fox. All these entities, except Rowland, are owned by Jim and Jay Justice.

U.S. District Judge Irene Berger issued an order May 30 setting Thursday as a deadline for the U.S. Attorney’s Office and Justice Energy to submit a proposal to the court on when the company planned to pay its contempt penalty in full. As part of that order, Berger also directed that the penalty be paid off by Jan. 1, should a payment plan be submitted.

The governor sold Justice Energy to Russian energy company Mechel OAO for $578 million in 2009. In 2013, James River Equipment sued Justice Energy after the company refused to pay $148,000 for parts and equipment at the mine. The governor bought Justice Energy back from Mechel in 2015 for $5 million.

In 2016, Justice Energy was held in contempt of court for not making payments to James River and for company officials failing to appear at hearings. The Fourth Circuit Court of Appeals upheld the contempt citation in 2018.

The court asked the U.S. Attorney’s Office to look into Justice Energy’s assets in an order on Jan. 31. On Wednesday, federal officials released that final report and order requesting the court pierce the corporate veil and go directly after Justice and his son, who are the sole shareholders. U.S. Attorney Mike Stuart called Justice Energy a “shell.”

“All of the actions and activities of (Justice Energy) are controlled by the Justices who control the boards of these various entities,” Stuart wrote in a letter to Justice’s attorneys.

“While (Justice Energy) 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 continued. “I believe that those who control (Justice Energy) have a legal obligation and the ultimate legal responsibility to make sure that the contempt sanction is paid.”

A request for comment from Bluestone Energy Group and Justice Energy attorney Andrew Ellis of the Beckley law firm Wooton, Davis, Hussell and Ellis was not returned.