CHARLESTON — Gov. Jim Justice alleges that a Virginia-based bank went from being a “lifetime financial partner” to a “self-proclaimed adversary” of his family’s companies in a lawsuit filed in federal court Tuesday.
Justice, members of his family and the companies they manage sued Carter Bank & Trust and the bank’s board of directors, alleging that, after Carter Bank’s founder died in 2017, the bank’s executives began making “unfair changes” to the terms of its loans to the Justice businesses and ignored attempts by the Justice family to communicate with the bank.
The lawsuit was filed Tuesday, one day after The Wall Street Journal reported that Justice was in talks with Swiss-based Credit Suisse for the company to recoup almost $700 million following the downfall of U.K.-based Greensill Capital, which loaned Justice family companies $850 million in May 2018.
Credit Suisse had provided money to Greensill before Greensill filed for bankruptcy in March after it lost key insurance coverage that provided back-up for its loans.
Justice briefly mentioned Carter Bank during his Tuesday COVID-19 news conference from his office in the West Virginia Capitol, where he answered at least three questions about his family’s private companies.
“The loans have always been personally guaranteed when they flowed from Carter Bank to Greensill along the way, so that’s been there for a long, long period of time,” Justice said Tuesday.
The governor called Greensill ”a bad actor.”
“It’s very unfortunate, and truly, it’s a pain, and that’s all there is to it,” Justice said Tuesday before the lawsuit against Carter Bank had been filed.
Justice, his wife Cathy, and their son, James “Jay” Justice III, and 11 family businesses, including The Greenbrier Hotel Corp. and Greenbrier-related sports and recreation entities, are seeking at least $421 million in damages and a declaratory judgment that would keep the bank from forcing the Justices to immediately pay the full sum of the loans without providing them “a good faith opportunity to repay those loans.”
The Justices filed the lawsuit in West Virginia the same day that “certain Greenbrier loans” reached their five-year maturity.
U.S. District Judge Frank Volk is presiding over the case.
The Justices’ attorneys start the complaint by describing the Justice family businesses as employing thousands of people in seven states, noting that the Justices have been committed to “giving to a variety of philanthropic concerns” and the governor’s involvement in youth sports.
The first footnote in the lawsuit notes that “James C. Justice II currently serves as the governor of West Virginia,” and his attorneys refer to him as Governor Justice throughout the lawsuit, even when describing events that took place prior to his first election in 2016.
In a lawsuit that Justice, his wife and son filed against Greensill in federal court in the Southern District of New York, the governor is referred to as JCJ II, and there is no mention of his business, philanthropic and youth sports histories or his status as governor.
The lawsuit filed in federal court in West Virginia describes Justice and Carter Bank founder Worth Carter as having a good business relationship, as well as a personal friendship that began when they met in 2001.
By the end of 2016, Carter Bank had issued Justice-family businesses $775 million in loans, including money the bank loaned the Justice companies between 2012 and 2014 amid downturns in the coal market.
As of Tuesday, Justice businesses had $368 million in outstanding loans with Carter Bank, according to the lawsuit.
Justice and Worth Carter’s relationship was so close that the governor delivered “a heart-felt eulogy in memory of his long-time friend and business partner” at Carter’s funeral in April 2017, according to the lawsuit.
Carter’s death “marked a distinct turning point in the relationship” between the Justice family businesses and Carter Bank, “as the relationship abruptly and rapidly began to deteriorate.”
In the lawsuit, the Justices describe Carter and Gov. Justice as reaching deals with “the handshake first, documents second” between 2001 and 2017.
“Carter Bank was a self-proclaimed ‘lifetime’ partner of the Justice Entities and a handshake between Carter Bank and the Justice Entities meant more than any piece of paper could because of the strength of the bond and they acted accordingly,” the Justices said in the lawsuit.
The Justices also said, “For Worth Carter, a handshake and his word were paramount.”
After Carter Worth’s death, Phyllis Karavatakis and Litz Van Dyke took over bank operations.
The Justices claim their relationship with Carter Bank soured when the bank officials began giving verbal promises to them regarding the flexibility of their loan payment plans and additional finances, but delayed and then ultimately never documented the agreements, which led to technical defaults on existing loans.
“Almost immediately, newcomers Van Dyke and Karavatakis, Worth Carter’s long-time associate, exhibited growing hostility toward the Justice Entities and the Justices personally,” the Justices said in the lawsuit.
The Justices note throughout the lawsuit that they had regularly made payments on their loans with the bank, but the new bank leadership, after inducing the businesses’ loan defaults, accelerated the loans, making them due in a matter of months, as opposed to 20 years, referring to the incidents as a bait-and-switch.
The Justices also say bank officials wouldn’t communicate with them outside of their respective attorneys.
The Justices called it a “childish ‘communication protocol’ that Defendant Carter Bank’s counsel purports to enforce with the fervor of a middle school hall monitor,” in the lawsuit.
The Justices said they had “no choice but to bring this lawsuit to protect themselves from the ongoing and future harm to their businesses” they say Carter Bank caused them.
“There should be no confusion — [the Justices] do not dispute that they received the funds lent by Carter Bank, but also note that Carter Bank’s behavior has caused massive damage to the Justice Entities, which will be demonstrated at trial to amount to at least approximately $421 million,” the Justices said in the lawsuit.