Federal prosecutors on Tuesday said they will seek a court ruling to hold West Virginia Gov. Jim Justice and his son, Jay Justice, personally accountable for a $1.23 million civil fine imposed on one of the family’s coal businesses, Justice Energy Company, Inc.
In a court filing, U.S. Attorney for the Southern District of West Virginia Mike Stuart said after deposing company executives, including the governor’s son, federal prosecutors concluded the company is “in reality, a shell corporation with no real independent and separate corporate existence.”
Stuart said the governor and his son are “the alter egos” for the company and he argues that the Justices should be held personally responsible for the civil contempt fine levied on Justice Energy.
The $1.23 million civil fine stems from a 2013 case over unpaid business debts. As the Ohio Valley ReSource reported in October, Virginia-based James River Equipment sued to recover roughly $150,000 in unpaid fees for mining equipment, services, and parts sold to Justice Energy.
Justice Energy had also agreed to a payment plan, but stopped making payments after just two.
Two years after being ordered to pay the debt, company representatives repeatedly failed to show up for court hearings. U.S. District Judge Irene Berger held Justice Energy in contempt of court to a tune of $30,000 per day, totaling $1.23 million. Justice Energy appealed the fines, but lost in 4th U.S. Circuit Court of Appeals last August.
In the months since, Berger allowed federal prosecutors to depose Justice Energy employees to get a better picture of the company’s assets.
In the memorandum filed Tuesday, Stuart noted prosecutors deposed multiple executives including the governor’s son. Prosecutors also deposed James Miller, secretary and treasurer of Justice Energy, and Stephen Ball, vice president and general counsel for the company, referred to as JEC in the filing.
“JEC has no substantive assets, has not engaged in true corporate activities, and is dominated and controlled by a limited liability company and certain corporations that are dominated and controlled by James C Justice II and James C. Justice III (“the Justices”), the shareholders of the corporate entity that ultimately controls JEC,” the document states.
The filing was first reported by Taylor Kuykendall with S&P Global.
The memo cites portions of the interviews federal prosecutors conducted. In them, prosecutors said, Jay Justice, who took over control of the majority of the Justice coal companies, was “not involved in JEC’s day-to-day business.” Justice also told prosecutors all major financial decisions related to the company would be made by him personally.
Stuart noted Justice Energy’s sole stated purpose is to operate the Red Fox Surface Mine located in McDowell County. A review of the company’s finances showed it owns almost nothing associated with the mine. The mining permit is held by Blue Stone Coal Corporation, the coal reserves are held by Rowland Land Company, and Blue Stone Coal Sales Corporation sells the coal mined there. Jay Justice is listed as president for all of these companies, the document states.
Another company that supplies equipment to the site, Blue Stone Resources, also owned by the Justices, has liens associated with it. Stuart notes different Blue Stone companies pay employees and even file taxes on behalf of Justice Energy.
Furthermore, unaudited balance sheets for Justice Energy provided to the U.S. attorney’s office show “little to no available funds.”
“There is no doubt that JEC was and is nothing more than a corporate shell dominated and controlled by James C. Justice II, James C. Justice III, and their business instrumentalities,” the filing states, noting the company has no money, no assets, and does not own the Red Fox mine it claims to be operating.
Last week, Berger gave Justice Energy a week to submit a proposal outlining how it will pay the $1.23 million fine by no later than Jan. 1, 2020.
Growing Legal Problems
This is the second time in a month that the U.S. Dept of Justice has taken action against the Justice family companies. In May, prosecutors filed suit to recover more than $4 million in delinquent fines for mine safety violations assessed by the Mine Safety and Health Administration.