A federal judge has ordered companies owned by West Virginia Gov. Jim Justice to pay $35 million over a lawsuit accusing them of violating a mining contract.
U.S. District Judge Gregory F. Van Tatenhove in Kentucky on Monday ordered the Kentucky Fuel Corp. and the James C. Justice Cos. to pay the sum.
The lawsuit was filed by the New London Tobacco Market and Five Mile Energy. They are accusing the Justice companies of failing to pay mining royalty payments and retainer fees.
The ruling includes roughly $17 million in damages, $17 million for royalties and $1 million in retainer fees.
A lawyer for Justice’s companies says they plan to appeal the judge’s ruling.
Coal companies controlled by the family of West Virginia Gov. Jim Justice have agreed to a settlement covering millions of dollars in overdue property taxes in four eastern Kentucky counties: Harlan, Knott, Magoffin, and Pike.
Checks totaling $1.2 million from Justice entities began rolling in last week, county officials said. According to state officials, the checks cover half the delinquent debt owed. Counties will receive the remaining amount in payments over the next six months.
Property taxes, which dwindled as the region’s coal industry declined, are used to fund essential services such as schools, fire departments, sheriff’s offices and libraries. County officials say the unpaid taxes from the Justice companies forced layoffs and added to hardships in an economically struggling region.
NPR, The Ohio Valley ReSource, and its partner stations reported in 2016 that the Justice companies had failed to pay more than $15 million in taxes and mine safety penalties in five states. Since then, the Justice companies have entered agreements to pay overdue taxes in West Virginia and, now, Kentucky. Federal prosecutors have also sued to recover millions in mine safety fines.
In a press release Monday, Kentucky Finance Cabinet Secretary William Landrum billed the agreement as a win.
“This settlement means the state and these counties no longer have to spend time, money and other resources on lawsuits that could take many years with no guarantee that the taxes would be paid,” Landrum said in the news release.
The agreement covers delinquent property taxes owed by three Justice family coal companies: Kentucky Fuels, Inc., Sequoia Energy, LLC, and A & G Coal, Inc. In exchange, suspensions sought by the Kentucky Department of Revenue on active mining licences issued to Kentucky Fuels will be lifted.
County officials, some of whom have fought the Justice organization in court to seek delinquent taxes, expressed mixed feelings about the settlement.
A representative for the Harlan County attorney’s office said Justice’s Sequoia Energy owes $141,179.36 in delinquent property taxes. Last week, the office received a check for about $93,000.
Pike County officials said last week Kentucky Fuels paid $177,497.10 to cover its 2017 and 2018 tax bills. The company owes about $252,000 in taxes from 2015 and 2016. Officials expect to receive six monthly payments of about $30,000, according to Tonnie Keene with the Pike County Attorney’s office.
“For us to collect that much money, that’s a good sum of money,” she said. “It’s paid off several years.”
Keene said it’s unclear if the county will have to write off any of the remaining debt after the six-month payment plan is completed.
“We won’t know until all these payments apply,” she said.
Pike County attorney Howard Keith Hall said he agreed to waive the penalties and interest for the amount covered in the settlement because it was a relatively small amount. Fees and penalties fund the county attorney office’s budget. He said over the years, Pike County collected more than $1.3 million from the Justice organization.
“We’re unique in that we’ve been able to collect so much,” Hall said.
“In a bad way”
Knott County, Kentucky, was home to one of the larger Kentucky Fuels properties and had perhaps the most at stake with the delinquent tax bills, which totaled roughly $2 million according to an official in the county clerk’s office.
The rural county lacks other large sources of revenue and depends heavily on coal severance and property taxes to pay for schools, public safety and other services. Without the Kentucky Fuels payment the school system faced a shortfall and several county employees were laid off.
“We ended up having to let a couple of our deputies go,” Knott County Sheriff Dale Richardson said in a March interview. “We only had five full-time deputies and we’re down to three. That puts that much more burden on us and it really puts us in a bad way.”
Richardson said the situation is more galling because it was not the first time the county had to hound the Justice companies for payment. Officials had filed suit twice before against Kentucky Fuels and even moved to seize some company property to recover debts.
“It’s not these people’s first rodeo,” Richardson said.
Assistant County Attorney Randy Slone said the county received a check of roughly $818,000 and that the company has pledged to make monthly payments to cover the other half of what was owed for outstanding tax debt.
But Slone noted that he has heard such promises before from the Justice companies.
“They have had agreements and not lived up to those,” he said. “But we are hopeful and we have not given up any rights, if they don’t comply we still have all the rights we had before.”
Slone said the delay in payment already caused considerable hardship for Knott County.
“At the end of the day we all have tax obligations whether you’re a billionaire or a regular Joe like me.”
Gov. Justice has an estimated worth of more than $1 billion and owned the luxury Greenbrier Resort in West Virginia in addition to the family mining companies. Since taking office he turned control of the companies to his daughter and son.
Justice v. Justices
Credit Sydney Boles / Ohio Valley ReSource
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Ohio Valley ReSource
Damage to a road near a Justice company mine in Kentucky.
The Kentucky tax settlement agreement is the latest in a string of recent legal actions concerning the Justice companies’ tax debts, business debts, and failure to pay mine safety fines.
Federal prosecutors said depositions with company officials, including the governor’s son, revealed that Justice Energy was a shell company controlled by the Justices. Prosecutors argued the Justices were, in practice, the company and should pay the fine. On Friday, another Justice-controlled company, Bluestone Resources, Inc., stepped in to pay the penalty. The Justice Department agreed to drop the motion, but retains the right to revive it if Bluestone Resources fails to pay the fine.
In April, the Justice Dept. filed suit on behalf of the U.S. Mine Safety and Health Administration to recover $4.7 million in delinquent penalties from the Justice mining companies for unpaid mine safety violations. That action came one month after a data analysis by the ReSource showed that the Justice companies’ mine safety debts had grown by more than 50 percent since Gov. Justice took office. The Justice companies have the highest delinquent mine safety debt in the U.S.
The Justice companies are also in a long-running dispute with state and federal regulators regarding penalties for failure to repair old surface mines in Kentucky, Virginia, and West Virginia. One such mine in eastern Kentucky has been the scene of repeated flooding and mudslides which have damaged neighboring properties and roads.
The ReSource’s Jeff Young contributed to this report.
In apparent anticipation of a federal lawsuit seeking recovery of overdue penalties, coal companies owned by the family of West Virginia Gov. Jim Justice have filed a lawsuit of their own against federal surface mining regulators.
The suit, first reported by WV MetroNews, is an apparent preemptive strike against the federal government, which is preparing to sue the companies over over unpaid fines associated with more than 100 environmental and reclamation violations at mines in West Virginia, Virginia, Tennessee and Kentucky.
According to lawsuit, negotiations between officials from the Department of Interior’s Office of Surface Mining, Enforcement and Reclamation (OSMRE) and the Justice companies, including the governor’s son, Jay Justice, to settle unpaid fines abruptly fell apart earlier this month.
The Justice companies contend the civil lawsuit by MSHA and the Justce Department was surprising, and argue in the newly-filed litigation that it may have pushed officials at the OSMRE to back away from a proposed $250,000 settlement agreement.
However, in a May 15, 2019 letter to lawyers representing the Justice companies that was included in the lawsuit, John Austin, the field solicitor in the Department of Interior’s Knoxville office, wrote that the believed settlement, and any settlement over $100,000, could not be approved without approval from the Justice Department.
“Therefore, notwithstanding your clients’ assertion about a deal they believe they made with OSMRE, there is not nor has there been an authorized agreement with the United States to settle the monetary debts of your clients for $250,000.00, or for any other amount,” Austin wrote.
The lawsuit describes a month-long effort by representatives from the Justice companies to settle fines from more than 100 violations at Justice mines dating back to 2017 as well as fines assessed against Jay Justice personally. The dollar amounts of the fines associated with the violations were redacted in the lawsuit.
Problem Properties
Credit Sydney Boles / Ohio Valley ReSource
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Ohio Valley ReSource
The October flood damaged the road near the Thacker house.
Unreclaimed mines can present hazards to public safety and property for those living nearby.
In October 2018, floodwaters washed away the road to Elvis and Laura Thacker’s home, located about a quarter-mile downhill from the mine, trapping them inside. A similar June 2016 flood caused mold and about $148,000 in damages.
Despite a history of reclamation violations and complaints by residents, the mine, owned by Justice-controlled Kentucky Fuel Corp., remains the subject of a years-long dispute between the Justice family and regulatory agencies.
Last fall, Kentucky officials said the the Justice companies owed $2.9 million in reclamation penalties. Representatives for Kentucky Fuel Corp. dispute the amount and say they have made significant progress addressing violations at Bevins Branch.
Still, last October, OSMRE issued an immediate harm cessation order for the site, and Bevins Branch appears to be one of the mines with unpaid fines included in the new lawsuit.
Timeline
According to the suit, on April 8, 2019, Jay Justice and Justice Mining Entities COO Tom Lusk met with Michael Castle, the field office director of the OSMRE Knoxville and Lexington field offices and OSMRE official Mark Snyder in Knoxville.
During the meeting, according to the lawsuit, Jay Justice proposed that his companies would prioritize completing mine reclamation work “in lieu of the penalty assessments and that the penalty assessments be reduced by the cost of the reclamation work.”
According to the document, Castle, with OSMRE, said that because the delinquent mines were not currently operational and “the companies are not obtaining any financial benefit through non-compliance” he believed he had the authority to create a settlement agreement.
The group agreed that if the total amount of penalties owed was not reduced below $250,000 after this reclamation work, the Justice companies would pay that amount over a year to satisfy the remaining debt.
Later that day, the parties returned for a second meeting, this time with their lawyers present, including Austin, DOI’s field solicitor based in Knoxville. Austin asked the Justice companies to provide collateral that they could satisfy the agreement, to which the Justice companies agreed.
Later, at another meeting, the question of whether the Justice companies would need to provide collateral was left unresolved, according to the lawsuit.
Justice company representatives said they left the April meetings believing an agreement was in place. They said a letter to Austin sent in late April, invited him to ask for any additional financial information from the Justice companies, went unanswered.
During that time, the Justice companies said they began doing reclamation work.
“In the week of May 6, 2019, the government’s attitude toward the Justice Mining Entities noticeably soured,” the lawsuit states. That week, MSHA and the Justice Department filed a lawsuit seeking $4.7 million in unpaid mine health and safety fines and fees from the Justices.
Days later, after agreeing to “suddenly renewed” requests for collateral and more financial information from the Justice companies, the lawsuit states they received the May 15 letter from Austin stating that the settlement agreement had not been made. Instead, he wrote that a letter authorizing the DOJ to file suit against the Justice companies on behalf of the Interior Department had been issued.
“We have suggested on more than one occasion that a showing of good faith will benefit your clients if they intend to pursue settlement,” Austin wrote, adding that includes the Justice companies “continuing to abate the environmental violations that exist in Tennessee and by making good on a settlement agreement negotiated on their behalf in 2017.”
A request for comment to OSMRE was referred to the Justice Department, which did not immediately reply.
In a statement from Justice company Bluestone Coal Corp., Jay Justice said the companies are still seeking a settlement agreement with the federal government, but the “incident with MSHA” made an impression.
“We don’t want to have to go to court to get the government to do the right thing and live up to its end of the bargain, but we can’t sit back and let the government take advantage of our good faith efforts to resolve this matter,” he said.
Pattern of Behavior
The Justice companies have a documented history of racking up mine safety fines, failing to pay taxes, and inadequately completing reclamation work.
The companies have also repeatedly failed to pay suppliers. A review of court documents by the Ohio Valley ReSource last fall found at least five cases in which judges ruled that Justice family companies failed to pay suppliers for goods or services. When compelled by courts to pay, the companies either refused or failed to meet agreed upon payments.
These cases, dating back to 2013, include a failure to pay for a range of common coal industry needs, such as parts for mining equipment, coal barge services, insurance, and the royalties due to mineral property owners. The debts the Justice family companies owed in these cases ranged from just under $150,000 to a little more than $3 million.
In all five cases the courts authorized U.S. Marshals to seize assets from the Justice family companies’ bank accounts in order to recover the debts. However, in some cases officials discovered the bank accounts were empty or closed.
Kentucky regulators have cited a company owned by coal operator Jim Justice for conditions that they say contributed to a mudslide and flooding that damaged six homes in Pike County.
Kentucky Energy and Environment Cabinet spokesman John Mura told The Courier-Journal regulators learned on Friday about the damages and sent investigators to the Bent Mountain surface mining operation.
The operation is part of Kentucky Fuel Corp., which is owned by Jim Justice, a billionaire coal producer running for governor as a Democrat in West Virginia.
Mura said violations on the citation issued Monday involve sediment control, off-permit disturbance, failure to notify, failure to pass water quality and a diversion ditch failure.
In a news release, Kentucky Fuel said it’s offering residents temporary housing, and providing large equipment and workers from nearby operations to help property owners with cleanup.
