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WV MetroNews Lawsuit accuses Justice-owned companies of racketeering, fraud

CHARLESTON, W.Va. — A Kentucky company with a federal lawsuit towards Gov. Jim Justice and his household’s businesses now accuses the Justices of racketeering, conspiracy and fraud.

Fivemile Power, which has been suing the Justice companies on behalf of New London Tobacco Market since 2012, filed an amended grievance this spring claiming the Justices have been deliberately shifting money and property from firm to company to avoid paying money owed.

The brand new motion accuses the Justice family of finishing up a enterprise technique for his or her private benefit, shifting assets amongst their many companies to keep away from paying money owed. These transfers are carried out by wire or mail, with out truthful compensation, the lawsuit alleges.

A lawyer for the Justice companies contends the original lawsuit was weak so the new allegations have been ginned up in an try and make the case pay off.

“It’s just the latest effort to try to squeeze money out of my clients that they’re not entitled to,” stated Richard Getty, a Kentucky lawyer representing the Justice companies. “They know the Justices are making money in West Virginia on metallurgical coal.”

Getty contends the racketeering declare is flimsy as a result of there’s no evidence of a broader scheme or alleged victims beyond Fivemile.

This can be a civil go well with, filed in U.S. District Courtroom for the Japanese District of Kentucky, so the accusations don’t equate to felony costs. But legal professionals for Fivemile Power are trying to construct their lawsuit on accusations of unfair business practices based mostly on conspiracy and racketeering allegations.

The lawsuit alleges that the Justices run an enterprise that includes themselves and “a core group of loyal staff of numerous entities who will do what the Justices say.

“The purpose of the enterprise is to utilize these entities for the Justices’ own personal benefit and to utilize the entities to avoid having to pay debts owed by various members of the enterprise.”

The lawsuit doesn’t look like associated to current questions asked by federal prosecutors, but there are overlapping themes.

In a separate, longstanding $1.23 million civil contempt case in federal courtroom, federal prosecutors this month requested whether or not Justice Power is definitely a shell company. Prosecutors filed a motion to “pierce the corporate veil” to drive the Justices to personally pay the sanction but wound up agreeing to permit a separate Justice Company, Bluestone Assets, to pay.

And individually from that, the U.S. Division of Justice has subpoenaed West Virginia tax officers for a decade of tax paperwork referring to Governor Justice and his household companies.

Getty, the lawyer for the Justice companies, says the questions on whether the Justice companies shuffle money to avoid legal responsibility don’t hold up.

“All these companies are separate corporate entities, he said. “Their books and records are kept separately.”

Justice has persistently stated his companies can pay their debts, that the apparent federal investigation gained’t add as much as a lot and that the companies’ financial outlook is enhancing. He has additionally advised individuals shouldn’t fear concerning the businesses.

“Our businesses are doing better right now than they have done for the last probably six years, way better,” Justice stated last week.

Requested about lenders coming after his businesses in courtroom, Justice stated to not fear.

Justice stated individuals shouldn’t fear so much concerning the funds of his companies.

“At the end of the day I would say to you one thing, don’t worry about my stuff,” Justice stated. “Don’t worry about my businesses. Don’t worry about a thing in the world except this state. That’s what you should be focused on is this state. Because things are going to be fine in my business world.”

The Fivemile Power case refers to him as Governor Justice throughout the submitting and accuses Justice and his household of a constant pattern of unfair business practices.

“This includes the transfer of assets from entities that have legal obligations that they do not wish to pay, to other entities in order to avoid payment of their debts,” the lawsuit states.

“Typically that is opposite to the most effective curiosity of the entities themselves, however is intended to profit the Justices. Their business technique typically is to induce different individuals into getting into agreements based mostly upon false representations that they or entities they control will carry out these agreements when, in truth, they do not intend to honor those agreements or pay the quantities due thereunder.

It continues, “This business strategy consists of incurring debts that they do not intend to pay and utilizing delay and forcing creditors to deliver unnecessary litigation so that the members of the Enterprise can keep away from full cost of their money owed. This enterprise strategy additionally consists of actions to deplete numerous of the entities of belongings once they have incurred debts and to switch such belongings, together with business opportunities to other entities,, to be able to forestall collectors from with the ability to acquire debts owed to them.

“Further, the defendants and the enterprise intentionally disregard and attempt to frustrate the judicial system’s power and ability to provide relief to creditors.”

The lawsuits cites two current accounts of the Justice firm practices.

One was a public broadcasting examination with the headline “Companies sue Justice family companies over debts, find bank accounts empty.”

One other was a Forbes story referred to as “The Deadbeat Billionaire: The inside story of how West Virginia Gov. Jim Justice ducks his taxes and slow pays his bills.”

Legal professionals for Fivemile Power then inform the story of how that company went into enterprise with Justice’s Kentucky Gasoline, tried to gather on debt and wound up in the courtroom system for years.

The enterprise relationship began in 2005 when Fivemile’s New London Tobacco Market agreed to assign leases of mineral rights to Kentucky Gasoline, owned by the Justice family. Kentucky Gasoline offered assurance that it was good for the deal by providing audited Consolidated Financial Statements.

By 2010, the companies entered into an up to date agreement. That’s when the relationship began to unravel.

Fivemile Power contends Kentucky Gasoline did not pay what it owed. That led to the original federal lawsuit, filed in 2012.

Getty, the lawyer for the Justice companies, contends the coal on the property has been marginal. “It’s a bogus claim, frankly,” he stated.

Once the federal  lawsuit was filed, legal professionals for Fivemile Power claim, the Justice companies “began to engage in a series of transactions with the intent to hinder, delay or defraud its creditors.”

Those transactions, the legal professionals contend, had the impact of draining the belongings, stockholders’ equity and future internet revenue that had been proven on the Consolidated Financial Statements.

Fivemile claims that every of the transfers by James C. Justice Companies concerned the use of wires or mail and have been meant to defend belongings and keep away from money owed.

“As a consequence, the defendants converted JCJC from a company who could make good on the Guaranty Agreement into one with no ability to pay,” said the legal professionals for Fivemile.

Some have been actual property transfers from one Justice entity to another “without valuable consideration for the real estate transferred.” Others have been transfers of real estate for money.

The legal professionals for Fivemile then detail several such transfers, typically mineral rights or real estate. Some of the allegations claim that funds that ought to have gone to Kentucky Gasoline as an alternative went to a Goldman Sachs brokerage account managed by Jay Justice, the governor’s son and president of the coal operations.

“These descriptions are but examples of how persons within the Justice Enterprise used wires and emails to receive income derived from a pattern racketeering activity, acquire or maintain an interest in or control of the Justice Enterprise, and conduct or participate in the conduct of the Justice Enterprise’s affairs,” wrote legal professionals for Fivemile.

“These examples are not intended to be exhaustive.”

Another instance cited by the Fivemile legal professionals was the sale of Justice’s coal belongings to the Russian firm Mechel in 2009.

Justice bought the coal holdings to the Russian company Mechel in Might 2009 for $568 million after which purchased it again in 2015 for $5 million.

The Fivemile legal professionals declare the top outcome emptied out the belongings of James C. Justice Companies and reorganized management beneath a brand new entity, Bluestone Assets.

“This transfer of the Bluestone Assets to New Bluestone, owned 100 percent by Governor Justice and Jay Justice was done with the intent, and had the effect of, stripping JCJC’s interest in the contingency payment and diverting that value to the Justices through their 100 percent interest in New Bluestone,” the Fivemile legal professionals claim.

The lawsuit contends such transfers amounted to fraudulent activity. The lawsuit singles out the governor’s son.

“Because the conveyances executed by Jay Justice as described herein constituted fraudulent and tortious conduct, he is personally liable for the damages caused thereby,” the lawsuit states.

The lawsuit also alleges conspiracy.

“As set forth above, Jay Justice and Governor Justice, individually, were transferees of certain of the fraudulent conveyances of JCJC’s assets,” the lawsuit contends.

“As such, and because  they were acting to benefit themselves personally and individually, they were not acting in the interests of JCJC.”

Finally, the lawsuit cites the Racketeer Influenced and Corrupt Organizations Act, affecting interstate and overseas commerce, “as evinced by its Bluestone transaction with Russian businesses.”

“Defendants have received income derived, directly or indirectly, from their pattern of racketeering activity as described herein,” the lawsuit states.

“Defendants have used or invested, directly or indirectly, some part of such income, or the proceeds thereof, in the establishment or operations of the Justice Enterprise. Thus, Defendants have thereby violated RICO.”

Legal professionals for Fivemile are asking for punitive damages of a minimum of $17 million and judgment for 3 times the quantity of the plaintiffs’ precise damages.

On Might 17, the federal courtroom produced a summons for Justice companies, plus the governor of the state of West Virginia.

“If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint.”