West Virginia Gov. Jim Justice is suing Carter Bancorp for $1 billion, claiming the Martinsville, Virginia-based company has illegally blocked it from refinancing hundreds of millions of dollars in loans.
The allegations were included in a 36-page complaint filed Friday in U.S. District Court for the Southern District of West Virginia. Justice, a Republican, announced April 27 he would seek the U.S. Senate seat currently held by Sen. Joe Manchin. Manchin, a Democrat, recently announced he would not run for reelection.
Justice, who took office in 2016, owns widespread holdings in agriculture, coal and hospitality, including the 710-room Greenbrier resort in White Sulphur Springs, West Virginia.
According to Justice's complaint, he had a "remarkably productive" relationship with Carter Bancorp's late founder, Worth Harris Carter. However, almost immediately
In place of a close bond "premised on mutual respect and honor," Carter's successor as CEO, Litz Van Dyke, and Executive Vice President Phyllis Karavatakis "exhibited tremendous hostility toward the Justice companies and the Justices personally," the complaint stated.
At the heart of the complaint is an assertion that the $4.5 billion-asset Carter Bancorp engineered a technical default on a $1.9 million payment for a coal-related loan to Justice, then used it to accelerate the maturity dates on $268 million of other, cross-collateralized loans. Justice claims further Carter Bancorp has blocked it from refinancing its debt with another lender in violation of the Bank Holding Company Act of 1956, "effectively seizing control of the Justice businesses and making it impossible for plaintiffs to ever fully pay off their loans."
A Carter Bancorp spokesman declined to comment Wednesday, citing a policy against commenting on customer relationships or pending litigation. The company, however, said Tuesday in a filing with the Securities and Exchange Commission that the allegations contained in Justice's suit are "false and misleading."
"They largely recite the factual allegations included in the lawsuit filed against Carter Bank by the Justice Parties in the same court in May 2021. That lawsuit was dismissed in September, 2021," Carter stated.
According to Justice's complaint, his relationship with Carter Bancorp began in 2001, with a single, $4.5 million real estate loan. The bank's lending to Justice expanded over the next 16 years, reaching $775 million at the end of 2016.
Justice stated the relationship totaled $740 million at the time of Worth Harris Carter's death. In the May 2021 complaint against the bank, Justice disclosed the relationship had shrunk to $368 million. At that time, Justice stated that he and his companies had made interest and fee payments totaling $238.5 million.
In a Nov. 7 research report, Janny Montgomery Scott Analyst Freddie Strickland estimated the current size of the Justice relationship at $302 million, all of which Carter has classified as nonperforming. As a result, the company reported a ratio of nonperforming loans to total loans of 9.04% on Sept. 30. Excluding the Justice relationship, Carter's credit quality "is solid and has improved since year-end 2022, with criticized and classified loans at only 0.35% of total loans" as of Sept. 30, Strickland wrote.
Carter has been pursuing its own litigation against Justice in Virginia state courts. The sides appeared to reach a settlement in September 2021. But trouble resurfaced in April 2023, when the Justice Companies issued a press release announcing "a significant lending dispute with Carter Bank & Trust." In the press release, Jay Justice, Jim Justice's son and the president and CEO of the Justice Companies, claimed Carter blocked a refinancing play that would have provided an immediate cash payment of $250 million.
In its SEC filing Tuesday, Carter Bank claimed the Justice Companies failed to adhere to the terms of their loan agreements. "As with all customers, the Justice Entities have an obligation to repay all amounts due and owing in a full and timely manner as agreed upon in the various loan documents governing their loans with Carter Bank. The Justice Entities did not meet that obligation," the bank wrote.
