Charleston
Gazette's Phil Kabler is right on top of what's really going on
under the Gold Dome. Here's a good luck at the truth on Gov
Justice.
Statehouse Beat:
Big Jim is in big trouble
Phil Kabler
Jun 5, 2021
In 2003, Gov. Bob Wise was revealed to have been
involved in what, based on the e-mail exchanges, might have been
the dullest extramarital affair in the history of American
politics.
Wise resisted calls to resign, but despite success in his first
three years in office, including funding Promise scholarships, he
opted not to seek reelection in 2004, realizing his ability to
govern effectively had been permanently compromised.
Last week, we learned that Gov. Jim Justice’s ability to govern
effectively has been compromised 1 billion times. The Wall Street
Journal reported last week that Justice has loan debts to Credit
Suisse approaching $700 million. A day later, he sued Carter Bank,
claiming the bank is unfairly calling in an additional $368
million in loan debt.
As a rule, because of potential vulnerability to outside
influences, we don’t want our leaders in either the public or
private sector to be deeply in debt. Every action Justice takes as
governor going forward will be shadowed with questions about
whether he’s acting for the public good or is attempting to
assuage what he called “a burden on my family beyond belief.”
The news raises all sorts of issues about Justice’s governorship,
including verifying that he has continued to actively operate his
private sector businesses while serving as governor.
The Journal reported that Justice personally guaranteed loans to
his Bluestone Resources Inc. when he was well into his first term
as governor.
Gazette-Mail reporter Lacie Pierson, reporting on the loans,
outlined a series of phone calls and meetings Justice had with
Greensill Capital executives, including one as recently as March
1, when Justice was in the middle of the legislative session and
also settling a lawsuit over his failure to abide by the
constitutional mandate that the governor must reside in
Charleston.
(All this adds credence to my theory that the reason Justice won’t
stay at the governor’s mansion is because he remains heavily
involved in the daily operations of his private businesses. It
would be a clear Ethics Act violation if he were conducting
private business using the public resources of the governor’s
mansion or governor’s office. It also explains why he broke with
precedent and failed to put his assets into blind trusts after
becoming governor, despite initially promising to do so.)
Being governor is supposed to be a full-time job, not something
you do with whatever free time you have when you’re not attending
to private business, particularly when that business involves the
daunting task of going to court to try to resolve $1 billion in
loan debt.
How much of each workday does Justice devote to trying to save his
empire from collapse? Twenty percent? Forty percent? Eighty
percent? There’s no way to know for sure, but we do know he’s not
devoting 100% of his time to governing the state.
Additionally, Justice’s decision to personally guarantee more than
$1 billion of loans raises serious questions about his judgment.
That’s an enormous gamble given the tenuous state of the coal
industry. It might well have been an act of desperation as the
only way to secure the loans.
In effect, Justice appears to have bet his entire business empire
on coal making a comeback so that his coal mines would have enough
production and profits to pay off the loans. Either that, or he
thought he could keep extending the loans indefinitely to avoid
ever repaying them.
Which raises the question, if his business judgment is so shaky,
should we trust his judgment on state matters, particularly his
unproven assertion West Virginia would boom economically if the
state income tax were repealed?
There’s also the questionable nature of the Greensill loans
themselves, which Bloomberg columnist Matt Levine described as “a
payday loan for a job Bluestone hadn’t yet applied for.”
As Levine explained in a March column, the receivables financing
that Justice engaged in is a pretty common business practice. For
instance, if Bluestone entered into a two-year, $15 million
contract to sell coal to Acme Steel, rather than wait two years to
collect the entire $15 million, it could enter into a receivables
financing loan with Greensill to get $14.9 million up front,
paying Greensill the $15 million when the contract closed out.
However, Levine found, based on Justice’s legal complaint against
Greensill, Bluestone was getting financing for “prospective loans”
from “prospective buyers.”
As Levine explained: “That is, there would be some steel company
that did not buy coal from Bluestone, and Bluestone and Greensill
would agree that probably it should and some day it would, and
they would figure that, well, if it did buy coal from Bluestone,
it would probably buy like $15 million worth, and so Greensill
would lend Bluestone that $15 million. And then Greensill would
eventually collect the $15 million from the steel producer, if and
when it did buy coal from Bluestone. This sounds a little like I’m
kidding but I’m absolutely not.”
He continued, “They used the term “Account Debtors” to refer to
steel companies that didn’t owe Bluestone or Greensill anything,
were not Bluestone customers, and possibly had never heard of
Bluestone or Greensill. It’s pretty bold! “Greensill Capital
understood that most of the Account Debtors were not existing
customers of Bluestone,” says the complaint.”
Justice’s lawsuit essentially contends Greensill is breaking its
deal to keep extending the loans until Bluestone actually finds
real customers to replace the phantom companies on which the loans
were granted.
(Upon filing for bankruptcy, Greensill sold the notes to Credit
Suisse, and for purposes of full disclosure, I own Credit Suisse
stock.)
As usual, when something goes wrong in Jim Justice’s world, it is
anybody’s fault but Jim Justice’s, and Justice blamed the
Greensill debacle on the Russians: “When the Russians had
Bluestone, what happened to Bluestone? It absolutely just melted
down to nothing,” he said during Tuesday’s briefing. (Two days
later, he claimed Bluestone is “extremely, extremely healthy.”)
That Justice sold Bluestone to Russian firm OAO Mechel in 2009 for
$568 million in cash and stock and bought it back in 2015 for $5
million in itself raises questions.
Clearly, Justice is in a dire financial situation and his suit
against Carter Bank indicates that because of cross-default and
cross-collateralization provisions in the loans, his entire
business empire is at risk of default and foreclosure, including
The Greenbrier resort.
All in all, Justice is compromised in a billion ways. The question
we have to ask ourselves, is he too compromised to continue to
serve as governor?
•••
Speaking of, leave it to Justice to make West Virginia a laughing
stock in the national media. Justice had barely finished
announcing the first round of state vaccination incentive prizes
before national media, including Forbes, The Hill, CBS and NBC
News, had lit up with the news that in addition to a $1 million
cash prize and college scholarships, Justice’s prizes include five
shotguns, five rifles and two pickup trucks.
This was one of those unfortunate moments that occurs because
Justice surrounds himself with “yes” men, so there was no one with
the guts or common sense to point out that these particular prizes
would be perpetuating West Virginia stereotypes, not to mention
displaying extreme tone-deafness by offering firearms as prizes in
the midst of a national epidemic of mass shootings.
As Charles Pierce pointed out in an Esquire commentary: “I am
firmly on the record in favor of incentivizing people to get the
damn shots. Free beers? Yes, please. Lottery fun-and-games? Why
not, since we’re all suckers for that stuff anyway. However,
firearms test my position severely. Even accepting that West
Virginia’s gonna West Virginia, the state has the eighth-highest
rate of gun violence in the country, so maybe the state government
should not adopt shooters-for-shots just yet.”
•••
Finally, I generally find that I receive favorable comments about
my columns, but more than one reader has told me they find my
writing about lobbyists’ financial disclosures to be boring, which
of course, hurts my feelings.
Excuse me for thinking it’s important to know how much lobbyists
are spending to influence legislators and other public officials.
Nonetheless, when the January-April disclosures came out, I was
curious (and hope readers might also be) to see how the pandemic
affected lobbyists’ spending for the 2021 regular session, with
the Capitol effectively closed to the public and COVID-19
restrictions putting a damper on receptions and dinners.
As expected, the Ethics Commission disclosures for January-April
show that 320 lobbyists (four have yet to file) spent a total of
$167,873, which was less than half of the $361,804 spent during
the same period in 2020.
(AARP lobbyist Angela Vance always skews those numbers since her
disclosures include costs of AARP advertising aired and published
during the sessions. That included $31,281 of advertising expenses
during the 2021 session, down from $111,230 in the 2020 session.
Take out her spending and the lobbyists’ 2021 session total was
$112,529, down from $226,189 in 2020.)
Yet, lobbyists still managed to find innovative ways to lavish
food and drink on legislators during the pandemic lock-down.
As I reported in March, the West Virginia Coal Association paid
homage to its old Coal Suite with a series of discretely
publicized evening receptions at the Beni Kedem Temple downtown.
(Prior to passage of the Ethics Act in 1989, during legislative
sessions, the Coal Association operated a 24-hour suite at a
downtown hotel where legislators could kick back and partake of
free food and drink round the clock.)
Lobbyist Chris Hamilton’s disclosure shows that during the 2021
regular session, the Coal Association hosted a total of 15 “Coal
Caucus” evening receptions at Beni Kedem, which is impressive when
you consider most legislators stay overnight in Charleston for
just 36 days of the 60-day session. Although listed attendance at
each of the receptions ranged from 35 to 57 people, the reported
costs for each reception were identical: $739.25 for each of five
receptions in February, then $934.06 for each of the remaining 10
receptions in March and April.
Overall, that works out to $13,036, which is well below what a
single big, blowout reception would run. Plus, they got a whole
slew of pro-coal bills passed this session.
Meanwhile, in order to avoid inducing stupor, I’ll try to dole out
more tidbits from the lobbyists’ disclosures in limited doses in
future columns.