Lawsuit: Former Blackjewel CEO Transferred $34M to Family Business Before Bankruptcy
Blackjewel, which owned two Campbell County mines, claims its former president transferred tens of millions of dollars to a business run by his wife and a subsidiary trust run by his family members for six months before the company filed for bankruptcy, according to a complaint filed in U.S. Bankruptcy Court.
Blackjewel, LLC, now the debtors and debtors-in-possession of the company, asserts the transfers were improper and it wants that money back.
That same day, the Belle Ayr and Eagle Butte coal mines suddenly closed and sent hundreds of its employees home. The mines now are operating and owned by Eagle Specialty Materials.
Blackjewel, LLC, claims that Blackjewel under Hoops transferred more than $34 million to Clearwater Investment Holdings, LLC, according to the complaint filed Thursday by its attorneys of the Point Pleasant, W. Va.-based Supple Law Office and the Cincinnati-based Squire Patton Boggs, LLP.
Clearwater's members are Jeffrey Hoops' wife, Diana, and another entity called Clearwater Trust. Hoops created the trust for the benefit of himself and members of his family. He is a grantor and beneficiary of the trust. His family members are the other trustees of the trust, according to the complaint.
The attorney for Hoops, Clearwater and related businesses and individuals did not immediately return a call and email for a response.
As an aside, Clearwater is funding the construction of the Grand Patrician Resort in West Milton, W. Va., and work continues, according to the resort's Facebook page.
The transfers to Clearwater were happening when Blackjewel was becoming increasingly insolvent, and it could not meet its obligations to creditors and its employees, according to the complaint.
Earlier allegations have raised questions about improper transfers, but Hoops in January denied that he took money from Blackjewel, and instead said that Clearwater loaned Blackjewel more than $41 million before July 1.
Blackjewel, LLC, attorneys dispute that characterization about a loan, and that the transfers from Blackjewel to Clearwater were repayments for a "revolving line of credit."
There's no evidence for that, according to the complaint. "No loan agreements or other instruments exist establishing any such line of credit by Clearwater to Debtors."
Likewise, Clearwater didn't charge interest for the money allegedly loaned to Blackjewel, and Blackjewel did not pay any interest to Clearwater; there was no security for repayments; there was no fixed maturity date nor schedule of repayments; Blackjewel was short of cash and it didn't an any way to obtain financing from outside lenders; and Blackjewel had no source to repay the money advanced by Clearwater, according to the complaint.
And Clearwater knew that Blackjewel was insolvent during the transfers.
The payments of tens of millions of dollars to Clearwater have harmed Blackjewel, LLC's, ability to satisfy its obligations to creditors, according to the complaint.
Blackjewel, LLC, is asking the U.S. Bankruptcy Court for the Southern District of West Virginia to cancel the transfers because the company has the right to that money to pay creditors. "The Debtors are entitled to recover from Clearwater the approximately $34 million of pre-petition [bankruptcy protection petition] payments by Debtors to Clearwater."
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