The Greenbrier Hotel Corp., owned by Gov. Jim Justice’s family, faces yet another financial strain — a $36 million lawsuit filed over a defaulted loan that was part of the federal government’s response to the economic threats of the COVID-19 pandemic.
First Guaranty Bancshares filed the lawsuit last month in federal court for the Middle District of Louisiana, where the bank is headquartered. The bank has a West Virginia connection through the chairman of its board, Marshall Reynolds, the Huntington businessman who owns Chapman Printing.
The Greenbrier Hotel Corp. is made up of close relatives and associates of the governor, whose most recent annual financial disclosure as a candidate for U.S. Senate reflects a personal liability of $1 million to $5 million to First Guaranty.
The bank contends in its July 17 filing that in late 2020 the Greenbrier Hotel Corp. agreed to terms in a promissory note that was signed by Jill Justice, the governor’s daughter who is president of the corporation.
The filing indicates the principal on the loan was $35 million.
The loan was made under provisions of the Main Street Program of the Federal Reserve under the pandemic relief CARES Act. The Main Street Program was established to support lending to small- and medium-sized for-profit businesses and nonprofit organizations that were in sound financial condition before the onset of the pandemic.
Justice took great pride in his communication and empathy as governor as his administration steered West Virginia through the COVID-19 pandemic. The two-term Republican is now running for U.S. Senate and is widely favored to win based on his name recognition and the state’s recent voting trends.
The Main Street Loan Program was established at the federal level in 2020 with 319 participating banks extending 1,830 loans to small- and medium-sized businesses.
The program had a total loan amount of $17.5 billion, with the U.S. Department of Treasury responsible for 95%, an amount of $16.6 billion, and the lender banks responsible for the remaining 5%.
Payment terms were for five years, with no payments due the first year. After the first year, interest payments became due in accordance with the loan agreement. So no principal was due in the first or second year of the loan.
From there, the loans were meant to be paid down gradually — 15% of the principal due at the end of year three, another 15% due at the end of year four and a balloon payment of 70% at the end of year five.
The federal Office of Inspector General for Pandemic Recovery has been auditing the program. Its most recent report has calculated overall loan losses across the nation to be $572 million.
The federal audit notes that several loans that have been declared a loss by the Federal Reserve Board are under investigation for suspected fraud on the part of the borrower. Of the 82 loans that have been declared a loss by the Federal Reserve, 28 loans are or were under investigation for suspected fraud. That’s about one in every three defaulting loan recipients under federal investigation.
The lawsuit by First Guaranty Bank alleges The Greenbrier has paid down nothing on its loan.
The filing agrees with the basic terms that The Greenbrier did not owe anything at all through the first year. Then, in the second year after taking out the loan, The Greenbrier was supposed to make monthly interest-only payments.
Following that, The Greenbrier was supposed to make a payment by Dec. 22, 2023, of 15% of the outstanding principal balance. By Dec. 22 of the current year, another 15% of the principal was to be due. And then at the maturity date of Dec. 22, 2025, the loan was to be paid in full.
First Guaranty alleges the loan became delinquent at that first real due date when The Greenbrier Hotel Corp. did not pay that first 15% installment. The bank contends no payments on principal or interest have been made in the months since then either.
By filing the federal complaint, First Guaranty says it is exercising its right to accelerate the maturity of the entire unpaid remaining balance and to increase the interest rate on the balance.
Counting the principal, accrued interest, late charges and expenses, First Guaranty says the corporation owes $36,586,423.
In addition, interest is accruing at a default rate of 21% a year, or $20,626 a day. Lawyers for The Greenbrier have not yet entered a response to the bank’s filing. U.S. Magistrate Judge Richard L. Bourgeois Jr., who was assigned to handle the case, scheduled a telephone conference for Oct. 17 for parties in the case to discuss due dates and possible hearings.
This is just one front of the financial trouble for The Greenbrier, the historic West Virginia resort.
A foreclosure sale has been scheduled for 2 p.m. Tuesday over claims that The Greenbrier’s ownership group defaulted on millions of dollars in a loan originally held by JPMorgan Chase. Lawyers for the Justice family have filed for a Greenbrier County judge to halt the sale, at least temporarily.
Meanwhile, lawyers for the company that provides the resort’s health insurance informed employees this week that they are at risk of losing coverage because The Greenbrier Hotel Corp. fell four months and millions of dollars behind on premiums. The insurance company alleged The Greenbrier collected premiums from employees but did not pass the money along. The due date for payment of the health insurance obligation is also Tuesday.
The state Tax Department still has several sales tax liens on The Greenbrier. Two of those amounting to $897,615 were released in recent weeks. The Greenbrier still has five liens remaining, adding up to $2,752,907.
Merchants collect sales taxes from customers but that’s never their money. It’s the customer’s money flowing to the government with the merchant in a middle role to pass those collections — or remit them — on to the tax official.
Overdue property taxes for The Greenbrier Hotel and four related businesses are listed at $2.2 million with the county courthouse.
Gov. Justice has contended that the financial problems, in particular the forced auction of The Greenbrier, are the result of political scheming by forces who don’t want him to help tip the U.S. Senate majority to Republicans.
“At the end of the day, it has to be driven by something,” Justice said last week during an administration news briefing. “I truly do believe that it is a political play. Everybody in the world that I talk to says the same thing. It is a political play. I’m running for the U.S. Senate and with all honesty it carries a terrific burden.
“I truly believe with all in me if I’m not running for U.S. Senate, you’d have never heard about this.”
