Coal companies controlled by the family of West Virginia Gov. Jim Justice have agreed to a settlement covering millions of dollars in overdue property taxes in four eastern Kentucky counties: Harlan, Knott, Magoffin, and Pike.
Checks totaling $1.2 million from Justice entities began rolling in last week, county officials said. According to state officials, the checks cover half the delinquent debt owed. Counties will receive the remaining amount in payments over the next six months.
Property taxes, which dwindled as the region’s coal industry declined, are used to fund essential services such as schools, fire departments, sheriff's offices and libraries. County officials say the unpaid taxes from the Justice companies forced layoffs and added to hardships in an economically struggling region.
NPR, The Ohio Valley ReSource, and its partner stations reported in 2016 that the Justice companies had failed to pay more than $15 million in taxes and mine safety penalties in five states. Since then, the Justice companies have entered agreements to pay overdue taxes in West Virginia and, now, Kentucky. Federal prosecutors have also sued to recover millions in mine safety fines.
In a press release Monday, Kentucky Finance Cabinet Secretary William Landrum billed the agreement as a win.
“This settlement means the state and these counties no longer have to spend time, money and other resources on lawsuits that could take many years with no guarantee that the taxes would be paid,” Landrum said in the news release.
The agreement covers delinquent property taxes owed by three Justice family coal companies: Kentucky Fuels, Inc., Sequoia Energy, LLC, and A & G Coal, Inc. In exchange, suspensions sought by the Kentucky Department of Revenue on active mining licences issued to Kentucky Fuels will be lifted.
County officials, some of whom have fought the Justice organization in court to seek delinquent taxes, expressed mixed feelings about the settlement.
A representative for the Harlan County attorney’s office said Justice’s Sequoia Energy owes $141,179.36 in delinquent property taxes. Last week, the office received a check for about $93,000.
Pike County officials said last week Kentucky Fuels paid $177,497.10 to cover its 2017 and 2018 tax bills. The company owes about $252,000 in taxes from 2015 and 2016. Officials expect to receive six monthly payments of about $30,000, according to Tonnie Keene with the Pike County Attorney’s office.
“For us to collect that much money, that’s a good sum of money,” she said. “It’s paid off several years.”
Keene said it’s unclear if the county will have to write off any of the remaining debt after the six-month payment plan is completed.
“We won’t know until all these payments apply,” she said.
Pike County attorney Howard Keith Hall said he agreed to waive the penalties and interest for the amount covered in the settlement because it was a relatively small amount. Fees and penalties fund the county attorney office’s budget. He said over the years, Pike County collected more than $1.3 million from the Justice organization.
“We’re unique in that we’ve been able to collect so much,” Hall said.
“In a bad way”
Knott County, Kentucky, was home to one of the larger Kentucky Fuels properties and had perhaps the most at stake with the delinquent tax bills, which totaled roughly $2 million according to an official in the county clerk’s office.
The rural county lacks other large sources of revenue and depends heavily on coal severance and property taxes to pay for schools, public safety and other services. Without the Kentucky Fuels payment the school system faced a shortfall and several county employees were laid off.
“We ended up having to let a couple of our deputies go,” Knott County Sheriff Dale Richardson said in a March interview. “We only had five full-time deputies and we’re down to three. That puts that much more burden on us and it really puts us in a bad way.”
Richardson said the situation is more galling because it was not the first time the county had to hound the Justice companies for payment. Officials had filed suit twice before against Kentucky Fuels and even moved to seize some company property to recover debts.
“It’s not these people’s first rodeo,” Richardson said.
Assistant County Attorney Randy Slone said the county received a check of roughly $818,000 and that the company has pledged to make monthly payments to cover the other half of what was owed for outstanding tax debt.
But Slone noted that he has heard such promises before from the Justice companies.
“They have had agreements and not lived up to those,” he said. “But we are hopeful and we have not given up any rights, if they don’t comply we still have all the rights we had before.”
Slone said the delay in payment already caused considerable hardship for Knott County.
“At the end of the day we all have tax obligations whether you’re a billionaire or a regular Joe like me.”
Gov. Justice has an estimated worth of more than $1 billion and owned the luxury Greenbrier Resort in West Virginia in addition to the family mining companies. Since taking office he turned control of the companies to his daughter and son.
Justice v. Justices
The Kentucky tax settlement agreement is the latest in a string of recent legal actions concerning the Justice companies’ tax debts, business debts, and failure to pay mine safety fines.
Last week, the U.S. Department of Justice filed a motion seeking to hold Justice and his son, Jay Justice, personally responsible for a $1.23 million civil penalty levied against one of the family’s coal businesses, Justice Energy Company, Inc.
Federal prosecutors said depositions with company officials, including the governor's son, revealed that Justice Energy was a shell company controlled by the Justices. Prosecutors argued the Justices were, in practice, the company and should pay the fine. On Friday, another Justice-controlled company, Bluestone Resources, Inc., stepped in to pay the penalty. The Justice Department agreed to drop the motion, but retains the right to revive it if Bluestone Resources fails to pay the fine.
In April, the Justice Dept. filed suit on behalf of the U.S. Mine Safety and Health Administration to recover $4.7 million in delinquent penalties from the Justice mining companies for unpaid mine safety violations. That action came one month after a data analysis by the ReSource showed that the Justice companies’ mine safety debts had grown by more than 50 percent since Gov. Justice took office. The Justice companies have the highest delinquent mine safety debt in the U.S.
The Justice companies are also in a long-running dispute with state and federal regulators regarding penalties for failure to repair old surface mines in Kentucky, Virginia, and West Virginia. One such mine in eastern Kentucky has been the scene of repeated flooding and mudslides which have damaged neighboring properties and roads.
The ReSource’s Jeff Young contributed to this report.