The hunt for the missing Greensill billions

The latest efforts by former Credit Suisse clients to reclaim billions of dollars lent on their behalf by failed finance firm Greensill Capital centre on a small Virginia community bank, a coal baron with his eyes on the US Senate and a grandiose hotel with a bunker big enough to house Congress.

The collapse of Greensill three years ago kick-started a worldwide hunt to recover funds that has so far involved legal action against Japanese conglomerate SoftBank, negotiations over an Australian steel business and $2.2bn of insurance claims.

But one of the most recent manoeuvres by debt collectors at Credit Suisse — which itself imploded last year and was rescued by its rival UBS — is a lawsuit lodged in the Commonwealth of Virginia. The target is local lender Carter Bank and the aim is to recoup $226mn from its biggest client, Jim Justice, governor of neighbouring West Virginia.

The lawsuit, filed in February, argues that Carter Bank received the $226mn in “legally improper transfers” from Justice’s mining group, Bluestone Resources.

Bluestone is just one part of Justice’s business empire, which includes more than 100 companies in energy and agriculture. But his trophy asset is the Greenbrier, an 11,000-acre luxury golf resort, complete with a huge underground bunker designed to host all members of Congress in the event of a cold war nuclear attack in what was dubbed “Project Greek Island”. 

Justice, who stands at an imposing 6ft 7in, has been governor of West Virginia since 2017. But this year, the 73-year-old is running for Joe Manchin’s US Senate seat and is heavily favoured to win the Republican primary on Tuesday. 

“He’s the Trump of the Blue Ridge Mountains,” said a person involved in the attempts to recover Credit Suisse assets, given the two businessmen’s political leanings, sprawling business interests and run-ins with lenders.

Revelations in 2021 of the steep debts owed by Justice to Greensill cost him his spot on Forbes’ billionaire list. Justice told the Washington Post in 2011 that describing his net worth at somewhat more than $1bn “would be a very conservative number”. 

Representatives for Jim Justice did not respond to requests for comment for this article.

Through Bluestone, Justice was one of the biggest borrowers from Greensill, which packaged up invoice-backed loans and sold them to investment funds run by Credit Suisse.

The Swiss bank persuaded 1,200 of its most prized clients to invest in the group of so-called supply-chain finance funds, which promised enticing returns with little risk. But in March 2021, Greensill filed for bankruptcy, trapping $10bn in the funds.

Justice filed a lawsuit against Greensill days later, accusing the financing firm of fraud and claiming not to know about Credit Suisse’s involvement. But that suit has since been dropped.

The Credit Suisse debt recovery team, which has since transferred to UBS, is still trying to recoup $2.6bn. Out of the money left to reclaim, Bluestone owes $690mn.

Credit Suisse’s plan to recover the money, formalised in a deal with Justice two years ago, involved regular repayments from Bluestone up to a total of $320mn. Then fund investors would be entitled to a share of the future proceeds when Justice and his family eventually sold the mining business. UBS declined to comment for this article.

For the plan to work, Bluestone mines need significant investment in their ageing infrastructure. The Credit Suisse debt collectors believe Justice has been unable to make the required investment because of the demands from Carter Bank, which is separately trying to recover $300mn from the family through another lawsuit.

Carter Bank, which was founded by Worth Carter, a former grocery cashier, has its origins in a series of community banks in Virginia and North Carolina that began in 1974. While it specialised in offering deposits and small loans to local residents and businesses, the Martinsville, Virginia-headquartered bank began a long-term relationship with Justice in 2001 with a $4.5mn real estate loan.

A close friendship between Justice and Carter soon developed, and along with it, Carter Bank’s exposure to the future state governor. Carter Bank has about $4.5bn in assets and just 64 branches. By 2017, Justice’s businesses had borrowed more than $750mn and Carter Bank was Justice’s biggest lender, financing his coal, farming and hospitality businesses.

But soon after Carter’s death in 2017 — when Justice gave a eulogy at his funeral — the bank’s new management team started to take a tougher stance on calling in Justice’s debts, a shift that culminated in the bank placing the loans owed by Justice’s companies into default last year.

The decision increased the amount of Carter Bank’s non-performing loans by more than 3,000 per cent. 

The bank is now in the process of trying to seize collateral from Justice to recoup the loan. First up is West Virginia’s Greenbrier Sporting Club, but the lender could ultimately try to seize the five-star Greenbrier hotel, one of America’s most renowned luxury resorts.

When the Credit Suisse debt recovery team first started to assess how to reclaim the money owed by Bluestone, it enlisted advisory business FTI Consulting to carry out an audit of the assets of Justice and his family, according to people with knowledge of the process.

FTI concluded that by far Justice’s most valuable asset was the sprawling Greenbrier resort, but that it was already heavily mortgaged, with Carter Bank holding a claim over the asset.

The new claim against Carter Bank accuses the lender of fraudulent conveyance, where a debtor passes on assets to another party that are owed to their creditor. The suit alleges Carter Bank has engaged in “aggressive efforts to collect on debt obligations” of Justice and his family businesses, which stymied investment in the Bluestone mines — and the ability of Credit Suisse to recover the Greensill money for its clients.

“There is a three-way negotiation going on to see where we can unlock more money so that Justice can reinvest it in the mine,” said a person involved in the Credit Suisse debt recovery. 

In a regulatory filing this year, Carter Bank said it was not involved in any financing arrangement between Greensill and the Bluestone entities and that it believes the allegations in the Greensill lawsuit “are false and misleading”. It added in a statement that it was the bank’s policy “to not comment on any customer information or pending litigation”. It has filed a motion to dismiss the lawsuit.

Meanwhile, Justice has sought to bring back some of the glamour to the 710-room Greenbrier. The building, with its federalist architectural style and striking resemblance to the White House, fell into bankruptcy in 2009, after which Justice beat Marriott in a bidding war in 2009 to reportedly buy it for only $20mn (or a little over double that including fees and the sporting club).

While the resort’s claim to have hosted every US president since Dwight Eisenhower ended with Barack Obama, it now accommodates a different kind of spectacle: the Saudi-backed LIV golf tournament.

Additional reporting by Robert Smith