GILLETTE – As former Blackjewel LLC CEO Jeffery Hoops seeks to recover nearly $30 million from the bankrupt coal producer, the company is pushing back, alleging he mishandled and took money for his own benefit.
In a 48-page motion filed Thursday, Blackjewel lawyers claim the bankruptcy may not have been necessary without the alleged mismanagement and financial malfeasance by Hoops.
“This level of insolvency and inevitable bankruptcy filings were the result of a years-long effort by Mr. Hoops to transfer tens of millions of dollars of (Blackjewel’s) assets for his benefit and the benefit of his family and other Hoops-Related Entities,” the motion says.
Hoops, his family and other businesses he owns claim they are owed about $29 million from loans made to the company prior to filing for Chapter 11 bankruptcy protection July 1.
What has followed has been a disastrous, drawn-out and convoluted financial mess that saw Hoops forced out as CEO, an abrupt months-long closure of the nation’s fourth- and sixth-largest thermal coal mines (Eagle Butte and Belle Ayr) and questions about Hoops’ financial management and stewardship that led the company to bankruptcy.
Along the way, Hoops has been the target of federal fraud allegations and the Campbell County Commissioners even briefly considered filing criminal charges against the former company chief.
Now the stakes are being raised again as Blackjewel wants a federal bankruptcy judge to compel Hoops, his family and businesses to testify and produce a laundry list of documents.
In addition to asking for things that would prove Hoops’ claims about what he’s owed, he’s being asked to verify his accounts about when and why he loaned money to keep Blackjewel afloat.
One of the more startling allegations in the motion is that Hoops and one of his companies, Clearwater Investment Holdings, “received more than $41 million” in distributions from Blackjewel prior to filing for bankruptcy “just in 2019 alone.”
That money wasn’t subject to any properly executed loan agreements “or other writings or specific terms establishing these distributions as loan repayments,” according to the court filing. “These ‘arrangements’ were never presented to, reviewed by or approved by (Blackjewel’s) board of directors nor were they subject to any other independent, third-party review.”
The company also wants documents that could explain how and why the company’s nearly 600 Wyoming employees weren’t paid for hours and overtime worked, as well as why 401(k) and health savings account deductions from paychecks went missing.
While Hoops declined to address the allegations in the motion on advice of his lawyer, he previously has maintained he has done nothing wrong and instead went to great lengths at personal expense to try and save Blackjewel’s 32 operations and more than 1,700 employees.
In fact, the motion alleges that Blackjewel and its operations “suffered millions of dollars of losses annually and had not generated positive cash flow from operations for years.”
In Wyoming, Blackjewel took over the Eagle Butte and Belle Ayr mines from Contura Energy in a transaction that simply had Blackjewel assume Contura’s debt associated with the mines. Blackjewel didn’t pay Campbell County the ad valorem taxes it assumed from Contura, and also didn’t pay its own production taxes from December 2017 on.
It wasn’t until the county threatened to take action against Blackjewel that it agreed to a weekly installment plan to make up for the arrears as well as keep current on its ongoing production taxes. The company made a handful of payments, then filed for bankruptcy.
The court filing also claims that Hoops never expected to make any money from the mines and instead profited on the backs of workers and at the expense of local, state and federal entities entitled to fees, taxes and royalties on the coal that was being mined and sold.
“The Hoops Parties have taken improper actions to harm (Blackjewel), their creditors and the community at large,” according to the motion.
Blackjewel lawyers also say they attempted to “untangle this web … that must be investigated and, where appropriate, addressed.”
One instance in particular is used as an example in the motion, when 90 days prior to filing for bankruptcy, some entities with ties to Hoops received payments of about $7 million in cash or property from Blackjewel operations.