Former Blackjewel miners and supporters watch a train engine leave without its load of coal. Protesters have been blocking tracks for two weeks seeking pay for work already done for Blackjewel (photo via Mountain Top News)
UPDATE (8/17/2019) – This post has been updated to include the public and private pensions, university endowments, and philanthropic foundations invested in Blackjewel through Lime Rock Partners.
Since July 29, coal miners in Harlan County, Kentucky have blocked a coal train demanding to receive pay for the work they did for Blackjewel, LLC, which recently declared bankruptcy and has begun selling off assets. Blackjewel, which was the sixth largest coal producer in the country in 2017 is owned in majority by the private equity firm Lime Rock Partners. Blackjewel founder and now-former CEO Jeff Hoops owns a minority stake in the business.
In recent months Blackjewel workers have had their paychecks bounce, have not received paychecks at all, and have found that employer and employee contributions to their retirement plans were not deposited. Blackjewel initially estimated that it owes its employees in Appalachia and Wyoming $4.5 million for work done before the company locked its gates and petitioned for bankruptcy, but reporting on the case has put the number at $11.8 million in back wages and $1.2 million in retirement contributions owed.
Beyond payment due to the miners, Blackjewel and related companies owe the public hundreds of millions of dollars in taxes, royalties, and fines as well as payments to creditors and vendors.
New findings raise serious questions about self-dealing by former CEO Jeff Hoops and his family – who are building a multi-million resort development in West Virginia. Hoops, and companies controlled by him and his family, are seeking $22.2 million for what they characterize as unpaid loans and owed royalties and rent payments from Blackjewel.
Hoops says that he is owed $11 million for loans he made to the company without documentation and apparently in violation of Blackjewel’s other credit agreements. Two other companies controlled by Hoops have filed claims against Blackjewel seeking a further $11.2 million in royalty payments and rent. The contracts supporting those claims are signed by Hoops as representative of both Blackjewel and the companies making claims against Blackjewel. The claims seek payment be sent to Hoops’s wife, Patricia, the namesake of Hoops’s planned resort.
Below, we profile Hoops and some of the other interests lining up to get paid as Blackjewel renegotiates its debts.
Jeffrey A. Hoops Sr. is the founder and former CEO (he was removed as a condition of an emergency loan granted during the bankruptcy proceeding) of Blackjewel and a number of related coal mining and marketing companies. Hoops, through an LLC, is a 37.5% owner of Class A shares of Blackjewel. He also owns 20,000 (out of 40,000 total) senior preferred shares of the company. Hoops contributed $3 million to the $34 million loan to Blackjewel with Lime Rock Partners and Riverstone.
Hoops – and companies controlled by him and his family – is also claiming that Blackjewel owes him a further $22.2 million in unpaid loans, royalties, and rent.
In his declaration filed with Blackjewel’s bankruptcy petition, Hoops reports that he and “various entities owned, controlled or otherwise affiliated with Hoops or the spouse or descendants of Hoops” had outstanding loans to Blackjewel exceeding $11 million.
According to a review of Hoops’s testimony in the bankruptcy case by the Sightline Institute, Hoops transferred approximately $45 million into Blackjewel and approximately $34 million out of it. Hoops characterized these transfers as a revolving loan; however, according to Hoops’s declaration, these loans were not documented. According to the Sightline Institute’s reporting, these loans violated Blackjewel’s credit agreements with other lenders.
Hoops is seeking another $5.9 million in payments from Blackjewel for a company that he controls. Triple H Real Estate, LLC is listed among Blackjewel’s 30 largest unsecured creditors in the company’s bankruptcy petition. Corporate records from West Virginia indicate that Jeff Hoops is a member, manager, and organizer of Triple H Real Estate and a registration form from Wyoming reports Jeff Hoops as its president and CEO. Three claim forms submitted by Triple H Real Estate identify Jeff Hoops’s wife Patricia Hoops as the manager of the company and direct that payments be sent to her.
The underlying contracts between Triple H Real Estate and Revelation Energy submitted as proof of the Triple H Real Estate’s claims bear Jeff Hoops’s signature on both sides of the transactions, raising further questions about self-dealing. One agreement entitles Triple H Real Estate to either 1% of the gross selling price or 50 cents per ton, whichever is larger, from coal mined at certain Revelation Energy (and later Blackjewel) properties. Triple H is seeking $3.5 million in royalties allegedly owed pursuant to this agreement. Another similar royalty agreement was submitted as the basis for a $2.3 million claim against Blackjewel. The final agreement is a lease for office space seeking $212,800 in unpaid rent from January 2017 through June 2019 from Blackjewel.
Another company that also appears to be controlled by Hoops filed a claim on the same day as Triple H Real Estate, seeking $5.3 million in royalties from Blackjewel. Lexington Coal Royalty Company, LLC is registered in Delaware and uses a corporate registered agent service; however, the company is represented by the same attorney as Triple H Real Estate and has also requested that payments be sent to Patricia Hoops. In the documentation for this royalty claim, Lexington Coal Royalty Company names Jeff Hoops as its manager.
The self-dealing between Hoops’s firms and Hoops’s movement of money between his personal accounts and Blackjewel’s without documentation and in violation of Blackjewel’s credit agreements raises suspicions that Hoops was siphoning money out of the company for his own purposes.
Hoops is building a multimillion-dollar resort at the site of the former Milton Memorial Hospital, in Milton, West Virginia. The resort, which Hoops has described as “The Greenbrier meets Kings Island,” will be called the Grand Patrician. The name is to honor both Hoops’s wife Patricia and the “elite style of the resort and its future clientele,” Hoops told the Charleston Gazette-Mail. The first phase of construction, which will cost $30 million, includes a “hotel, chapel for destination weddings, 500 person convention center, and nine-hole golf course replicating famous par three holes from around the world,” according to WCHS News. Future plans include a 3,500-seat replica of the Roman Coliseum, replicas of Yankee Stadium, Fenway Park, Wrigley Field, and Camden Yards, horse stables and trails, and a medical clinic and rehab center.
Clearwater Investment Holdings, LLC, is funding the resort project. It is also the creditor that Hoops says is owed $11 million in Hoops’ unsecured, undocumented revolving loan to Blackjewel. However, Brent Walls, the chief financial officer of Clearwater Investment Holdings told the Huntington Herald-Dispatch that “no funds have been taken from [Blackjewel] to finance this project.” Brent Walls is also the contact person named by Blackjewel for Triple H Real Estate, the Jeff Hoops-managed LLC seeking $5.9 million in royalty payments.
While media coverage has tended to focus on Hoops due to his unorthodox financial dealings with his companies and high-profile resort development, less attention has been paid to Blackjewel’s majority owner, the private equity firm Lime Rock Partners.
Lime Rock Partners
Lime Rock Partners, a Connecticut- and Houston-based private equity firm, is the majority owner of Blackjewel and is also a secured creditor, providing $3 million of a $34 million loan to Blackjewel led by Riverstone Holdings.
Lime Rock is an energy-focused private equity firm, with investments in fossil fuel companies throughout the supply chain. As mentioned above, a Lime Rock fund – Lime Rock Partners V – owns a 62.5% stake in the Blackjewel and two Lime Rock managing partners – co-founder John Reynolds and chief financial officer Jeffrey Scofield – sit on the Blackjewel board of directors.
Beyond Lime Rock’s 62.5% ownership of the Class A shares of Blackjewel, Lime Rock managing partner John Reynolds also appears to have a personal investment in the company. According to a filing in the bankruptcy case, the John Reynolds Revocable Trust owns 20,000 senior preferred shares in Blackjewel (out of 40,000 total), which were purchased for $2 million. Preferred shares in a company often guarantee dividend payouts to their owners and pay out dividends at a higher rate than common shares. In the event of a corporate liquidation – which is one possible outcome from Blackjewel’s bankruptcy – preferred shareholders get paid before common shareholders.
Several public and private pension funds, university endowments, and philanthropic foundations are invested in Lime Rock Partners V, which raised $1.4 billion in 2008, primarily from clients already invested with Lime Rock.
Public pensions include the California Public Employees Retirement System ($85 million), the Colorado Public Employees’ Retirement Association ($50 million), the New Mexico Public Employees’ Retirement Association ($10 million), the Pennsylvania State Employees’ Retirement System ($42.5 million), and the State Teachers Retirement System of Ohio ($75 million).
Two public universities – the University of California system and the University of Michigan – have their endowments invested in Blackjewel through Lime Rock Partners. The University of Michigan Endowment has $50 million invested in Lime Rocker Partners V and the Regents of the University of California has $30 million.
Private pensions invested in Lime Rock Partners V include the Employees’ Retirement Plan of Duke University, the Massachusetts Institute of Technology Long-Term Disability Plan, the MIT Basic Retirement Plan ($7 million), and the MIT Retiree Welfare Benefit Trust ($1 million) and the Northwestern Memorial Hospital Employees’ Pension Plan ($3 million).
Among the charitable foundations whose money Lime Rock invested in Blackjewel are the Andrew W. Mellon Foundation, the Carnegie Corporation of New York ($10 million), the James S McDonnell Foundation ($1 million), the John S and James L Knight Foundation ($7 million), the J. Paul Getty Trust ($16 million), the Neubauer Family Foundation, the Polk Brothers Foundation, the Pritzker Traubert Family Foundation, the Robert Wood Johnson Foundation, the Rockefeller Foundation ($25 million), and the Bat Hanadiv Foundation No. 3.
Other investors include the Aberdeen Private Equity fund of funds ($15 million), the multi-family office Stonehage Fleming Family & Partners, and the financial services firm TIAA ($85 million).
Though Lime Rock’s relationship to Blackjewel has gone relatively unremarked upon during the bankruptcy, the fund’s involvement merits some scrutiny considering the abrupt closure of Blackjewel’s mines and the millions of dollars in unpaid wages and benefits to workers. As majority owners with a controlling presence on Blackjewel’s board, Lime Rock managing partners John Reynolds and Jeffrey Scofield should have had some knowledge of the severe cash flow problems that led to Blackjewel’s abrupt bankruptcy and failure to pay its workers.
According to Blackjewel’s bankruptcy petition, the company’s biggest secured creditor is a fund controlled by the private equity firm Riverstone Holdings. A Riverstone Holdings fund, Riverstone Credit Partners LP, lent Blackjewel $28 million along with $6 million from Jeff Hoops and Lime Rock Partners.
Riverstone Holdings lent Blackjewel another $5 million in emergency financing on July 3, demanding that founder and minority owner Jeff Hoops resign as a condition.
Riverstone Holdings is an energy-focused firm with investments in a variety of fossil fuel companies, primarily in the oil and gas industry, but also in coal and some renewable energy companies. The firm was founded by David M. Leuschen and Pierre F. Lapeyre Jr., two alumni of Goldman Sachs’ Global Energy & Power Group.
Investors in Riverstone Credit Partners – the Riverstone Holdings fund that financed Blackjewel – include the Teachers Retirement System of the State of Illinois ($50 million), the Texas Tech University System Endowment ($15 million), the Missouri Department of Transportation and Highway Patrol Employees Retirement System ($12.5 million), the Employees’ Retirement System of Baltimore County ($10 million), the Dallas Police & Fire Pension System ($10 million), and the Hartford Municipal Employees Retirement Fund ($5 million).
Other investors include the Bert Bell/Pete Rozell NFL Player Retirement Plan, the Kaiser Permanente 401(k) Retirement Plan, the New Hampshire Retirement System, and the Operating Engineers Local 324 Defined Contribution Pension Plan.
Other secured creditors
Other secured creditors to Blackjewel include Caterpillar Financial Services, United Bank, Fifth Third Bank, Javelin Global Commodities, and Uniper SE.
Blackjewel owes Caterpillar $23.8 million on a loan for mining equipment according to Hoops’s declaration.
Blackjewel has a line of credit and term loan with United Bank, upon which it owes $5 million and $1 million respectively.
An equipment loan from Fifth Third Bank landed Blackjewel in court with the bank. Upon petitioning for bankruptcy, Blackjewel said it owed $7,342,828.88 to the bank in the judgment in that lawsuit and in prejudgment interest.
Blackjewel also owes money to two commodity traders: Javelin Global Commodities and Uniper SE. Each company paid $5 million to Blackjewel in prepayment for 176,000 short tons of coal. As of Blackjewel’s bankruptcy petition, Javelin’s prepayment amount had been reduced to $1,791,678 and Uniper’s prepayment amount had been reduced to $4,952,875.
Back taxes, public royalties, and fines
Beyond the money owed to its workers and the claims of its creditors, Blackjewel owes more than $100 million in unpaid taxes and royalties to various state and federal governmental entities.
The US Department of the Interior Office of Nature Resource Revenues tops the list of the 30 largest creditors to Blackjewel submitted in the bankruptcy proceeding. According to that list, Blackjewel owes the US government $60,058,947.80 in mining royalties.
Blackjewel’s list of its top 30 creditors says that the company owes $10,339,211.56 to the Internal Revenue Service for back taxes. However, claims made by the IRS against Blackjewel and the related companies Lone Mountain Processing LLC, Revelation Energy Holdings LLC, Revelation Management Corp, and Blackjewel Holdings LLC total $19,884,744.18 – nearly double what Blackjewel reported.
The company’s list of top 30 creditors also includes several state and local governments where their mines are located:
- Campbell County, Wyoming: $37,085,803.80
- Wyoming Department of Revenue: $11,624,023.74
- Kentucky State Treasurer: $6,052,821.64
- Missouri Department of Treasury – Office of Surface Mining: $2,190,578.04
- Virginia Department of Taxation: $1,628,057.15
Claims filed so far by these governmental entities do not all match up perfectly with the amounts estimated by Blackjewel. In some cases, such as the IRS claims for $19.9 million, claims exceed the amounts estimated by Blackjewel. In other instances, government agencies have filed claims for less than what Blackjewel estimated it owes them or had not yet filed claims when this piece was published.
Some governmental bodies who were not on Blackjewel’s list of its top 30 creditors have also filed claims:
- Kentucky Department of Revenue: $19,921,972.55
- West Virginia State Tax Department: $10,563,902.13
- Buchanan County Virginia Treasurer: $555,346.18
- Virginia Employment Commission: $392,494.58
- State of West Virginia Office of Miners’ Health, Safety and Training: $670.00