CASPER — The unprecedented bankruptcy case involving coal operator Blackjewel showed signs of resolution last week when a federal judge approved the sale of two Wyoming coal mines to a new company called Eagle Specialty Materials. But a court document filed Saturday revealed the federal government has been investigating Blackjewel for potential fraud since before the company filed for bankruptcy, adding another possible wrinkle to a case that has rattled Wyoming’s coal country for more than three months.
“The United States was investigating potential violations of the False Claims Act by Debtor, Blackjewel, LLC, and had issued a subpoena to Blackjewel in connection with that investigation,” Fred Westfall, a U.S. attorney stated in court documents.
The federal government asked the West Virginia federal bankruptcy court to delay discharging Blackjewel of its debts, a move that would allow the federal government to continue investigating possible violations of the False Claims Act. The False Claims Act holds corporations that defraud the government liable.
“The idea behind the law is (a company) should not be able to use bankruptcy to defraud the government out of debts owed to the government,” Joshua Macey, a law professor at Cornell University, studying bankruptcy laws, told the Star-Tribune.
Once the sale of a handful of its coal mines are finalized, Blackjewel will liquidate, or cease to exist in the court’s eyes. The technical conclusion of the Chapter 11 bankruptcy case makes pursuing an ongoing investigation, or repayment, against the company much more difficult, Macey explained. The complaint and ongoing investigation will likely not affect the purchase of Eagle Butte and Belle Ayr mines, approved by the court Wednesday, according to Macey. But the federal government will probably not be able to recover the $50 million owed in royalties and rent. About half of federal mineral royalties flow back to the state of Wyoming. According to the sales agreement, the new owner will acquire the mines free and clear of most outstanding debt obligations.
By Camille Erickson
Casper Star-Tribune Via Wyoming News Exchange