By Greg Johnson

January 22, 2020 - Responding to allegations he milked Blackjewel LLC and its operations of millions of dollars, former CEO Jeffrey Hoops Sr. categorically denies claims made by the bankrupt coal producer, saying he instead went to extraordinary personal financial lengths in an attempt to save the company.

In a 31-page response filed in U.S. Bankruptcy Court on Tuesday afternoon, Hoops says he and Clearwater Investment Holdings loaned the company more than $41 million in the months leading up to filing bankruptcy July 1, and that they took back about $30 million in payment. While he acknowledges there isn’t any documentation for the loans and repayment, Hoops says it was above-board and legal.

Furthermore, Hoops claims he’s still owed about $11 million in unpaid loans to the company. Either himself, through family members or other companies he has interests in, Hoops also has filed claims against the Blackjewel estate for about $29 million.

Lawyers for the company filed a 48-page motion Jan. 9 asking for extensive discovery of Hoops, many of his family member and his companies. They also want the court to compel Hoops and others to submit to questioning. The underlying theme is an assertion that the bankruptcy was a result of mismanagement.

“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.

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 allegations in the motion is that Hoops and Clearwater Investment Holdings,“received more than $41 million” in distributions from Blackjewel prior to filing for bankruptcy “just in 2019 alone.”

Calling the claim “patently false,” Hoops says in his response that the company would have gone under more quickly without his and Clearwater’s help.

“Because no lenders were willing to provide any financing to the Debtors (Blackjewel), Mr. Hoops and Clearwater allowed their own personal lines of credit to be used to provide … a lifeline,” the response says. “This loan arrangement allowed the Debtors to keep their mines open, supplies flowing, their employees paid …”

He also objects to the wide-ranging discovery sought by Blackjewel, which ask for 20 entities and 10 individuals to produce documents that cover 62 outlined points of information. Overall, the company has demanded 2,880 discovery requests, which the objection says far exceeds attorneys going on a fishing expedition.

While the objection acknowledges “there were financial issues” leading up to the bankruptcy, it wasn’t anything out of the ordinary for other struggling coal companies during a down time for the industry.

“Virtually every company in this industry is suffering, has suffered, and in fact, this company is maybe the 61st coal company to go bankrupt,” according to the response. “So they actually managed through this substantially better than many of their colleagues and competitors and peers.

“Everything was done to try and save the company and keep it afloat.”

Blackjewel’s discovery is one of several items on the docket for a Wednesday motion hearing in the U.S. Bankruptcy Court for the Southern District of West Virginia.