Blackjewel's unpaid bills wrecked businesses, owners say
July 11, 2019
GILLETTE— A year to the day before Blackjewel LLC shocked Wyoming by abandoning the Eagle Butte and Belle Ayr coal mines, the Golay family gave up on Blackjewel.
The Golays had cleaned mine buildings for decades, and for multiple owners. But by July 1, 2018, Blackjewel had driven them out of business, they told WyoFile. Months of the company stiffing their family-run cleaning business had left them unable to pay their home mortgage or other bills. They’d foregone those personal obligations to pay their four employees, the Golays said, until they ultimately had to lay them off.
In a July 25, 2018 letter to now-ousted Blackjewel CEO Jeffrey Hoops, Tana Golay listed the invoices the company had left unpaid in a desperate attempt to collect. The outstanding invoices added up to $37,500, a grain of sand in the soaring pile of hundreds of millions of dollars in debt Blackjewel accumulated before the company came crashing down last week. But for the Golays, it was everything.
“Mr. Hoops, what took us 27 years to build as a ‘MOM & POP’ business, you have torn down in less than 7 months,” Tana Golay wrote. “Congratulations!”
The Golays are not alone. Blackjewel racked-up debt all over Gillette. The company owes $156 million to vendors Blackjewel traded with in “the normal course of business,” according to bankruptcy filings. It’s unclear how much of that money is owed to local vendors in Wyoming. But in interviews this week, local business owners said the company was always slow to pay and often would only settle debts when threatened with loss of service.
The story of the Golays and other Gillette businesses raises increasing questions about Hoops’ financial management of the company and shows the widespread wreckage left behind when two large coal mines fall into the hands of a company that didn’t pay its debts.
In the fall of 2018, Blackjewel finally paid the Golays what they owed, but it was too late to save their business. The court took Blackjewels late payment as part of Carefree Cleaning’s bankruptcy proceedings. The Golays now work for the local school district. Their financial status is diminished and their mortgage is harder to cover. They miss being business owners, instead of government employees, they said. Their bankruptcy filings shows a sharp drop in income for the couple.
“We lived comfortably,” Tana Golay said. “Now we struggle.”
Last week, Blackjewel suddenly abandoned the two mines, sending home nearly 600 workers. Two days later Hoops was forced out as CEO by lenders in proceedings a bankruptcy judge called “unprecedented.”
Among Blackjewel’s unpaid bills is a nearly $6 million debt to Wyoming Machinery Company, an industrial equipment dealer out of Casper. The large company has lawyers filing motions in West Virginia bankruptcy court to secure the money it’s owed and reclaim equipment left at the mines. Smaller business operators interviewed by WyoFile this week don’t have those resources. If the mines don’t reopen, as they hope, they’ll have to walk away and try to rebuild.
Blackjewel acquired the mines in December 2017. From that point forward the operation was negligent in paying its bills, four Gillette-based contractors or business owners told WyoFile this week. Some of those companies have uncollected accounts with Blackjewel big enough to wreck their balance sheets. Two of them have laid off or plan to lay off employees since Blackjewel’s July 1 collapse.
All of them blamed Hoops for not paying Blackjewel’s bills, not the local management team that moved with the mines through a series of owners. Local vendors had built relationships with the mines’ staffs under different ownership for years, and say those relationships were tested after the man from Appalachia took over the company and it became much harder to collect.
“I feel sorry for the management and accounts receivable [department],” said Doug Cox, owner of Western Services, a courier service that transferred machine parts to the mines, often on an emergency basis.
“They’re the ones whose reputations suffer because Jeff Hoops didn’t pay his bills,” Cox said. “That’s really hard on really good people that live in this town.”
WyoFile received no response to a request for comment from a lawyer and was unable to contact Hoops himself.
The bankruptcy filing that caught state and county officials flat-footed was less shocking for those who say Hoops stiffed them for over a year and a half.
“We saw it coming,” said Tana Golay. “I don’t know why nobody else did.”
Contractors who provide machinery, delivery, cleaning and maintenance services to Eagle Butte and Belle Ayr describe a cycle with Blackjewel under Hoops. They would go out to the mines and do the work, either for the occasional job or on a contract like the Golays. They’d bill Blackjewel for their work. The bills would go unpaid and pile up.
Some, like Cox at Western Services, would threaten to stop work. “You never got paid unless you called and threatened to cut off service,” Cox said.
Managers at another small Gillette company, Elite Industrial, would threaten to cut off their work repairing machines and doing electrical contracting. “All of a sudden there’d be a check here by 5 o’clock,” said Sven Lunberg, a manager there. Elite Industrial has 17 employees, Lunberg said.
Paid for several outstanding invoices, the contractors would go back to work. Then the cycle would repeat itself. “Then [the debt] would get big again and I’d threaten to cut off services and get paid again,” Cox said.
But some of those companies had significant unpaid bills when Blackjewel filed for bankruptcy last week. Western Services is owed $600,000 and had to lay off seven of 22 employees, Cox said. Elite Industrial is owed $20,000 and will likely have to lay someone off, Lunberg said. While news accounts and state officials have focused on the 580 Blackjewel employees, the real number of jobs lost to the bankruptcy is likely already higher than that and likely to continue growing, local businessmen say.
The business owners interviewed by WyoFile have lost what little faith remained in Hoops. Yet some contractors expressed hope they could go back to work with Blackjewel now that the CEO has been ousted, as a new management team pursues financing to reopen the mines.
“I think you’ll see [debts] worked out without Hoops in charge,” Cox said.
Forgiveness for the out-of-state businessman who snapped up the two struggling coal mines is harder to come by in Gillette, where mine workers have bemoaned the loss of retirement savings and contractors blame Hoops for unpaid bills.
“To leave employees high and dry like that, it’s almost malicious,” said Lunberg.
Vern Golay bought Carefree Cleaning from his father, he said. They’ve cleaned at other mines for Peabody Energy and Kiewitt and for 15 years cleaned the Eagle Butte and Belle Ayr mine buildings under Alpha Natural Resources, Contura Energy and finally Blackjewel. Around 2010, the couple focused their business solely on the Eagle Butte and Belle Ayr. Vern and Tana and their son cleaned office buildings and employees’ changing rooms and break rooms, laboratories where coal was tested and the control rooms that supervised the loading. They cleaned around electrical equipment and industrial mining machinery.
Business was good and getting paid wasn’t a question until Hoops’ Blackjewel took over, they said.
“For 14 years,” Vern said, “we’d put a bill on their desk and five days later we’d get paid.”
When Alpha Natural Resources declared Chapter 11 bankruptcy, Carefree Cleaning had to wait a year on two bills, but when the payment came in, it came with “a little interest,” Vern said.
The Golays kept cleaning the mines as Alpha Natural Resources created a new company, Contura Energy, and spun the mines off to them. They kept cleaning as Contura sold the mines to Blackjewel in 2017. In a testament to the state of the coal industry, two of the nations’ most productive mines sold at a loss, but in statements Contura said getting out from under the reclamation and other obligations put them ahead in the long run.
Blackjewel took over mine operations. The Golays kept cleaning, and billing. “Then a month comes along,” with no check, Vern said. “Then two months comes along.”
They could float for a while, he said, but started asking local management where their checks were. Blackjewel paid Carefree Cleaning for several months of accumulated bills sometime in March or April of 2018, Vern said. By then they’d already laid off their four employees. The couple and their son were doing the cleaning at the two mines by themselves. “We’re still trying,” Vern said.
When the money came in, they hired employees back.
They kept cleaning the mine buildings. But again, Blackjewel didn’t pay. “We let everybody go again at the end of May,” Vern said. “We’re broke again.” The Golays had been driving up their debt to pay their employees, Vern said. They were neglecting mortgage payments and making tough decisions each month about their other bills.
“We were keeping our lights and our gas on,” and that was it, Tana said.
Tana Golay was cleaning the buildings at Eagle Butte by herself, a job previously done by four people, Vern said. Her body ached. “Her rotator cuff was wearing out on her,” Vern said.
By the end of June, Blackjewel was three months behind on paying the couple. A local employee they’d worked with for years called a meeting with them, and, unable to get the money out of the eastern Blackjewel management, told the couple to “walk away,” according to Vern.
The Golays were done. On July 1 they packed their stuff and walked away. “A year ago exactly,” from when Blackjewel shuttered its doors, Vern said.
The company didn’t settle up until the following fall, Vern said. By then, the Golays were in bankruptcy proceedings. Records at the Wyoming Bankruptcy Court show the Golays filed for Chapter 7 liquidation bankruptcy on Oct. 2. The couple owed significant taxes.
“I’m broke and I’m 63,” Vern said on Tuesday, speaking to WyoFile in the living room of his house in Gillette. He’s now a custodian for Campbell County School District #1, where his wife also works. If he works until he’s 70, he should be able to retire, Vern said.