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Blackjewel Brings Long-Held Questions About Former CEO Jeff Hoops To A Head

Stephanie Joyce

In a flurry of court filings last week, Blackjewel LLC and related entities sought permission to investigate the company's former CEO and President Jeff A. Hoops over what it called "a years-long effort by Mr. Hoops to transfer tens of millions of dollars of the Debtors' assets for his benefit and the benefit of his family and other Hoops-Related Entities."
Attorneys for Blackjewel requested extensive communications from Hoops along with many of his family members and affiliated companies. It's also seeking permission to investigate pre-bankruptcy transfers made by Hoops to other companies or related-entities.

"It appears that Hoops acted with one guiding principle: to use the Debtors and their assets to improve his personal, and the Hoops Parties', bottom line-despite the harm it caused the Debtors and their creditors," a court filing read.

It goes on that pre-bankruptcy actions may not have been legitimate or properly authorized, may have resulted in the improper removal of valuable resources from the Debtors estate, and that Blackjewel itself could be entitled to compensation.

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Marshall University
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Questions have surrounded Hoops' pre-bankruptcy actions since the company filed for bankruptcy on July 1, 2019. Just days after, Riverstone Credit Partners offered transitional, or debtor-in-possession, funding on the condition of Hoops resignation.

Court testimony in that first week revealed Hoops was making personal loans to Blackjewel and then paying himself back, rather than the highest tier debtor. Hoops had tried to describe $34 million he had paid to himself as normal business operations.

At the time, the U.S. Trustee said, "While we appreciate the emergency in this situation, we certainly think are suspicious that some of this is a situation that was self-made to have a quick result, where a loan that would favor the insider in this case."

Days later, Hoops released a letter, primarily in all-caps, seeking to set the record straight.

"THERE HAS NOT BEEN ONE CENT TAKEN OUT OF THE MINING COMPANY, THE EXACT OPPOSITE I HAVE LOANED MORE MONEY TO TRY TO GET THIS COMPANY THROUGH THESE DIFFICULT TIMES," he wrote at the time.

Now, Blackjewel's lawyers are accusing Hoops Parties of taking improper actions to harm the debtors for their own financial gain, "with little regard for the impact on the Debtors, their creditors, and the community at large."

Its January 9 filing lists off a series of questionable pre-bankruptcy money transfers, distributions, and loan agreements. That includes Hoops and Clearwater Investment Holding receiving more than $41 million in pre-petition distributions from Blackjewel related to "purported and undocumented loans or advances."

"It appears that Hoops acted with one guiding principle: to use the Debtors and their assets to improve his personal, and the Hoops Parties', bottom line"

Blackjewel's lawyers say those things "were never presented to, reviewed by, or approved by the Debtors' prepetition board of directors nor were they subject to any other independent, third party review. The nature and volume of these substantial payments in the period preceding the Debtors' chapter 11 filings raise significant questions about whether they were appropriate or enforceable."

The filing predicts there may have been hundreds of questionable transfers.

Lawyers attempted to meet with Hoops and requested that Hoops' counsel respond by January 8 as to whether parties would agree to all or some of the requested documents. Parties did not provide any "substantive" response.

The court has yet to approve the motions to begin investigation of Hoops and related parties. Mr. Hoops did not respond for comment.

Have a question about this story? Contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.

Before Wyoming, Cooper McKim has reported for NPR stations in Connecticut, Massachusetts, and South Carolina. He's reported breaking news segments and features for several national NPR news programs. Cooper is the host of the limited podcast series Carbon Valley. Cooper studied Environmental Policy and Music. He's an avid jazz piano player, backpacker, and podcast listener.

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