The federal government is looking at possible fraud by the owner of the Belle Ayr and Eagle Butte coal mines in Campbell County, even as a possible sale of the mines by Blackjewel, LLC, appears imminent, according to bankruptcy court records.

“Since the commencement of the bankruptcy proceedings, counsel for Blackjewel and the United States have engaged in discussions under the False Claims Act made against the Blackjewel and the United States’ investigation of Blackjewel,” Assistant West Virginia U.S. Attorney Fred Westfall, Jr., wrote on Saturday.

Monday afternoon, he asked the Bankruptcy Court for the District of West Virginia on behalf of the IRS, Department of the Interior and other federal agencies to require Blackjewel and other debtors to preserve and not destroy their business records.

Their preservation is necessary to evaluated the assets and liabilities of the debtors, comply with federal land state laws, and to determine whether any potential legal actions may be brought against any of the debtors or anyone involved with them, Westfall wrote.

Prosecutors already were investigating possible fraud before the Milton, W.Va.-based Blackjewel filed Chapter 11 business reorganization bankruptcy protection on July 1.

According to the Federal Rule of Bankruptcy Procedure, a party to a case has 60 days to file a complaint about discharging debts — Blackjewel owes millions of dollars in taxes — within 60 days after the first meeting of creditors on Aug. 6.

That deadline was Sunday, Oct. 5.

On Saturday, Westfall asked the bankruptcy court to extend the deadline to Dec. 4 about discharging its debts because of the investigation of possible fraud.

Blackjewel doesn't object to the federal government’s claims or extending deadline, Westfall added.

In August, the court approved the mines' sale from Blackjewel to the Bristol, Tenn.-based Contura Energy, but the deal has been held up while the government seeks payment of federal mineral royalties.

Meanwhile, Contura last week asked the court to allow it to pay $90 million to  Eagle Specialty Materials, a subsidiary of FM Coal, to take Eagle Butte and Belle Ayr — the fourth- and sixth-most-productive coal mines in 2017.

Contura also would pay Campbell County $13.5 million for unpaid local taxes.

Eagle Specialty Materials would settle certain outstanding debts to creditors and assume $237 million in reclamation bonds associated with the mines because Contura still owns the Wyoming mining permits.

The proposal relieves Contura of future liabilities associated with the Powder River Basin mines while providing "long-term employment opportunities for hardworking miners" and government revenue, Contura Chairman and CEO David Stetson said in a statement.

On the day Blackjewel filed for Chapter 11 bankruptcy protection, it sent about 600 workers home. Some have returned to the mines for some work. Hundreds more have been out of work at closed mines in Kentucky, Virginia and West Virginia.

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