Indictment of CEO potential turning point in coal mine safety
It signals that federal prosecutors are ready to go after the top ranks of coal executives when they uncover a pattern of safety violations. If successful, they would set new legal precedents.
“There have long been bad choices in the coal mining business, but the fall guys have always been the lower echelon employees,” says Jim Lees, a former prosecutor and criminal defense lawyer, based in Charleston, W.V., in an interview. “I don’t recall prosecutors ever making their way to the boardroom.”
Such a case is hard to prove. In a best-case scenario, holding top executives responsible for mining disasters would force corporations to place more emphasis on mine safety, standards that would apply far beyond coal mining to all industrial sectors, he adds. In the worst case, this prosecution will simply drive corporate decisionmaking underground to avoid potential scrutiny.
On Nov. 20, Mr. Blankenship, the former chief executive of Massey Energy, pleaded not guilty to three criminal counts dealing with violations of mine safety laws and a single count of securities fraud. The indictment was in connection to the 2010 explosion of a Massey coal mine outside Beckley, W.V., which led to 29 mining fatalities. The trial date is set for Jan. 26.
The Blankenship case is exceptional. Shareholders and boards see him as a man driven to perfection; unions and regulators view him as heartless and insolent, especially toward government monitors.
Prosecutors, who filed formal charges Nov. 13 in US District Court for the Southern West Virginia, maintain that the coal boss’s blind pursuit of increased production and greater profits came at the expense of coal miners’ safety. In the years leading up to the indictment, federal prosecutors had secured four other convictions of Massey personnel, who ostensibly have been cooperating with them as prosecutors worked their way up the corporate ladder. Massey Energy is now owned by Alpha Natural Resources.
To win their case, however, prosecutors will have to accurately reconstruct the decisionmaking process that led to the safety violations, which in a coal business with $2.3 billion in revenues is quite difficult, Mr. Lees adds.
Blankenship has hired a high-powered legal team to defend himself. Two of his attorneys represented Dominique Strauss-Kahn, the former head of the International Monetary Fund, who was accused of sexual harassment.
“Mr. Blankenship is entirely innocent of these charges,” his attorney William Taylor said in a statement. “He will fight them and he will be acquitted.”
Prosecutors allege that Massey neglected to follow mine safety laws, resulting in the explosion at the Upper Big Branch, or UBB, mine. Workers had been ordered to disconnect services to detect leaks, keeping the mine running, they say, while employees had a system in place to send alerts that government monitors were on the way.
“Blankenship knew that UBB was committing hundreds of safety-law violations every year and that he had the ability to prevent most of the violations . . . . Yet he fostered and participated in an understanding that perpetuated UBB’s practice of routine safety violations, in order to produce more coal, avoid the costs of following safety laws, and make more money,” the indictment reads.
Specifically, between Jan. 1, 2008 and April 9, 2010, the UBB branch was cited 835 times for mine safety violations. Massey had been assessed about $900,000 in fines but had only paid $168,000 of that. Indeed, a central criticism of the company is that it would drag its feet and contest everything, hoping to wear down regulators and continue business as usual.
The indictment alleges that Blankenship was obsessed with increasing mine production, forsaking routine safety work. “For example, ... Blankenship sent the known UBB executive a handwritten note chastising him for employing too many coal miners in jobs that focused on safety examinations,” calling the allocation of such resources “ridiculous and crazy.”
In another note to a different executive, he wrote, “As I said at UBB, ... I could Krushchev [sic] you. Do you understand?” (Former Soviet Premier Nikita Khrushchev once said Communism would bury the West.)
The charges for violating workplace safety laws range from one to five years. The single count for securities fraud is eligible for a 20-year prison sentence – a charge that maintains the coal baron lied to shareholders, telling them that after the UBB accident that the company valued mine safety above all else. Prosecutors countered that the stock had fallen 17 percent right after the disaster, causing Blankenship’s net worth to fall by $3 million. UBB made up 14 percent of Massey’s $2.3 billion in revenues – the biggest division in that company.
If convicted on all counts, Blankenship could be sentenced to 31 years in prison. Lees, the West Virginia attorney, says that prosecutors have the upper hand in this case, given that they have spent four years building it while the defense team has just months to prepare.
“I think there are extremely political overtones to this case, which is not to say that the case was brought for political reasons,” he adds. “Feelings are running intensely high among the mining communities – that their husbands, fathers, and brothers were not protected. There is a lot of sentiment among the unions as well that Don Blankenship did not run safe operations. And the reality is that if you prosecute him successfully, you could make a name for yourself.”