It might have otherwise gone unnoticed, but Bristol-based Alpha Natural Resources, one of the country’s largest coal companies, has agreed to settle a leftover securities fraud lawsuit for $265 million involving Massey Energy Co., the notorious, formerly Richmond-based firm that Alpha bought in 2011.
The settlement with the Pension Reserves Investment Management Board, which oversees pensions in Massachusetts, is just one of a number of lawsuits by shareholders and investors challenging Massey’s safety record which led to a 2010 mine blast in West Virginia that killed 29 miners and was the worst such incident in the U.S. in 40 years.
Massachusetts Treasurer Steven Grossman, who is chairman of the investment board, says the settlement shows that businesses need to be “open and transparent to people who invest in them.”
Massey, which had the worst safety record in the country before the mine blast at Upper Big Branch, was forced into sale and was bought by Alpha for $7.1 billion. Since then, Alpha has been working to clean up various lawsuits and improve safety by retraining the Massey employees who started working for Alpha after the sale. By June 2012, federal prosecutors said that Alpha seems to have made progress improving safety conditions.
Donald Blankenship, the hard-nosed former chief of Massey who got a golden parachute worth at least $86 million after resigning in 2010, is still the possible target of a federal probe in West Virginia.
Indeed, one unresolved issue is what exactly the culpability of corporate executives and directors is if they know something is badly wrong with their firm but don’t do anything about it. A bill in Congress that would toughen oversight and set higher levels of responsibility for corporate boards has gone nowhere.
Unless, federal prosecutors take indictments against former Massey officials, perhaps including Blankenship, it seems that any kind of justice will have to come from lawsuits such as that by the Massachusetts pension fund.
The Massachusetts lawsuit, which claimed that Massey misrepresented its safety record to artificially prop up its stock price, has been just one of a slew of legal actions on public criticism by investors in New York, Connecticut and other states.
Not all of the suits have been successful. A federal judge in West Virginia recently ruled against a suit by one shareholder, saying that his concerns had been addressed in other settlements. Blankenship’s payout, part of the accusation, was remarkably generous but legal, the judge decided.
An Alpha spokesman said that the firm decided to settle the Massachusetts lawsuit so it could move on to other things. Part of the buyout price included a legal fund to settle Massey’s claims, including a $1.5 million payout to each of the families of Upper Big Branch victims.
But that’s a core part of the problem. Bad companies do their damage and people die or the environment is destroyed. Prosecution is nonexistent to sluggish, especially in a place like West Virginia where King Coal rules. The current federal probe has been going on for about two years with only three convictions of fairly low- to middle-level employees.
In the 1970s, for instance, former Gov. Arch Moore, who later served time in prison for corruption involving payoffs from coal firms, personally dropped penalties sought in a lawsuit against Pittston Coal (an Alpha predecessor) from $100 million to $1 million. Pittston was involved in building flimsy waste dams on Buffalo Creek which breached in heavy rain in 1972. The ensuing tsunami of filthy water, 30-feet high, killed 125 people as it washed out downstream towns.
With history as a judge, it may show progress that Alpha is paying out $265 million to get rid of yet another Massey lawsuit. In reality, though, it isn’t that big a deal by today’s standards. Much of the cost had already been factored in during the $7.1 billion buyout. Massey former executives are either long gone or were absorbed into Alpha’s structure.
Alpha has built memorials to the dead miners at Upper Big Branch and is a major donor to politicians and do-good projects, such as West Virginia Public Broadcasting’s popular “Mountain Stage” radio show.
The largesse naturally plays out in Alpha’s home state of Virginia where it favors Republicans but can be pragmatic. Alpha gave Republican Ken Cuccinelli at least $92,500 in the recent gubernatorial election and only $10,000 to Democrat Terry McAuliffe. Now that McAuliffe has won, Alpha is giving him $25,000 for his Jan. 11 inauguration.
But then, giveaways are standard for coal companies, regardless of how they treat their employees or the environment. Under Blankenship, Massey Energy gave away millions to local colleges and to his home town of Matewan, W.Va. Massey’s previous, Richmond-based owners handed over millions in the capital area, creating such institutions as the Massey Cancer Center.
The cycle may alter a little, but it continues.
The writer is author of “Thunder on the Mountain, Death at Massey and the Dirty Secrets Behind Big Coal,” St. Martins Press, 2012.