by Mike Roselle
Every few minutes the big man would get a fax from his assistant. He would compulsively scan the numbers. Every two hours, for every mine he ran except one, he would get an update on the amount of coal coming out of each mine. For that one, the Upper Big Branch Mine, the big man would get a report on coal production every half hour. If production went down in any of these mines he didn’t send an e-mail or text, or even make a phone call. He scrawled his orders on the print outs and faxed them back. “Move more coal” “You have a kid to feed. Do your job,” “I could Khrushchev you. Do you understand?” “In my opinion, children could run these mines better than you all do. Look at your cost and figure out what you are going to do to get it down because if we don’t have a better August and September than we had July, you can be assured that the stock options are not going to look very attractive.”
The man writing these frantic orders was Don Blankenship, CEO of Massey Energy and the most infamous coal baron in Appalachia. He was relaying these orders to his second in charge, Chris Blanchard, (aka “Unnamed” in the text of the recent Federal Indictment), the supervisor of Marfork Coal Company, a Massey owned operation that also included the Upper Big Branch Mine complex near the small town of Rock Creek, on the Coal River in southern West Virginia.
It was 2009 and the prices for metallurgical coal were dropping from an all time high of close to two hundred dollars a ton in 2008 to just under seventy dollars a ton. In 2008 met coal had been in high demand and fetched high prices due to international shortages blamed on flooding in Australia and a building boom in China. The big man was starting to see profits go down and wanted to cut labor costs until the market slump was over. He was paying 18 dollars a ton in labor and wanted that down to 14 dollars a ton, or someone was going to lose their job. Metallurgical coal still sold for substantially more per ton than Massey’s other major product, which was steam coal used to generate electricity. Metallurgical coal from UBB was particularly important to Massey because it was an essential ingredient in a blend of metallurgical coal needed to make steel that also included coal from a group of other Massey mines near UBB.
When operating at full productivity, the UBB longwall mining section could produce more than $600,000 worth of coal every day, more than any of Massey’s dozens of other underground mining sections. The equipment needed to run a longwall mining section was expensive, typically costing many tens of millions of dollars. It was this machine, called a continuous miner, that would be at the center of every event that followed. During the Indictment Period, Blankenship personally monitored the details of UBB’s longwall operations closely. After the longwall section began operation at UBB, the big man insisted on personally receiving a report every thirty minutes not only detailing the longwall section’s coal production but also the reasons for any production delays. He even insisted on receiving this report via fax at his home on evenings and weekends.
In November 2009, when the expected inflow of water entered the area of the UBB longwall section, there was no system in place to drain it, and airways that were necessary to ventilate the mine flooded, at least two of them filling with water from floor to roof. This is a mine well known to contain a lot of methane gas. On December 14, 2009, a federal mine safety inspector issued a shutdown order upon discovering that coal miners at UBB were being required to work and travel in dark and murky water measuring up to four feet in depth with invisible “slip and trip” hazards on the floor of the flooded area-conditions that the inspector found could result in drowning. This decision to hasten operation the longwall miner was made in substantial part as a result of pressure from the big man to begin operating the longwall machine as soon as possible.
For Don Blankenship, this was not a coal mining machine, it was a money making machine, the most profitable one in the USA, and he wanted to run it 24/7 with as few workers as possible, with no workers allowed to shut down the machine to attend to the many safety procedures required by law. That meant poor ventilation due to low airflow and lack of properly placed curtains. That meant no cleaning up the coal dust that covered the mine floor to a depth of up to a foot, or even scattering limestone the dust or it to keep it from being combustible. Or fixing the water sprayers that help control dust and to cool the cutting heads of the longwall miner to prevent the friction and heat from igniting the dust.
Not that Massey or Big Don were losing money. Even though coal production had fallen by 32 percent since its peak in 2008, by 2009, the UBB mines generated revenues exceeding $331 million, which represented l4% of Massey’s total $2.3 billion in revenue. For 2010, Massey projected even higher revenues of $432 million for the UBB, which would have been 16% of Massey’s total projected revenue of $2.7 billion, and more than the projected revenue for any other Massey mining group. U.S. Securities and Exchange Commission filings show Blankenship was paid $17.8 million in 2009, the highest in the coal industry. His 2009 pay represents a $6.8 million raise over 2008 and almost double his compensation package in 2007. Blankenship also received a deferred compensation package valued at $27.2 million in 2009, a year in which Blankenship received notices of more than 890 violations of mandatory mine safety and health standards, according to Massey’s own account in the daily safety-law violation reports he received from Blanchard. He did nothing to address them, and yet Massey’s board of directors voted to award Blankenship bonuses that brought his total compensation for the year to over $17.8 million.
On April 5, 2010, a huge explosion occurred at the UBB. Not surprisingly, its epicenter was at the longwall mining machine where investigators found that the water presser was inadequate to cool the grinders, there was only half of the airflow needed to control methane, air shafts were flooded, and no rock dust or coal dust cleanup had been performed since the machine was installed. 29 men lost their lives and at the time of this writing the UBB mine has not reopened since. In 2011 Massey merged Alpha Natural Resources and the big man was released from the company’s management, although he still remains a major stockholder.
By April 7, 2010, Massey’s Class A Common Stock price had dropped to $9.15 per share, or l6.8% down from its closing pricing on April 5, 2010. For the second quarter of 2010, Massey Energy reported a net loss of $88.7 million or $0.88 per share. Massey generated $693.1 million of produced coal revenue in the quarter from the sale of 9.8 million tons of coal. By comparison, Massey reported net income of $20.2 million on produced coal revenue of $603.2 million in the second quarter of 2009 from the sale of 9.4 million tons of coal. This decrease reduced Blankenship’s net worth on his 291,223 shares of Massey stock by approximately $3 million. His actual net worth is rumored to be in the hundreds of millions, much of it in offshore accounts.
Other large institutional investors lost much more and soon filed complaints with the Security and Exchange Commission. From April 7, 2010, through April 9, 2010, Big Don was getting nervous about the company’s stock value. He retained a law firm and a public relations firm and issued the official Massey response to the tragedy. “We at Massey,” it stated, “do not condone any violation of Mine Safety and Health Administration regulations and we strive to be in compliance with all regulations at all times.” Consequently, this claim was repeated verbatim in a filing made with the SEC, and in a press release distributed by means of interstate wire transmissions and companies engaged in the business of distributing press releases by means of interstate wire transmissions.
On April 8, 2010, Blankenship reviewed and approved the UBB Shareholder Statement, and approved its release to the public and its filing with the SEC. This was his biggest mistake. On November 20th Don Blankenship was indicted on four felony counts in the Federal District Court of the Southern Region by US Attorney Booth Goodwin. You might be forgiven for thinking Big Don was being held accountable for what the late Senator Robert Byrd called “industrial homicide.” Twenty nine men would never see their families again. The tragedy was found to be preventable and due to a lack of compliance to mandatory health and safety procedures that were ignored to produce more profits for Massey. But that is not the case. At least not the case Mr. Goodwin will submit to the court.
Of the four counts he is charged with, with a combined maximum sentence of 31 years, the most serious charge against Blankenship is Securities Fraud, with a 20 year maximum sentence upon conviction. The second two are lying to the investigators investigating the blast. These charges carry five years each. The fourth and final count is conspiracy to violate the health and safety laws prior to the blast. This carries, upon conviction, a maximum sentence of one year.
The blast itself, and the death of 29 men will not an issue here and won’t be mentioned much in the trial, if at all. Goodwin would simply have not been able to connect Blankenship to the explosion and prove his responsibility for the deaths. The good news is that he doesn’t need to.
Regardless that the four counts do not include cold blooded murder, we in West Virginia and the rest of the world know that the big man is on trial for the deaths of those men just as the nation knew that Al Capone’s trial on tax evasion was for his part in the St. Valentine’s Day Massacre. There will be no one in the courtroom or on the jury that doesn’t remember that morning. There is no one in Raleigh County that doesn’t know who ran Massey Energy. And the real good news is this: In the two counts charging Big Don of violating the mining laws, he has already incriminated himself with his own words, scrawled on fax paper, and in the hands of the Federal Prosecutor, and that is all that is needed to prove the other two counts. A slam dunk? I think so.