“Too Big to Jail” is a book about the rarity of corporate criminal prosecutions. CEO indictments almost never happen. But with every rule there are exceptions, and a big one just happed in West Virginia. Writes the Charleston Gazette,
Don Blankenship, the longtime chief executive officer of Massey Energy, was indicted Thursday on charges that he orchestrated the routine violation of key federal mine safety rules at the company’s Upper Big Branch Mine prior to an April 2010 explosion that killed 29 miners.
A federal grand jury in Charleston charged Blankenship with conspiring to cause willful violations of ventilation requirements and coal-dust control rules — meant to prevent deadly mine blasts —during a 15-month period prior to the worst coal-mining disaster in a generation.
The four-count indictment, filed in U.S. District Court, also alleges that Blankenship led a conspiracy to cover up mine safety violations and hinder federal enforcement efforts by providing advance warning of government inspections.…
The indictment also alleges that, after the explosion, Blankenship made false statements to the U.S. Securities and Exchange Commission and the investing public about Massey’s safety practices before the explosion.…
Blankenship pressured Upper Big Branch management to violate safety standards in favor of maximizing production and profits, the indictment alleges. One mine manager received a handwritten note from Blankenship in March 2009 “chastising him” for “insufficient attention to cost-cutting,” telling the manager, “You have a kid to feed. Do your job,” the indictment alleged. That same mine manager at Upper Big Branch was told, when he wasn’t producing as much coal as Blankenship demanded, “I could Khrushchev you. Do you understand?”
You can read the indictment here.
Notes the Associated Press,
"It's a big deal to charge a CEO, so prosecutors will need witnesses on the inside who can describe what the practices and the culture of the company were like," [University of Virginia law professor Brandon L.] Garett said. He said that testimony likely will come from some of the former Massey officials who have pleaded guilty and cooperated with the government.
One of those individuals is David Hughart, whom we covered in March 2013. Hughart, who pled guilty to two counts of conspiracy, implicated Blankenship “in what appears to be a widespread corporate practice of warning coal miners about surprise inspections.”
I don’t know if it's coincidence of just irony, but as Blankenship’s indictment was announced, NPR put out an incredible 2-part story resulting from a “joint investigation by NPR and Mine Safety and Health News,” which “found that thousands of mine operators fail to pay safety penalties, even as they continue to manage dangerous — and sometimes deadly — mining operations. Most unpaid penalties are between two and 10 years overdue; some go back two decades. And federal regulators seem unable or unwilling to make mine owners pay.” And the report begins by featuring the story of one Jack Blankenship, whose mining story progressed a big differently than Don’s:
Jack Blankenship was pinned facedown in the dirt, his neck, shoulder and back throbbing with pain.
He was alone on an errand, in a dark tunnel a mile underground at the Aracoma Alma coal mine in Logan County, W.Va., when a 300-pound slab of rock peeled away from the roof and slammed him to the ground. As his legs grew numb, he managed to free an arm and reach his radio. For two hours, he pressed the panic button that was supposed to bring help quickly.
"I couldn't hardly breathe," Blankenship remembered four years later. "I'd black out and come to. I was waiting to die. I'd already had my little talk with God."
Aracoma Alma and then-owner Massey Energy had a history of serious safety problems, including falling rock. In the two years before Blankenship's accident, the mine was cited by federal regulators more than 120 times for rock fall violations, according to records from federal regulators. That included inadequate roof support and deficient safety checks for loose rock.…
"Most folks out there, including me, are totally shocked when they find out that ... you can actually just sit around and not pay the fine and keep producing coal and put money in the bank," said Tim Bailey, Blankenship's attorney and a West Virginia native with three generations of coal miners in his family.
Retiring U.S. Sen. Jay Rockefeller, D-W.Va., said [Don] Blankenship and the mines he once operated "treated miners and their safety with callousness and open disregard. As he goes to trial, he will be treated far fairer and with more dignity than he ever treated the miners he employed. And, frankly, it's more than he deserves."
When Don Blankenship quit in December 2010, we covered the story of his golden payout, walking away with “$2.7 million, a free house for life, millions more in deferred compensation, and a ‘salary continuation retirement benefit’ of $18,241-a-month that will continue for 10 years after his departure at the end of the year.…Per W. Olstad, a lawyer with CtW Investment Group, a shareholder group that has pushed for Blankenship to step down, [called it], '[A]n egregious payout. It’s way beyond what he's earned. Given how destructive his mismanagement has been, he simply does not deserve it.'”
Well now, he may be spending 31 of those golden years in another kind of “free house”. Yet that won’t be his only legacy. Notes the Gazette,
For years, Blankenship has been not only a powerful voice in the coal industry but a power broker whose involvement in West Virginia politics could cut both ways. At a time when a major verdict against Massey was headed for the state Supreme Court, his personal funds helped defeat then-Justice Warren McGraw’s re-election effort and his personal friendship with Blankenship likely helped cost then-Justice Spike Maynard his seat on the court. Some Republican operatives who helped engineer their party’s takeover of both houses of the West Virginia Legislature in this year’s election got their start working for Blankenship-funded political efforts.