Documents: Alpha would have hired Blankenship

May 24, 2011 by Ken Ward Jr.

There’s a flurry of new reports out about the impending buyout of Massey Energy by Alpha Natural Resources. Shareholders of the two companies are set to consider the proposed $8.5 billion deal on June 1 — but there’s a hearing scheduled for Thursday in a Delaware courtroom as part of a last-ditch effort to block the transaction.

We’ve got an updated story tonight on recently unsealed documents in that case, in which we report:

Massey Energy executives moved toward a sale to Alpha Natural Resources as internal pressures grew for a broad-ranging examination of — and potentially major reforms in — the company’s long-troubled safety practices, according to new court documents made public Tuesday.

In November, a committee from Massey’s board of directors was prepared to recommend creation of a “blue-ribbon” panel of outside safety experts, similar to the Baker Panel created by BP after the deaths of 15 workers in a 2005 refinery explosion.

The board committee also had determined that a change in the top leadership at Massey — including then-CEO Don Blankenship — was needed to rebuild the company’s reputation and to regain the confidence of shareholders, regulators and public officials, according to the court documents, filed by lawyers who are seeking to block the Massey-Alpha transaction.

“The board thus realized that Blankenship had to go,” the lawyers, representing a group of Massey shareholders, said in a legal brief supporting their argument for a preliminary injunction to at least stall the merger.

But here’s something else that those court documents say: Alpha CEO Kevin Crutchfield testified under oath in a legal deposition that his company was prepared to give Blankenship a job as a consultant after the merger.

Blankenship, of course, “retired” after unsuccessfully opposing the Alpha buyout of Massey. But this new information  adds another twist to the continuing concerns being raised in the media, by independent investigator Davitt McAteer and by the United Mine Workers about Alpha’s plan to hire some of the more controversial folks currently working for Massey Energy.

And it’s particular fascinating if it’s true that, as these court documents allege, Alpha’s own due diligence reports showed this about Massey:

The entire Massey organization appears to be managed by an autocratic central command and control structure. This can be seen in all facets of the organization and results in senior operating management being involved in lower level mine issues and decisions.

The Massey culture is driven by a strong focus on production and its associated components with other facets of the operations such as employee safety and regulatory compliance receiving minimal consideration.

Bloomberg posted the first report I’m aware of about these documents. Their story is here, but it doesn’t look like they picked up on this detail about Blankenship. Bloomberg does report:

The sale to Alpha was motivated by directors’ desire to be protected from liability for shareholder suits, the lawyers added. The pension’s fund case was filed as a so-called derivative suit, which would return any recovery to the company. Individual shareholders wouldn’t receive any direct payments as a result of the suit.

“The Massey board did not negotiate the merger from a clean personal slate,” the pension fund’s lawyers said.

Meanwhile, my buddy Howard Berkes at NPR has more on the nice chunks of change Massey executives would pocket if the merger goes through, adding important details to a story we first reported in the Gazette yesterday:

They were in charge when the nation’s worst coal mine disaster in 40 years hit their Upper Big Branch coal mine in West Virginia.

They ran a company with a “culture in which wrongdoing became acceptable, where deviation became the norm,” according to a team of independent investigators who scrutinized that deadly mine explosion.

They “exhibited a corporate mentality that placed the drive to produce coal above worker safety,” those same investigators concluded.

Yet, 18 current and former Massey Energy executives and members of the company’s board of directors will share $196 million in salary, benefits, severance, pension, retirement and deferred compensation when the company is sold to Alpha Natural Resources, as expected, on June 1.


One Response to “Documents: Alpha would have hired Blankenship”

  1. Monty says:

    “The Massey culture is driven by a strong focus on production and its associated components with other facets of the operations such as employee safety and regulatory compliance receiving minimal consideration.”

    What else, really, needs to be said about Massey?

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