Coal Tattoo

In newly unsealed documents field with the West Virginia Supreme Court, lawyers for Massey Energy shareholders alleged that Alpha Natural Resources CEO Kevin Crutchfield (right) made a secret deal to hire key Massey executives linked to the Upper Big Branch Mine Disaster.

The allegations are outlined in this petition for a preliminary injunction to block the Alpha-Massey merger. Justices just a few minutes ago announced their 3-0 vote (with Justices Davis and Benjamin disqualified) declining to issue the requested injunction.

Justice also voted, though, to unseal at least certain documents in the case, as had been requested on Friday in a legal motion filed by The Charleston Gazette and NPR.

In their now-unsealed petition, lawyers for the California State Teachers Retirement Systems and other Massey shareholders outlined these new allegations:

Faced with the prospect of a hostile takeover by Alpha and loss of control of the company’s internal investigation and its exculpatory ‘supernatural cause of the explosion … the board, led by Defendant [Bobby] Inman, entered into a secret pact with Alpha CEO Kevin Crutchfield that the Massey Energy officers who were directing the internal investigation would be promised high-ranking positions within the post-merger company. Not coincidentally, the Massey Energy officers in charge of the internal investigation are the ones most culpable for the Upper Big Branch explosion …

It continues:

Defendants have hidden these and other key facts from the company’s shareholders, who are scheduled to vote on the merger at a special meeting set for June 1, 2011, by issuing a materially false and misleading Proxy statement.

The petition quotes from Massey’s Proxy statement:

Subsequent to their September 28 meeting, Mr. Crutchfield and Adm. Inman (right)  spoke to each other by telephone on a number of occasions … Although it was not a factor in the Massey board of directors’ evaluation of a potential business combination with Alpha, Adm. Inman also indicated that there were several key operators running Massey mines who were very talented and that Alpha would be well served to recognize their talent and consider appropriate positions for them at Alpha if a business combination were consummated.

Then, the petition says:

This statement is false and misleading as evidenced by deposition testimony in this action and confidential internal documents produced in the course of discovery … In truth, Inman discussed five Massey Energy executives and just two mine operators. Four of the five Massey Energy executives he discussed are named Defendants in this action, including the two men running the company’s internal investigation who are, not coincidentally, the high-level Massey Energy executives most culpable for the Upper Big Branch disaster, Chris Adkins (chief operating officer) and Shane Harvey (general counsel).

Tellingly, the only two mine operators Inman discussed were Chris Blanchard and Jason Whitehead, the president and vice presidnet of Performance Coal Company, which operated the Upper Big Branch Mine at the time of the explosion. Shareholders (and the public) are currently unaware of this fact or the fact that these two operators’ hiring was part of a broader secret pact between Inman and Crutchfield through which Alpha would hire the Massey Energy executives most culpable for participating in (or covering up) illegal conduct implicated in the UBB disaster.

The petition says:

Crutchfield’s response to Inman’s demand took place during an October 1, 2010, telephone call that is memorialized in an email. “I pledged that none of these names would pose a problem.”

In a response brief, Massey disputes this version of events, saying:

… The record flatly contradicts petitioners’ claim. Alpha’s CEO, Kevin Crutchfield, testified on May 10, 2011, that the decision whether to extend offers to the various individuals whom he discussed with Admiral Inman was ‘still a work in progress’ … Moreover, Admiral Inman testified that he had the same conversation with Steve Leer of ARch Coal (who at the time was among the parties that had expressed an interest in a potential transaction with Massey), thus negating any suggestion that these ‘social considerations’ motivated Massey’s merger with Alpha.

The company’s filing continues:

… Petitioners’ theory that Inman sought the ‘social agreement’ in order to retain ‘control’ of the internal investigation of UBB makes no sense. The ability to control Massey’s internal investigation would have no effect on the defendants’ potential liability on the derivative claims, since the findings of that investigation would not preclude other, outside investigations from reaching difference conclusions and assigning culpability regardless of what Massey’s own findings are. Indeed, at the time of Admiral Inman’s discussions with Alpha and Arch, Massey’s board had an advisory committee composed of independent directors who were specifically charged with investigating the underlying derivative claims, including the ones at issue in this case. Petitioners’ secret pact theory, therefore, is at best frivolous and gets them nowhere.

Of course, the only documents about these allegations that are currently available to the public are the Supreme Court petition and response that were unsealed this morning … the original documents — including a preliminary injunction brief and many exhibits — remain under seal before Kanawha Circuit Judge Charles King.

UPDATED:  Judge King has scheduled a hearing on the request to seal these records for 1:30 p.m. Wednesday, right about at the same time that officials from Alpha and Massey — joined by Senate President, acting as governor, Earl Ray Tomblin — will be holding an unveiling of a new sign at Massey’s regional headquarters in Julian, W.Va.

Stay tuned …