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Court Papers Signal Concern Over W. Va. Mine Company's Safety Record

Documents just unsealed in a lawsuit seeking to block Massey Energy's sale to Alpha Natural Resources reveal deep concerns about Massey's safety record, reputation and leadership — not from the usual critics — but from two Massey board members and from Alpha.

The documents were still sealed Monday when they were referred to in an NPR story about two last-ditch attempts to block Alpha's takeover of Massey, which is expected after shareholder votes June 1.

One of those attempts is in court in Delaware and the court unsealed some of the documents in the case Tuesday.

They provide solid evidence, for the first time, that there were growing concerns inside Massey Energy's board about then-CEO Don Blankenship, the sullied reputation of the company and the safety record that preceded the deadly April, 2010, explosion at the company's Upper Big Branch coal mine in West Virginia. Twenty-nine miners died.

An "advisory committee" of two relatively new board members, Robert Holland and Linda Welty, had been assigned to investigate the merits of lawsuits by some institutional shareholders who claimed Massey executives and board members were responsible for poor safety conditions at the company's mines and a consequent drop in Massey's value.

The documents quote an advisory committee conclusion in November "that a change in top leadership was required to rebuild the company's reputation, regain the confidence of shareholders, regulators and public officials, and be in a position to enhance the company's safety and compliance performance."

This was two weeks before Blankenship announced his retirement. Massey says that's a coincidence.

Holland and Welty also recommended the formation of a Blue Ribbon panel of outside experts to investigate further but found "Massey's reputation was so damaged ... no one would touch the assignment and risk potentially being linked to the likes of Blankenship," according to a brief written by attorneys seeking to block the merger.

The attorneys had reviewed accounts of the advisory committee's recommendations and depositions from board members.

The notes and transcripts of the depositions remain sealed so it's impossible to determine the accuracy of the quotes and characterizations provided by the attorneys. But in responding briefs, neither Massey nor Alpha contested the accounts described above.

In fact, Massey's response notes that the advisory committee said "a change in top leadership" was required. The committee also said that the Massey board should not renominate Blankenship as chairman and CEO, and should consider whether Blankenship "provided the most viable option for Massey going forward."

The documents also reveal details about the merger with Alpha in which Alpha expresses concerns about Massey's safety practices and proposed terms of the takeover.

In one passage, the documents quote Alpha CEO Kevin Crutchfield dismissing as "obnoxious" a Massey proposal that Alpha indemnify Massey's directors and executives for "willful acts of misconduct."

Alpha says in its response that Crutchfield's response is taken out of context but neither it nor Massey challenges the quoted proposed indemnity language.

Crutchfield also testified, the documents say, that he was prepared to offer Blankenship a consulting agreement with Alpha if he hadn't retired.

That's despite Alpha's own conclusions about Massey's management and safety culture after visiting the company's mines. Here are some excerpts of Alpha's assessments. They're from a sealed exhibit quoted in one of the unsealed documents:

-- "The entire Massey organization appears to be managed by an autocratic central command and control structure."

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

-- "The underground site visits indicated a strong cultural emphasis on production first with compliance and out by maintenance on a non-priority basis."

-- "The plants are generally poorly maintained and have been for a period of time."

Alpha did not challenge these quotes in its response to the shareholders brief.

The observations by Alpha echo the assessments of critics and federal regulators, who have been dismissed by Blankenship and senior board member and retired Admiral Bobby Inman.

Crutchfield's consideration of an ongoing relationship with Blankenship is also consistent with Alpha's decision to hire Massey executives for key positions despite their role in the same safety culture Alpha critiques.

NPR has requested an interview with Crutchfield specifically about those hiring decisions but Alpha has yet to respond to that request.

The documents that remain sealed may become public Thursday in Delaware in a hearing set to consider a preliminary injunction blocking Massey's takeover by Alpha.

A similar hearing was scheduled in an identical case in West Virginia Wednesday but that hearing was postponed. The documents in that case remain sealed.

Massey and Alpha shareholders meet separately in Kingston, Tennessee, a week from today, June 1, to vote on the merger proposal.

Here are PDFs of the newly released documents. Click the title on each box to enlarge:

Update at 6:51 p.m. ET: In the West Virginia case, attorneys for the shareholders filed a motion today with West Virginia's State Supreme Court of Appeals asking the court to seal all records relating to the motion for a preliminary injunction. They're arguing that the records contain facts disclosed under confidentiality agreements.

The defendants' response to both the motion to seal and the petition for a preliminary injunction is due on Friday.

West Virginia's Supreme Court is expected to hear both matters next Tuesday, May 31.

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