ICG misled investors, union says
International Coal Group misled potential investors by hiding the deteriorating safety conditions at the Sago Mine, the national AFL-CIO alleged this week.
In a letter, AFL-CIO Secretary-Treasurer Richard Trumka urged the U.S. Securities and Exchange Commission to investigate and take action against ICG and its founder, New York billionaire Wilbur L. Ross Jr.
Trumka alleged ICG wrongly claimed in its initial public offering for stock purchasers that its operations had a good safety record.
At the same time, Trumka said, federal inspectors were citing the company for hundreds of safety violations, including many that “would cause serious or deadly injury if not corrected.
“These serious risks existed and were known to ICG while they were preparing for and conducting the IPO, yet the company did not disclose them to potential investors,” wrote Trumka, a former United Mine Workers president.
“We believe this failure was in violation of the fundamental requirements of the nation’s securities laws to provide investors with all material information necessary to make a reasonable investment decision,” Trumka wrote in his Monday letter to SEC enforcement director Linda C. Thomsen.
John Heine, an SEC spokesman, declined to comment or to confirm that his agency received a copy of Trumka’s letter.
Officials from ICG’s public relations firm, Dix & Eaton, did not immediately respond to a request for a response to Trumka’s allegations.
The Sago Mine is a non-union operation, and ICG is already battling with the UMW over the union’s role representing some of the mine’s workers during the ongoing disaster investigation.
Twelve miners died and another was critically injured following the Jan. 2 explosion at the Sago Mine, a small underground operation south of Buckhannon.
The accident is the worst coal-mining disaster in West Virginia in nearly 40 years and one of the two worst nationwide since 1984.
Ross, a specialist in buyouts of financially troubled companies, formed ICG in 2004 to buy some of the former Horizon Natural Resources coal holdings out of bankruptcy.
Five years before, Ross had begun buying up stock in Morgantown-based Anker Energy, which owned the Sago Mine.
By 2002, Ross controlled Anker, according to SEC and court records. He finalized the purchase, through ICG, in November 2005.
Through its initial stock offering, ICG raised nearly $210 million with the sale of $21 million shares of stock, according to company news releases.
In his letter, Trumka alleged that investors who bought that stock were misled about the company’s safety practices and their financial implications.
“In addition, we believe that the failure of ICG to disclose material information relating to mine safety prevented the normal processes of oversight and accountability by the capital markets from addressing mine safety at ICG’s Sago Mine, substantially contributing to the deaths of 12 miners,” Trumka wrote.
Trumka noted that ICG began to seek investors in late April, with an initial registration statement filed with the SEC.
Since that time, Trumka wrote, the Sago Mine “saw a significant increase in citation levels from” the U.S. Mine Safety and Health Administration.
“During the three-year period that Anker had operated Sago, the mine was cited for 172 health and safety violations,” Trumka wrote. “However, from the period that the mine reopened in 2004 through the end of 2005, the mine received 276 citations, 208 of which were issued in 2005 alone.”
However, in its stock prospectus, ICG told potential investors the company had a record of “recognized leadership in safety and environmental stewardship.” ICG also reported the company’s injury rates in 2004 “were below industry averages.”
Trumka complained that the company’s SEC filings did not disclose “ICG was in violation of federal law, and that the company was in a position to take measures to prevent a deadly event but had negligently refused to do so.”
To contact staff writer Ken Ward Jr., use e-mail or call 348-1702.