Blankenship’s hands-on management provides target for prosecutors

On May 20, 2010, Massey Energy CEO Don Blankenship went to Washington to testify before a U.S. Senate Health and Human Services subcommittee hearing on mine safety.

Every half-hour, Massey Energy CEO Don Blankenship wanted a report on coal production at the longwall section of his company’s Upper Big Branch Mine.

Prosecutors say Blankenship insisted on specific details, especially on any reasons for production delays. Mine managers had to fax Blankenship these reports at his home, in the evenings and even on weekends, prosecutors say.

For years, Blankenship was known in the coalfields for this sort of hands-on approach to managing Massey’s mining empire.

Now, though, as Blankenship faces a four-count federal indictment — and a maximum sentence of more than 30 years in prison — prosecutors are hoping to use this management style to give them exactly the kind of evidence they need to obtain a conviction.

“The fact that Blankenship was such a micromanager in the running of his mines may turn out to be the knife in his back,” said Tony Oppegard, a Kentucky lawyer and longtime mine safety advocate.

Through his lawyer, William Taylor, Blankenship has denied any wrongdoing. He has promised to fight charges that he conspired to violate mine safety rules, hampered federal safety enforcement and lied to securities regulators and investors. Blankenship, 64, is to be in federal court in Beckley on Thursday for an initial appearance before a federal magistrate.

Trial is certainly months — maybe more than a year — away. On Friday, U.S. District Judge Irene Berger, acting without a motion from either side to do so, issued a broad gag order that instructs lawyers, potential witnesses and family members of the disaster victims not to discuss the case with the news media. Berger’s order also restricts access to court filings to everyone except lawyers in the case and court officials.

In a 43-page grand jury indictment issued Thursday, prosecutors do not specifically allege that Blankenship caused the April 5, 2010, explosion that killed 29 workers at Massey’s Upper Big Branch Mine in Raleigh County. But, they allege that Blankenship “fostered and participated in an understanding that perpetuated UBB’s practice of routine safety violations, in order to produce more coal, avoid the costs of following safety laws, and make more money.”

The indictment sketched out the broad outlines and some of the details of how prosecutors will likely try to use Blankenship’s well-known management style against him.

“Blankenship — the CEO and Chairman of a publicly traded corporation with more than $2 billion in annual revenue — routinely personally reviewed details such as one of UBB’s operating sections starting three hours late because of necessary maintenance, a request to give a small number of truck drivers working for the UBB mining group a raise from approximately $11.59 an hour to approximately $13.50 an hour, and a request to spend $750 to hire a contractor to check the freeze-proofing systems at a UBB-group mine before cold weather arrived,” the indictment said.

In the indictment, U.S. Attorney Booth Goodwin did not charge Blankenship under a section of the mine safety law that spells out potential criminal liability for corporate officers and directors. Instead, the first count of the indictment charges Blankenship with conspiracy to violate another section, which governs corporate liability of mine operators.

Under this approach, Goodwin and Assistant U.S. Attorney Steve Ruby will have to prove that Blankenship was an “operator” of the Upper Big Branch Mine, a term the law defines as anyone who “controls or supervises a coal mine.”

The indictment offers a variety of examples of the sort of evidence Goodwin and Ruby would use in trying to prove that Blankenship’s management of Upper Big Branch fits that definition.

For example, the indictment alleges that in early 2009 — after federal regulators threatened tougher enforcement action as violations at Upper Big Branch began to rise — Blankenship began to request and receive daily reports that detailed the cost of the safety fines that Massey was being assessed.

At first, these reports broke down the fines by Massey’s mining groups. By August 2009, though, the reports were getting more specific — Blankenship was getting daily reports on safety violations and fines broken down by individual mines. Between April 3, 2009, and April 5, 2010 — the day the 29 miners died in the explosion — Blankenship received nearly 250 such daily reports.

“It was Blankenship’s practice to review each of these reports when he received it,” the indictment states. “Substantially every one of these 249 reports showed Blankenship that the UBB mining group was committing hundreds of safety-law violations every year.”

The indictment says that Blankenship “closely managed the UBB mine and group of mines, routinely directing and making decisions on detailed matters of the mines’ everyday operations.”

Among other examples, the indictment states that, in April 2008, Blankenship gave an Upper Big Branch manager a handwritten note “criticizing the placement of a specific piece of equipment” in a section of the mine and “demanding to know the details of the section’s airflow configuration and the specific sequence in which the section cut coal from each of its passageways.”

“This elaborate level of involvement further enabled [Blankenship] to take action to reduce safety-law violations at UBB had he chosen to do so,” the indictment states.

In December 2011, after Goodwin’s office worked out a deal not to prosecute Alpha Natural Resources for any criminal liability acquired with Alpha’s purchase earlier that year of Massey, former Department of Justice official David M. Uhlmann wrote a New York Times commentary that criticized that non-prosecution agreement. Though Goodwin’s deal preserved the government’s ability to go after corporate officials like Blankenship, Uhlmann said that the companies themselves should be prosecuted, because it’s often too difficult to make criminal charges stick against top executives.

“This case may be the exception, but senior corporate officers rarely have sufficient personal involvement to be charged with crimes,” Uhlmann, now a law professor a the University of Michigan, wrote in the Times.

After Blankenship was indicted, Uhlmann said that his views haven’t changed, but acknowledged that the allegations in the indictment, “if proven, could establish that Blankenship is criminally responsible for failing to prevent violations that he knew were occurring. If the government has evidence that Blankenship actually directed violations to occur, its case will be even stronger.”

Oppegard, the Kentucky mine safety lawyer, said it’s true that most top coal company executives aren’t involved in day-to-day and mine-by-mine details the way Blankenship was. Given the way mine-safety criminal laws are written, that provides them with some insulation from prosecution when violations do occur. Criminal cases are more common, and easier to prove, against lower-level officials such as foremen in charge of individual mine sections or work shifts.

“Reports every 30 minutes? I’ve never heard of such a thing,” Oppegard said. “It may be his undoing, that he was so obsessive about everything.”

Reach Ken Ward Jr. at kward@wvgazette.com, 304-348-1702 or follow @kenwardjr on Twitter.