Court Documents Allege 'Secret Pact' In Massey Coal Merger

May 31, 2011

Documents just unsealed in a lawsuit involving the pending merger of coal mine giants Massey Energy and Alpha Natural Resources claim a "secret pact" promised high-level jobs to Massey officials if the company agreed to the takeover.

The Massey officials include several who were directly involved in the management of Massey's Upper Big Branch coal mine, where 29 mine workers died in a massive explosion last year, and in the investigation of that disaster.

The documents were unsealed by the West Virginia Supreme Court of Appeals in response to a joint motion by NPR and The Charleston Gazette. Transcripts of depositions that contain further details remain under seal.

NPR plans to contest the continued sealing of those documents.

One of the unsealed documents sought a court injunction (since denied) to block the merger, which is set for a shareholder vote tomorrow. Several large institutional Massey shareholders claim the friendly takeover by Alpha is an attempt to shield Massey executives and board members from liability and puts "their personal interests ahead of the shareholders in driving the sales process to favor Alpha ..."

One major example cited by the institutional shareholders in their pleading is "a secret pact with Alpha CEO Kevin Crutchfield that the Massey Energy officers who were directing the internal investigation of the Upper Big Branch explosion would be promised high-ranking positions within the post-merger company."

These Massey officers, the pleading alleges, include those "most culpable for the Upper Big Branch explosion ..."

Massey counters in its response that the "secret pact theory ... is at best frivolous," suggesting the job offers were not a major consideration in the merger discussions.

The pleading says that the Massey officials considered for Alpha jobs include Chief Operating Officer Chris Adkins, General Counsel Shane Harvey, CEO Baxter Phillips and Chris Blanchard and Jason Whitehead, senior officials at the Massey subsidiary that operated the Upper Big Branch mine.

Alpha has already announced that Adkins, Harvey and Phillips will get new positions at Alpha if the merger is approved.

Documents unsealed last week in a similar shareholders lawsuit in Delaware disclosed a consulting job offer at Alpha for former Massey CEO Don Blankenship. The same documents included Alpha and internal Massey criticism of the management of Massey and its safety culture.

Adkins will jointly "spearhead the implementation" of "Running Right," Alpha's main safety program, according to an Alpha announcement last month. His appointment was noted in a recent report from an independent team investigating the Upper Big Branch disaster.

Adkins' executive supervision of Upper Big Branch and the company's Aracoma mine, which experienced a deadly disaster in 2006, "makes him a questionable choice to run a safety program," the report said.

Alpha spokesman Ted Pile told NPR last month, "We spent a lot of time ensuring that these people [Adkins and other Massey executives] would be a good match with our ethics." Later, after criticism of the appointment surfaced, Pile said Adkins would not have any responsibility for safety at Alpha.

The independent team's report also questions the actions of Blanchard and Whitehead immediately following the explosion. The two executives, who were not mine rescuers and did not have mine rescue breathing apparatus, spent four hours underground and unsupervised in apparent violation of an order from the Mine Safety and Health Administration.

Some mine rescuers said the two left footprints and used self-rescue breathing devices behind, which caused some confusion during the search for victims. There's also concern that Blanchard and Whitehead had access to evidence.

The independent investigative report, which was commissioned by then-Gov. Joe Manchin just after the blast, also suggests Blanchard and Whitehead share blame for "the normalization of deviance" at Upper Big Branch, where investigators found serious failures and deficiencies in safety practices, along with intimidation of workers.

Alpha has not included Blanchard and Whitehead on its publicly-released lists of Massey officials tapped for Alpha jobs after the merger. NPR has asked Alpha to confirm whether they have been offered or given Alpha positions but the company has yet to respond.

In their response to the pleading, Massey Energy and the executives and board members targeted by the lawsuit, do not contest the claim that jobs for these Massey officials were discussed as part of a merger deal. But the pleading quotes the deposition of Alpha CEO Kevin Crutchfield, who called the job offers "a work in progress."

It "is simply not true," the Massey response says, "that all of the referenced individuals will be employed by Alpha post-merger."

But the response also notes that Massey director Bobby Inman discussed job arrangements with an executive at Arch Coal, which also considered a takeover of Massey.

The job offer discussions with Alpha raise questions about the company's oft-stated commitment to a safety culture that is distinctly different than the one documented at Massey Energy in the independent investigative report and in NPR's year-long investigative reporting project stemming from the Upper Big Branch explosion. Alpha has not responded to NPR's request to discuss the announced appointments with CEO Crutchfield.

The documents follow. Click on their titles to enlarge:

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