Massey Energy: The Accountant of Coal

Mingo County, W. Va., is a famously truculent place. In the rolling hills by the Kentucky border, the Hatfields and McCoys feuded in the late 1800s. In 1920 a gun battle broke out in the Mingo town of Matewan between workers and coal agents over efforts to organize the mines. Ten died in the "Matewan Massacre," one of America's bloodiest labor clashes.

Don Blankenship, who attended high school in Matewan, is a creature of his environs. Sixty years old, burly and combative, Blankenship is the chairman and CEO of Massey Energy (MEE), which owns and operates the Upper Big Branch mine in Montcoal, W. Va., where an explosion on Apr. 5 killed 29 miners and injured two more. An accountant by training, Blankenship is an unapologetic capitalist who takes a dim view of regulators, "greeniacs," and "people of the far-left communist persuasion," as he described environmentalists in a November 2008 speech. Some investors and industry veterans say there's a connection between the explosion, the second fatal incident at a Massey mine in four years, and Blankenship's desire for profit. In an Apr. 12 letter to Massey directors, William Patterson, executive director of CtW Investment Group, which advises pension funds, called the deadly blast "the tragic consequence of the board's failure to challenge...Blankenship's confrontational approach to regulatory compliance." Blankenship and Massey did not return calls for comment; his attorney, Thomas V. Flaherty, told Bloomberg News that at Massey, "safety is Job One."

Over the years, Blankenship has wielded power in a variety of ways. He has traveled into the mines to persuade workers to abandon union organizing efforts. He has inserted himself into local politics, bankrolling a campaign that helped topple a local judge who had ruled in favor of workers. "Don Blankenship is perfect for Massey Energy," says Kevin Thompson, a lawyer who in 2004 mounted a still-pending class action against the company for allegedly contaminating groundwater in the county. "It's more than cost-cutting with Blankenship. It's a need to control. It's a need to win."

Since the explosion at the Upper Big Branch mine, Blankenship has been uncharacteristically quiet. Yes, he has twittered constantly (sample: "We regret the national news is so inaccurate") and expressed his condolences to the families of the dead. But Blankenship the provocateur has gone into hiding. With the federal government investigating and regulators vowing to tighten rules, the self-described "street fighter" is facing the toughest challenge of his 28-year career. On Apr. 12, New York State Comptroller Thomas P. DiNapoli, who oversees a retirement fund that owns 303,550 shares of Massey stock worth $14.1 million, called for Blankenship to resign. "We have to protect shareholder value," he told Bloomberg Television. "There need to be changes at Massey."

Donald Leon Blankenship grew up next to the railway tracks in Delorme, a small town in Mingo County. "Don was raised in a very hardscrabble existence by a single mother," says Flaherty. He worked as a union miner and put himself through Marshall University, where he earned an accounting degree. Blankenship began his Massey career as an office manager at the company's Rawl Sales & Processing unit in January 1982 and was named president of Rawl in May 1984. He has been chairman and CEO of Massey Energy since 2000 and head of A.T. Massey Coal, a wholly owned subsidiary, since 1992. "He's a bottom-line, number-crunching accountant who managed to become CEO of a company," says attorney Bruce Stanley, who has battled Massey in court. "He's driven by budgets and numbers."

Stanley and other adversaries contend it was Blankenship's dogged opposition to the United Mine Workers of America that won him the top job at Massey. In 1984, Blankenship persuaded Massey's management to oppose the contract the union had negotiated with other coal companies, according to Phil Smith, a union spokesman. Blankenship demanded a separate contract for each mine, Smith says. The union refused and went on strike. "It was very vicious, the first time in 60 years that a mine operator brought in strikebreakers [and] armed guards," Smith says. The strike lasted four years, Smith recalls.

By 1988, Massey had sold or closed 18 of 23 unionized facilities, says Smith. Today the Mine Workers represents only two of its coal-processing plants, he says, and no mines. The union tried three times to organize workers at Upper Big Branch. The first vote was a tie. The union lost the second by 14 votes and withdrew its petition before a third vote was taken, he says. "When we began, we had over 70% of the people who signed [union] cards," Smith says. "Then Don Blankenship went into the mines and talked to the miners. He was his own personal union-buster."

In January 2006 a fire broke out in Massey's Alma No. 1 mine, 60 miles from Charleston, W. Va. Two miners died and nine were hurt. The widows sued Blankenship, Massey, and Aracoma, the affiliate that runs the mine. Citing a memo Blankenship sent his mine superintendents in October 2005, the widows alleged he was personally responsible for safety problems. In the memo, he urged superintendents to ignore orders to do anything other than "run coal." This included working on construction projects involving "overcasts," ventilation controls that help keep the mines safe. "This memo is necessary only because we seem not to understand that coal pays the bills," Blankenship wrote.

The widows claimed in the suit that the memo demonstrated that it was company policy to downgrade safety in favor of production. Blankenship denied responsibility and claimed the widows' lawyers quoted the memo out of context and failed to include a subsequent communication reminding the managers that safety "is our first responsibility," according to court papers filed in 2008. "Anyone who gives a fair reading of that memo would agree that it's torturing the facts," says Flaherty, who defended Blankenship in the suit.

Blankenship said in a deposition that he shut down mines if he saw safety problems. "In the 20 years since I have been empowered at Massey, we have beat the industry average [for accidents] 18 times, tied it once, and we have been beat by the industry average one time," he said. The widows settled during trial, on confidential terms. The fire, along with a second fatal explosion at another mine that year, prompted federal regulators to enact tougher mine safety laws.

Blankenship has made no secret of his aversion to what he deems judicial meddling in business. In 2004 he backed Brent D. Benjamin in an election against Warren McGraw, a justice on West Virginia's Supreme Court of Appeals who was known for ruling against employers and in favor of workers. Blankenship told a local newspaper, "Warren McGraw says he's for the working man, but he's not." He gave $2.5 million to a political action committee called "And for the Sake of the Kids." The group aired TV commercials criticizing McGraw's decision, as part of a three-judge panel, to release a convicted pedophile. Benjamin won a 12-year term on the court. In the summer of 2006, according to court papers, Blankenship met in Monte Carlo with another judge, Elliott "Spike" Maynard.

A little more than a year later, Benjamin and Maynard joined a 3-2 decision overturning a ruling that would have forced Massey to pay $50 million in damages to rival Harman Mining for forcing it out of business. Both justices denied any bias, pointing to decisions where they disagreed with Massey. Maynard then recused himself, but at the rehearing Massey won another 3-2 vote, with Benjamin's support. Benjamin and Maynard didn't immediately return calls for comment.

Last June the U.S. Supreme Court ruled that Benjamin should have recused himself and ordered the state Supreme Court of Appeals to rehear the case. By November, when the case was reheard, Maynard had been defeated, and Benjamin had recused himself. Once again the court threw out the jury verdict. "It is a shame that there has been yet another miscarriage of justice in this lengthy saga," Stanley said at the time.

Blankenship, his opponents and supporters agree, simply has to get his way. Nothing illustrates this better than his fight with a maid earning $8.86 an hour. In 2001, Deborah May started working for Mate Creek Security, a company "related to Massey Energy," according to court documents. When Mate Creek assigned her to work for Blankenship, according to the documents, May cleaned his three-story home, shopped, and did laundry. By 2005 she was also cleaning a bus, two cabins, and a mansion in Kentucky. She received one 30 cents hourly raise. After Blankenship said she would also have to care for a "German police dog," according to the documents, she quit.

In November 2005, May applied for unemployment benefits, saying she was forced to leave the job. The state denied her claim, concluding she quit for no reason. In June 2008, West Virginia's top court reversed the state's denial of benefits. Two of the court's justices said "the unrefuted evidence" showed that Blankenship "physically grabbed" the maid, threw food after she brought back the wrong fast-food order, and tore a tie rack and coat hanger out of a closet after she forgot to leave the hanger out for his coat. "This shocking conduct" showed May was in effect fired because she felt compelled to quit, the justices said. They said the conduct was "reminiscent of slavery and is an affront to common decency."

Blankenship has a complicated relationship with the people of West Virginia. In a state where the jobless rate hovers at 9.5%, mining jobs have been paying the rent for generations. "You are either going to work in the mines or flip hamburgers," says Chuck Nelson, who was a miner for 26 years before quitting in 2000. Last May, when the Tug Fork River flooded Matewan, Blankenship was one of the first people to greet Mayor Sheila Kessler. "He told us we could have whatever we needed, manpower, equipment, he even called back laid-off miners," Kessler says. Blankenship's company hands out gifts to children at Christmas and donates $100,000 a year to the city's museum.

The explosion that ripped through the Upper Big Branch mine at 3 p.m. on Apr. 5 has hardened some hearts in coal country. The cause of the explosion remains under investigation, but high levels of methane gas hampered recovery efforts and may have contributed to the blast. The Mine Safety & Health Administration has issued more than $900,000 in fines at the mine in the past 16 months. In January, inspectors found problems with ventilation systems designed to prevent the buildup of methane. The Upper Big Branch was cited for 38 "mine ventilation" violations in the past 12 months, according to federal records. Coal production at the mine increased threefold last year, while the number of violations doubled.

When Blankenship visited the mine shortly after the incident, he was escorted by more than a dozen police officers. Nelson, the retired miner, recalls a Labor Day rally funded by Blankenship, who wore a shirt emblazoned with the American flag and thundered about regulators and politicians who "have no idea how to improve miner safety. The very idea that they care more about coal miner safety than we do is as silly as global warming." "All he did was criticize the government, and the whole time he's dressed in the Stars and Stripes," Nelson says. "He's anti-American."

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