Secret CEO Recordings Allowed in Massey Mine Blast Trial

  • Jurors start with Blankenship on compensation, Massey's value
  • Mine had third-most violation citations 2008-2009, Jury Told

Donald Blankenship’s own words may come to haunt the former Massey Energy Co. chief executive officer at his criminal trial as a federal judge said prosecutors can let the jury hear conversations secretly recorded while he led the company.

U.S. prosecutors say it was Blankenship’s domineering control of Massey and disregard for safety that led to a 2010 explosion that killed 29 miners. Jurors began hearing them on Friday and in coming days may hear examples of his hands-on management style from the recordings. The trial will resume Oct. 13, the day after the Columbus Day holiday.

U.S. District Judge Irene Berger in Charleston, West Virginia, said the government may play 18 recordings of Blankenship conversing with other Massey officials in its effort to prove he plotted to violate safety laws and impede mine inspections. Prosecutors accuse him of then lying to investors about the company’s compliance with regulations.

Blankenship, 65, can be heard on one saying that a confidential memo outlining safety problems at Massey’s Upper Big Branch mine, site of the 2010 blast, would be “a terrible document” to be turned over in litigation, prosecutors said earlier.

Excluded Recordings

Berger excluded, as irrelevant, recordings of board discussions about Blankenship’s compensation package. Her ruling followed Thursday testimony by a former mine employee who said she was ordered to provide alerts about surprise inspections.

“These tapes will offer jurors a real-time look into the inner workings of Mr. Blankenship and are likely to provide evidence that is far more powerful than the testimony of any witness,” Robert Mintz, a white-collar criminal-defense lawyer in New Jersey who isn’t involved in the case, said Thursday.

“Tapes are the gold-standard of evidence for federal prosecutors because it allows juries to witness criminal conduct as it unfolds,” Mintz said in an interview.

Blankenship’s lawyers argued unsuccessfully that the government didn’t do enough to authenticate the recordings, which were turned over by Alpha Natural Resources Inc. The company discovered them after it acquired Massey in 2011 for $7.1 billion, according to court filings.

Tame Samples

Jurors heard tame samples late Friday afternoon, with none of the promised remarks on production and safety. Blankenship was heard discussing his stock options, the falling price of Massey shares, when company money could be spent and scrutiny from the U.S. Environmental Protection Agency. One theme was his evident belief that he was undercompensated.

In a conversation with a consultant he said company shares had fallen from $95 to less than $35 and that his own stock options were worth $12 million.

“Twelve million is a lot of money,” the other man said.

“Twelve million is not a lot of money compared to five or six billion,” he replied, an apparent reference to Massey’s market value at the time.

‘So Unappreciative’

In another talk, with an unidentified woman, Blankenship said the company’s market capitalization had risen past $3 billion that day. “They’re so unappreciative of it,” he said in what was an apparent reference to the company’s board of directors.

“Wall Street doesn’t understand,” he said, referring to the coal business. Stock and options, he said, are “not something I can go to the store and buy groceries with.”

Earlier Friday, Tyler Childress, a computer specialist with the U.S. Mine Safety & Health Administration, testified on the mine’s record of violations.

Upper Big Branch was the third-most-cited underground coal mine in the U.S. from January 2008 to April 2009, Childress said.

Many violations related to supervisors’ failure to meet ventilation requirements and to ensure that safety features on equipment were in proper working order, Childress said.

A month before the explosion, Massey was cited for operating machines that had only half the required number of functioning water sprays designed to cut down on explosion-causing sparks, the official testified.

‘Unwarranted Failures’

Some of the shortfalls amounted to “unwarranted failures to comply with mandatory standards,” which are more serious violations, Childress told the jury.

Blankenship has shown little emotion during early testimony, sitting quietly at the defense table or joining his lawyers at conferences with the judge.

During a break Friday, Blankenship admired his likeness drawn by a courtroom artist with colored pencils and jokingly asked the artist to “take a little off the chin.”

The case is U.S. v. Blankenship, 14-cr-00244, U.S. District Court, Southern District of West Virginia (Charleston).

Before it's here, it's on the Bloomberg Terminal.