United States of America v. Don Blankenship – The Case to Watch
Ashley N. Deem, KLJ Staff Editor[1]
Kentucky native Don Blankenship, former Chairman and Chief Executive Officer of what was once the sixth-largest coal company in America, Massey Energy (“Massey”),[2] is currently on trial in federal court in West Virginia, facing three felony charges that carry a maximum statutory sentence of thirty years in prison. These charges stem from one of the most tragic industrial accidents in history, an explosion that resulted in the death of twenty-nine coal miners at Upper Big Branch (“UBB”)[3], a long wall deep mine located in southern West Virginia, in April of 2010.[4] Mr. Blankenship is “not charged with causing the explosion” at UBB; rather, the charges focus on circumstances leading up to the event, including allegations of securities fraud and felony conspiracy.[5]Although the accident occurred in 2010, the indictment against Mr. Blankenship came nearly four-and-a-half years later in November 2014.[6] During this period, “the largest criminal investigation of a coal-mine disaster in modern times” ensued:[7] Mr. Blankenship retired from Massey in December of 2010;[8] Massey was acquired in an $8.5 billion deal by Alpha Natural Resources (“Alpha”) in January of 2011;[9] and the largest-ever settlement in a U.S. mining disaster case was reached in the amount of $210 million, paid by Alpha, in exchange for its immunity as a corporate entity.[10] However, the settlement agreement leaves open the possibility of individual prosecutions.[11]Also during this period, United States Attorney for the Southern District of West Virginia, Booth Goodwin, sought and obtained the convictions of three former Massey officials – former security chief, Elbert Stover;[12] former employee, Thomas Harrah;[13] and former executive, David Hughart.[14]Mr. Hughart implicated Mr. Blankenship by identifying him as a participant in a conspiracy to evade surprise Mine Safety Health Administration (“MSHA”) inspections.[15] As a result, Mr. Blankenship was indicted by a federal grand jury on charges of conspiring to violate federal mine safety standards.[16] The indictment also alleged that Mr. Blankenship made false statements to the SEC regarding Massey’s safety practices in an attempt to stabilize the company’s otherwise plummeting stock prices. [17] To the contrary, Mr. Blankenship’s defense attorneys have attempted to show a man who was “deeply concerned with mine safety” and committed “no willful violations of safety laws.”[18] Mr. Blankenship maintains that he is innocent of the charges pending against him.[19]Now entering its third week, the trial, much like Mr. Blankenship himself, has already become “the stuff of legend in Appalachia.”[20] Issues such as attorneys’ fees and venue, fought over many months ago, continue to resurface. Currently, the case seems to turn on Mr. Blankenship’s leadership style and his self-recorded telephone conversations.The first battle, ultimately a victory for Mr. Blankenship, was fought over Alpha’s obligation to pay Mr. Blankenship’s attorneys’ fees; however, in the wake of the indictment, Alpha denied such responsibility, citing its belief that Mr. Blankenship had cause to believe his conduct was unlawful, thus violating the terms of the relevant agreements.[21] Shortly thereafter, Mr. Blankenship filed an action in Delaware Chancery Court seeking those unpaid legal expenses, and the court ordered Alpha to pay all reasonable fees.[22] The Delaware court further held that the only term or condition Alpha can impose on Mr. Blankenship is a duty to repay in the event he is not entitled to indemnification (in this case, being convicted of the charges brought against him).[23]Venue has been an issue from the very beginning of the case, and Mr. Blankenship’s defense again requested change of venue as recently as last month.[24] The charges were initially brought against Mr. Blankenship in Beckley, West Virginia; however, he attempted to remove the case either to the Northern District of Maryland or the Martinsburg division of the U.S. District Court of the Northern District of West Virginia.[25]Judge Irene Berger allowed removal only to Charleston – the state capitol – a location less than thirty miles from the UBB location.It would be a significant understatement to assert that public sentiment is not in his favor. Mr. Blankenship’s ideological and financial contributions in the political arena have arguably had the single largest effect in electoral politics in West Virginia. In fact, in 1984, when the United Mine Workers went on strike at Massey, Blankenship refused to sign the demanded labor agreement and, as a result, was the target of a drive-by shooting in which eleven shots were fired at him.[26] As of 2003, Forbes reported that the Mr. Blankenship keeps as a “memento” behind his desk a “20-year-old Zenith TV, knobs missing, pierced by a bullet” from this event.[27] In 2015, over thirty years later, the television remains in the same spot.Although he identifies “the worst tragedy of [his] life” as “the day of the Massey mine explosion,”[28] his role as the top official at Massey at the time of the UBB accident, his opposition to the United Mine Workers and other union organizations, and his role in electing West Virginia Supreme Court Justice Brent Benjamin[29] have combined for an overall net approval rating of -31.[30] It is unlikely Mr. Blankenship could have received a fair trial anywhere in West Virginia, and at least for some, this trial has an ever-present, underlying question – will justice truly be served?The allegations are attenuated and the charges are weak;[31] however; U.S. Attorney Goodwin, rumored candidate for Governor of West Virginia,[32] continues on his crusade to pierce the corporate veil and, for the first time in history, seeks to convict a top mining executive of charges that have previously been leveled only against the corporate entity. As stated by West Virginia University law professor Pat McGinley, “Historically, prosecutions of a top coal company executive for mine safety violations isn’t rare – it’s unprecedented.”[33]Goodwin seems to rely on Mr. Blankenship’s style of leadership – painting him as a “micro-manager” – in order to show his strong grasp on the inner workings of the company.[34] Prosecutors allege that Mr. Blankenship wanted reports every half-hour on coal production and “insisted on specific details, especially on any reason for production delays.”[35] Back in 2014, Kentucky lawyer Tony Oppegard said this “may turn out to be the knife in his back”; it seems he was, in all probability, correct, at least in terms of where the prosecution seems to place its focus.[36]Mr. Blankenship also secretly recorded his telephone conversations, and the prosecution has been successful in convincing the court to admit most of those conversations into evidence. These conversations include a discussion of a confidential safety memo and discussions with Massey’s compensation committee regarding stock options.[37]Furthermore, this month the prosecution introduced into evidence a safety memo written by former counsel to Massey, Stephanie Ojeda, discussing the need for significant safety reform.[38] These items will likely impact the jury’s verdict, as will be shown in the coming days and weeks.The outcome of this case is one that will inevitably deliver a huge impact on not only the coal industry, but also corporate governance across the board as we consider where the line is drawn between notions of due diligence/duty of care and micromanaging to the point of individual criminal liability.[39] And on a broader scale, with the many procedural issues embedded within, this case may prove to be significant in the realm of criminal trial procedure in such a way that has yet to be determined.More details will follow as this unprecedented case progresses.[1] J.D. expected May 2017.[2] David Segal, The People v. the Coal Baron, New York Times, June 20, 2015, http://www.nytimes.com/2015/06/21/business/energy-environment/the-people-v-the-coal-baron.html (last visited October 19, 2015).[3] Mine Safety and Health Admin., U.S. Dep’t of Labor, Report of Investigation, Fatal Underground Mine Explosion, April 5, 2010 at 2 (2010) (according to the MSHA report, the explosion started as a methane ignition. The report attributed the physical conditions leading up to this methane ignition as the result of “a series of basic safety violations at UBB.”[4] Ian Urbina, No Survivors Found After West Virginia Mining Disaster, New York Times, Apr. 9, 2010, http://www.nytimes.com/2010/04/10/us/10westvirginia.html?pagewanted=all (last visited Oct. 19, 2015).[5] Jeff Jenkins, Attorneys argue over Blankenship recordings; judge to rule, WV Metro News, Oct. 8, 2015, http://wvmetronews.com/2015/10/08/former-ubb-miner-takes-stand-in-trial-of-former-massey-ceo-don-blankenship/ (last visited Oct. 19, 2015) (emphasis added).[6] A timeline of events in Upper Big Branch disaster, Huffington Post Politics, Sept. 27, 2015, http://www.huffingtonpost.com/huff-wires/20150927/us-mine-explosion-trial-timeline/ (last visited Oct. 17, 2015).[7] Ken Ward Jr., Former Massey official sentenced to 42 months in prison, Charleston Gazette-Mail, Sept. 10, 2013, http://www.wvgazettemail.com/News/201309100025 (last visited Oct. 17, 2015).[8] Vicki Smith and Michael Felberbaum, Don Blankenship Announces Retirement, Huffington Post, Dec. 3, 2010, http://www.huffingtonpost.com/2010/12/03/don-blankenship-retirement_n_791931.html (last visited Oct. 17, 2015).[9] Heather Struck, Massey Energy Agrees to $8.5 Billion Alpha Acquisition, Jan. 30, 2011, http://www.forbes.com/sites/heatherstruck/2011/01/30/massey-energy-agrees-to-8-5-billion-alpha-acquisition/ (last visited Oct. 17, 2015).[10] 29 W.Va. families settle in Upper Big Branch deaths, USA Today, Jan. 11, 2012, http://usatoday30.usatoday.com/news/nation/story/2012-01-10/mine-disaster-settlement/52486826/ (last visited Oct. 17, 2015) (discussing the $46.5 million allotment to victims’ families within the settlement).[11] Id.[12] Vicki Smith, Ex-Security Chief at Upper Big Branch Mine, Hughie Elbert Stover, Loses Federal Appeal, Huffington Post, Feb. 13, 2013, http://www.huffingtonpost.com/2012/12/14/hughie-elbert-stover-upper-big-branch-explosion_n_2301890.html (last visited on Oct. 17, 2015) (discussing nature of Stover’s convictions, including lying to investigators and ordering a subordinate to destroy documents following the UBB accident).[13] The Associated Press, A timeline of events in Upper Big Branch Disaster, CNS News, Nov. 13, 2014, http://cnsnews.com/news/article/timeline-events-upper-big-branch-disaster (last visited on Oct. 17, 2015). (discussing Harrah’s sentencing of “10 months in prison for faking a foreman’s license and lying to federal authorities during an investigation of the explosion”).[14] Id. (discussing Hughart’s sentencing to 3 ½ years in prison for providing advance notice of surprise safety inspections to other Massey subsidiaries).[15] Howard Berkes, Former Massey Exec Gets 42 Months In Mine Disaster Case, NPR, Sept. 10, 2013, http://www.npr.org/sections/thetwo-way/2013/09/10/221161240/former-massey-exec-gets-42-months-in-mine-disaster-case (last visited on Oct. 18, 2015).[16] Indictment, U.S. v. Blankenship, No. 514-CC-00244 (S.D. W. Va. Nov. 13, 2014), available at http://www.wvgazettemail.com/assets/PDF/CH62291113.pdf, archived at https://perma.cc/S5KB-6H8Q.[17] Ken Ward Jr., Longtime Massey Energy CEO Don Blankenship Indicted, Charleston Gazette-Mail, Nov. 13, 2014, http://www.wvgazettemail.com/article/20141113/GZ01/141119629/1460 (last visited on Oct. 17, 2015) (referencing Blankenship’s Indictment, supra note 15.[18] Sheryl Stolberg, Coal Baron’s Trial May Hinge on His Secretly Recorded Conversations, New York Times, Oct. 16, 2015, http://www.nytimes.com/2015/10/17/us/coal-barons-trial-may-turn-on-his-secretly-recorded-conversations.html (last visited on Oct. 18, 2015).[19] Ken Ward Jr., Blankenship repeats ‘not guilty’ plea, Charleston Gazette-Mail, March 24, 2015, http://www.wvgazettemail.com/article/20150324/GZ01/150329619/2007050334 (last visited October 19, 2015).[20] Stolberg, supra note 17.[21] Blankenship v. Alpha, Del. Ch., C.A. No. 10610-CB at 28 (May 28, 2015) (Mem. Op.) (discussing legal expenses under the terms of Massey’s October 2010 Amended and Restated Certificate of Incorporation (“the Charter”) and an agreement and Plan of Merger between Massey and Alpha (“the Merger agreement)).[22] Id. at 66.[23] Id.[24] Linda Harris, Former Massey CEO Don Blankenship again requests change of venue, The State Journal, Sept. 24, 2015, http://www.statejournal.com/story/30110603/former-massey-ceo-don-blankenship-again-requests-change-of-venue (last visited on Oct. 18, 2015).[25] Id.[26] Rawan Jabaji, 5 Things You Need to Know About…Massey CEO Don Blankenship, PBS, May 20, 2010, http://www.pbs.org/wnet/need-to-know/five-things/massey-ceo-don-blankenship/842/ (last visited Oct. 19, 2015).[27] Bernard Condon, Not King Coal, Forbes, Forbes, May 26, 2003, http://www.forbes.com/forbes/2003/0526/080.html (last visited Oct. 19, 2015).[28] Don Blankenship, About Me, Don Blankenship American Competitionist, http://www.donblankenship.com/about-me/ (last visited on Oct. 16, 2015).[29] Stolberg, supra note 17 (discussing Blankenship’s involvement in electing State Supreme Court Justice, Brent Benjamin, which prompted a documentary film labeling him “The Kingmaker.” Blankenship spent $5 million and, subsequently, Justice Benjamin voted to throw out a $50 million jury verdict against Massey).[30] West Virginia Miscellaneous, Public Policy Polling, Sept. 20, 2011, http://www.publicpolicypolling.com/main/2011/09/west-virginia-miscellaneous.html (last visited on Oct. 18, 2015).This holds particular significance when you consider Barack Obama’s approval rating that same year as being higher than Mr. Blankenship’s rating in light of the role Obama’s negative rating played in the election cycle in West Virginia in 2014.[31] Ken Silverstein, Securities Fraud Charges Against Coal Baron Are Weak and Controversial, Experts Say, Forbes, Oct. 17, 2015, http://www.forbes.com/sites/kensilverstein/2015/10/17/securities-fraud-charges-against-coal-baron-are-weak-and-controversial-experts-say/ (last visited Oct. 19, 2015).[32] Hoppy Kercheval, Booth Goodwin eyes governor’s race, WV Metro News, http://wvmetronews.com/2015/04/08/booth-goodwin-eyes-governors-race/ (last visited Oct. 19, 2015).[33] Ken Ward Jr., Experts debate impact of Blankenship prosecution, Charleston Gazette-Mail, Oct. 4, 2015, http://www.wvgazettemail.com/article/20151004/GZ15/151009772/1101 (last visited October 19, 2015).[34] Stolberg, supra note 30.[35] Id.[36] Ken Ward Jr., Blankenship’s hands-on management provides target for prosecutors, Charleston Gazette-Mail, Nov. 15, 2014, http://www.wvgazettemail.com/article/20141115/GZ01/141119492/1104 (last visited Oct. 19, 2015).[37] United States v. Blankenship, 5:14-cr-00244 (S.D.W.V.), Audio Excerpts, Ex. 109-129 (available at http://www.justice.gov/usao-sdwv/us-v-blankenship).[38] Memorandum from Stephanie Ojeda, Counsel for Massey Energy, to Don L. Blankenship; Baxter F. Phillips Jr., Chris Adkins regarding MSHA Violation Reduction (July 6, 2009) (on file with the author and available at http://www.justice.gov/usao-sdwv/file/782771/download).[39] Silverstein, supra note 30, 31 (citing Mike Hissam, former federal prosecutor and now defense lawyer for Bailey & Glasser, a Charleston, W.Va. firm, “Prosecutions based on general statements in a press release may open up many companies to liability or prosecution for otherwise innocuous or aspirational statements.”