SEC Requiring Coal Firms To Report Safety Problems
MORGANTOWN, W.Va. — A lawyer suing the former Massey Energy Co. says investors might have made better decisions about putting money into the coal company had it been required to report safety violations to the U.S. Securities and Exchange Commission before last year's Upper Big Branch mine disaster that killed 29 miners.
Instead, New York attorney Joel Bernstein says, shareholders relied on Massey's false claims that it had launched initiatives to make safety a priority after earlier accidents.
"They told the public, they told the employees and they told the investors they were doing it," he says, "and they didn't."
Earlier this week, the SEC announced new rules that require mining companies to start reporting any fatalities and all major health and safety violations, mine by mine, in their quarterly and annual financial reports. The filings are mandated in the wide-ranging Dodd-Frank Wall Street Reform and Consumer Protection Act, which Congress passed to try to increase corporate accountability.
The rules take effect 30 days after publication in the Federal Register. They require companies to report within four days any "significant and substantial" violations, citations, flagrant violations and imminent-danger orders issued by the federal Mine Safety and Health Administration.
Coal operators must also include the dollar value of proposed fines, whether the company has been or may be designated a pattern violator by MSHA, and any pending cases with the Federal Mine Safety and Health Review Commission.
The National Mining Association opposed the requirements when they were proposed and considers them duplicative, spokeswoman Carol Raulston said Friday.
"MSHA has a searchable database that is available to the public," she said, "so information is public for all mining companies, not just those that are publicly traded and regulated by the SEC."
Virginia-based Alpha Natural Resources bought Massey and its assets, including the Upper Big Branch mine near Montcoal, for $7.1 billion in June. Alpha spokesman Ted Pile said its legal team has known about the new SEC requirements, "and naturally, we will comply."
The Wall Street Journal () reported Friday that Alpha will try to negotiate settlement of 18 wrongful death lawsuits in the Upper Big Branch disaster during a four-day mediation session set to begin Jan. 6 in Daniels. http://on.wsj.com/rOTLlR
Pile declined comment except to say Alpha is "hopeful we can resolve the legacy issues we inherited ... so we can move forward."
Earlier this month, Alpha reached a $210 million settlement with the Department of Justice that spares the corporation criminal prosecution for the 29 deaths in April 2010. Individuals, however, can still be prosecuted.
The settlement wiped out 370 safety violations related to the worst U.S. mine disaster in four decades.
It also includes $46.5 million in restitution to the victims' families, guaranteeing them and two survivors of the blast $1.5 million. Those who accept can still sue, but the $1.5 million will be deducted from any settlement or award. At least eight families of dead miners previously settled with Massey.
MSHA says Massey allowed highly explosive methane gas and coal dust to accumulate at Upper Big Branch, and that worn and broken cutting equipment created the spark that ignited the fuel on April 5, 2010. Broken and clogged water sprayers allowed a mere flare-up to turn into an inferno that ripped through miles of underground tunnels and killed men instantly.
In its final report, MSHA said the root cause of the explosion was Massey's "systematic, intentional and aggressive efforts" to conceal life-threatening problems. Managers went so far as to maintain two sets of pre-shift inspection books – an accurate one for itself, and a fake one for regulators, MSHA said.
Still, in the year before the blast, MSHA issued more violation orders at Upper Big Branch than at any other U.S. mine. It shut the mine down 48 times that year but had to let it reopen when problems were fixed.
Between Jan. 1, 2009, and the day of the blast, MSHA cited Upper Big Branch for 645 violations and imposed penalties of more than $1.2 million.
Bernstein says investors didn't know about them.
He represents plaintiffs in a pending class-action lawsuit against Massey in U.S. District Court in Beckley, accusing Massey of violating the Securities Exchange Act. The investors say Massey repeatedly claimed to be one of the safest operators in the industry, regularly touting safety achievements and leading them to believe that safety was a corporate priority.
Three investigations of Upper Big Branch, however, have since concluded the company regularly put production and profits before the health and welfare of its workers.
Massey asked U.S. District Judge Irene Berger to dismiss the investors' case in April, but the plaintiffs – led by the Massachusetts Pension Reserves Investment Trust – argue that MSHA revelations about Massey's deceptive practices constitute new evidence. They want to refile their complaint.
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VICKI SMITH 12/23/11 05:48 PM ET Associated Press