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UPPER BIG BRANCH DISASTER ALPHA ORDERED TO FUND DEFENSE FOR BLANKENSHIP EX-MASSEY CEO'S LEGAL FEES REACHED $5.8M ON APRIL 1


Publication: THE CHARLESTON GAZETTE
Published: Friday, May 29, 2015
Page: 1A
Byline: KEN WARD JR. STAFF WRITER

Alpha Natural Resources must pay for former Massey Energy CEO Don Blankenship's legal costs as Blankenship fights an indictment charging him with mine safety and securities crimes, a business court judge in Delaware ruled Thursday.

Chancery Court Judge Andre G. Bouchard concluded that Blankenship is entitled to have Alpha pay his defense lawyers under "the unambiguous terms" of an agreement through which Alpha bought Massey Energy in 2011.

The decision is a victory for Blankenship, who faces a trial scheduled to start July 13 and has unpaid post-indictment legal fees that - according to the ruling - had reached $5.8 million as of April 1.

"We are pleased but not surprised, said William Taylor, Blankenship's lead defense lawyer.

Alpha spokesman Steve Hawkins said the company is reviewing the ruling.

Blankenship faces up to 30 years in prison if he's convicted of all three felony counts in an indictment that alleges he put coal production and profits ahead of mine safety at Massey's Upper Big Branch Mine, where 29 workers died in an April 2010 explosion.

For some period of time, Massey and then Alpha apparently were paying Blankenship's legal costs related to various investigations of the mine disaster and Massey safety practices. Agreements to pay legal costs are relatively common for corporate officers.

Earlier this year, Alpha informed Blankenship that the company no longer would pay his defense costs. Alpha argued that, under its agreement with Blankenship, it was not required to pay because the company had "determined that Mr. Blankenship had reasonable cause to believe that his conduct was unlawful."

Testimony in the case indicated that Alpha officials had made this determination, at least in part, by reviewing a variety of statements attributed to Blankenship about safety and financial practices at Massey prior to Alpha buying the company. Also considered, according to court testimony, was a June 2009 memorandum on "Massey's compliance culture" that was prepared by Bill Ross, a former federal mine inspector hired by Massey to work on mine safety issues, the judge's ruling notes.

During a court hearing, though, the Alpha official who made the determination, Executive Vice President Philip Cavatoni, "did not identify any specific law or regulation that he concluded Blankenship had reasonable cause to believe that he had violated," Bouchard wrote in his 67-page ruling.

"Nor did Cavatoni believe that any such unlawful conduct needed to be based on or related to the allegations of the indictment, the judge wrote. "When I asked Cavatoni at trial to elaborate on the basis for his determination, he conceded he could not identify any specific examples of unlawful conduct by Blankenship and spoke in vague generalities.

In a footnote, Bouchard expressed "serious doubts about Alpha's determination, saying that statements attributed to Blankenship appeared to have been "cherry-picked by Alpha general counsel Richard Verheij "to lead to a pre-ordained conclusion by Cavatoni.

Reach Ken Ward Jr. at kward@wvgazette.com, 304-348-1702 or follow @kenwardjr on Twitter.

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