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Blankenship used to controversy Massey Energy president


Publication: THE CHARLESTON GAZETTE
Published: Sunday, November 07, 2004
Page: P1A
Byline: Ken Ward Jr.

kward@wvgazette.com On Oct. 27, Don Blankenship got on the phone for another quarterly conference call. It was time to report Massey Energy's latest financial results.

The news wasn't good. Massey had earned its stockholders just 3 cents per share - only one-third of what Blankenship, the company president, and other management had projected.

Dan Roling, a longtime coal analyst with Merrill Lynch, demanded some answers.

"You constantly are not making a reasonable earnings level," Roling told Blankenship. "What confidence do I have that it's going to change?" Six days later, Blankenship was in Charleston to celebrate a major election victory that he hopes will solve some of his company's problems.

Powered by a multimillion-dollar campaign by Blankenship, political newcomer Brent Benjamin last week unseated incumbent Justice Warren McGraw for a 12-year term on the West Virginia Supreme Court.

During that term, Benjamin will hear perhaps 34,000 cases. The court will make rulings - and decide not to make rulings - in cases that affect everything from coal industry regulation to criminal sentencing.

West Virginians will vote in two more presidential and gubernatorial campaigns before Benjamin must run for re-election in 2016.

So who is the man who did more than anyone else to put him on the court? Just who is Don Blankenship?

In West Virginia politics, Blankenship has become a major kingmaker.

But in the coal business, his company is floundering financially and faces a flurry of lawsuits by regulators, shareholders and citizens.

Labor leaders and environmental activists are quick to attack the 54-year-old Mingo County native.

"He's caused more suffering to more people in the Appalachian region than any one human being I can think of," Cecil Roberts, president of the United Mine Workers union, said last week.

Over the past 20 years, Massey has dueled with the UMW over the company's efforts to remain mostly union free. Another major fight is brewing over Massey's purchase of unionized operations of bankrupt Horizon Natural Resources.

At the same time, Massey repeatedly has run afoul of state and federal environmental regulations. The violations were so blatant that federal officials prosecuted two Massey subsidiaries in 2002 on rare criminal Clean Water Act charges.

"He believes that businesses should be allowed to operate without any controls by government - no unions, no environmental regulations and no mine safety rules," Roberts said.

Business leaders praise Blank enship, and say his company does more good than bad for West Virginia.

"They are a good corporate citizen in the sense that they employ 4,000 to 5,000 people in West Virginia," said Steve Roberts, president of the state Chamber of Commerce.

"I believe it is hard for their kind of company to avoid making mistakes, but I think they try to avoid making mistakes," Roberts said. "I don't think they do those things intentionally." Coal industry insiders, though, say privately that Blankenship and his company are not popular among their competitors.

"He is not well thought of," one industry official said last week.

"The view is that a lot of the criticism directed at the industry comes from things that Massey does." Growing up in Mingo Donald Leon Blankenship was born in Mingo County on March 14, 1950.

At the time, the county had more than 47,000 residents, compared to 28,000 today. In 1950, Mingo County produced nearly 6 million tons of coal with 5,000 working miners. Last year, the county produced twice as much coal with only 1,300 miners.

Blankenship grew up in the area, attending Matewan High School. His family operated small groceries. He trained as an accountant, taking classes at Marshall University and working in the mines during the summers.

"I graduated from Marshall in just three years," Blankenship said in a 1985 Associated Press interview. "At that time, I was taking more credit hours than anybody ever had at Marshall, 27 and 28 hours a semester." After graduation, Blankenship left the state, later working as an accountant for food companies in the South and Midwest.

He came back in the early 1980s, and joined Massey's Rawl Sales and Processing Co. Working first as an accountant there, Blankenship moved up quickly to be president of Rawl Sales.

About that time, Massey refused to sign on to the 1984 national coal contract that UMW officials were negotiating with the Bituminous Coal Operators Association.

Among other objections, Massey said that its various mines were not all part of one company. Massey wanted the UMW to negotiate separate deals with each site. Union officials feared such an arrangement would create an uneven playing field.

Massey had already beaten UMW organizing drives in 1981 at Elk Run Coal in Boone County and Marrowbone Development in Mingo County.

After a bitter and sometimes violent strike that lasted 15 months, Massey secured contract concessions from the UMW at Rawl Sales.

But by that time, Massey had closed or shifted to contracting companies at many of its operations. Striking UMW workers lost jobs and health-care benefits. "It was a horrible situation," Roberts recalled.

During the strike, Blankenship complained that UMW members fired shots into his office and car. He said he had once been a union member, but now believed the UMW had lived out it usefulness.

"It's gotten too powerful and it's time people realized they don't have to be slaves of the union any longer," Blankenship said at the time.

Four years later, the UMW struck Pittston Coal operations over the company's refusal to pay into the union's retiree health-care plan.

Massey filled Pittston coal orders, prompting violent protests by union pickets.

During the Massey strike, then-Mingo Circuit Judge Elliott "Spike" Maynard fined the UMW $200,000 for picket line misconduct. The ruling was later overturned by the state Supreme Court.

Today, Maynard is the court's chief justice. He has been seen socializing with Blankenship several times, including at an election night celebration in Charleston.

'Whatever it takes' Blankenship became head of Massey in early 1992, and stayed on after the firm was spun off from Fluor Corp. in 2000.

Blankenship is divorced, and lives in a company-owned house near Williamson.

Associates say he is a big racing fan. His son drives cars on the professional dirt track circuit.

Steve Canterbury, a longtime state political consultant who now runs the regional jail system, said Blankenship collects rare baseball cards.

"He does it on a grand scale," Canterbury said. "He's really into it." Canterbury described Blankenship as very smart, and very strong willed.

"When he's decided to go a specific route, he will do whatever it takes, including spending whatever it takes," Canterbury said.

Canterbury also said Blankenship is intensely loyal.

"If he's your friend, my God, he's your friend," Canterbury said. "But you don't want him as your enemy, because he's just as tenacious." Numerous people noted that, like fellow Mingo County native Buck Harless, Blankenship is a self-made success - working his way from humble beginnings to running one of the nation's largest coal producers.

But other acquaintances disagreed with Canterbury, saying that - unlike Harless, who is known for helping those he cares about - Blankenship has few close friends and is not known for being loyal.

Over the last two years, Charleston lawyer Brian Glasser has won jury verdicts against Massey in Boone and Mingo counties on behalf of residents who live near the company's operations.

In one of those cases, Blankenship explained that the coal industry simply cannot always follow the law.

"I expect that we try to comply with the laws," Blankenship said in a November 2002 deposition.

"But as you know, on things like the trucking, you can't comply with it," Blankenship said. "So there are situations where we are in a box of not being able to comply with unreasonable laws." Glasser said he was impressed that Blankenship "tells the truth," but added, "that's why he sounds outrageous." "He also is the ultimate expression, in my opinion, of an accountant," Glasser said. "Everything is a number.

"But the people who live there are irrelevant to his calculations," Glasser added. "It just doesn't come up in his brain." Glasser said Blankenship is also competitive, and obsessed with finding every advantage he can over other coal operators.

"What drives him is also what makes him impossible to deal with," Glasser said.

'Him against the world' When J. Davitt McAteer took over as head of the federal Mine Safety and Health Administration for the Clinton administration in 1993, Blankenship came to visit him at MSHA's Arlington, Va., office.

"He explained that he was a Christian - maybe born again Christian - and was committed to making the mines safer because of that," McAteer recalled.

But McAteer, in a 2001 report prepared for Gov. Bob Wise, found that Massey's practice of using a myriad of contractors to mine coal contributes to West Virginia's continuing mine-safety problems.

"He has established a track record in safety that is not enviable," McAteer said last week.

McAteer said Blankenship "fashions himself an innovator" on mine safety issues, and objects to regulators telling him what to do.

"He has a sense that it's him against the world," McAteer said.

McAteer agreed that others in the coal business don't care for Blankenship and feel that Massey gives the whole industry a black eye.

"His attitudes are a throw-back to the bad old days," McAteer said.

Charleston lawyer Michael Callaghan, a former federal prosecutor, tried to crack down on Massey when he was Wise's first Department of Environmental Protection secretary.

Callaghan said he heard one story - perhaps told only in jest - that, if any Massey operations won a reclamation award, Blankenship would demand that the site supervisors be fired.

"He's not much into regulation," Callaghan said.

In 2001, Blankenship briefly pulled out of the West Virginia Coal Association. He was upset that the group supported an increase in the tax that funds cleanups of abandoned mine sites.

Bill Raney, the coal association president, said Blankenship rejoined in less than a year. He's now a valued member and on the group's board of directors, Raney said.

"He's absolutely dedicated to Southern West Virginia - to making sure there are opportunities and a future there," Raney said.

Playing politics Blankenship is not new to politics. A registered Republican, he's been a frequent campaign contributor.

But this year was clearly different. By his own estimate, he poured at least $3.5 million into independent efforts to oust McGraw from the Supreme Court.

Benjamin has declined to say if he will recuse himself from cases involving Massey. Benjamin says Blankenship's spending is no different than the money plaintiffs' lawyers spent to support McGraw.

But so far, no public records have indicated that a single trial lawyer spent anywhere near $3.5 million to support McGraw.

Tim Bailey, a Charleston plaintiffs' lawyer who helped raise money for McGraw, said there's another distinction worth making.

"A trial lawyer is not a party to a case," Bailey said. With Blankenship, he said, "you've got a party to the litigation who is funding this campaign.

"You're talking about a group versus an individual, and you're talking about a lawyer versus the party in a case," Bailey said.

Blankenship's spending has also put business lobbyists and advocates for "tort reform" into a difficult position.

For example, a group that calls itself Citizens Against Lawsuit Abuse spent an undisclosed amount on anti-McGraw ads. But now, that group points to spending in the Benjamin-McGraw race as evidence that the system needs to be changed.

"Warren McGraw no longer serving on the Supreme Court is a good thing for the state of West Virginia," said Bill Bissett, the group spokesman. "But millions of dollars being spent on a judicial race is a bad thing for the system." Roberts, the Chamber of Commerce president, said his group tried before this year's election to get lawmakers to change the way judges are selected.

"We couldn't get the Legislature to listen, so we had to play this out in a political contest," Roberts said.

"Our members wanted us to do this," he said. "What I heard people saying was that this had to be done, that Don Blankenship and the Chamber are to be congratulated for their efforts." 'We're going to be watching' Under Blankenship, Massey has bought up a lot of smaller mining operations. Many of them are marginal sites with environmental problems that make mining tough and have gotten Massey in trouble with regulators. At the same time, Blankenship has built up Massey's coal holdings with huge amounts of some of the highest quality and most valuable metallurgical coal in the country.

But the company has lost money in 11 of its last 16 quarters, according to financial disclosures filed with the U.S. Securities and Exchange Commission.

In each of the last two years, Massey reported financial losses of more than $30 million, according to those SEC filings.

When he talked to industry analysts two weeks ago, Blankenship predicted things would get better.

"We know that we have missed the numbers a number of times," Blankenship said. "It's been an embarrassment for me for two or three years now." One analyst joked that things had better improve.

"We're going to be watching, and if you do not make it, I'm going to come and find you where you live," he said.

Blankenship responded, "That will be fine. My reputation precedes me in that regard." To contact staff writer Ken Ward Jr., use e-mail or call 348-1702.

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