A federal appeals court ruling affirming the conviction of former Massey Energy CEO Don Blankenship spells out that those at the top of an organization are subject to penalties, including incarceration, to deter prioritizing production over safety.
The U.S. Court of Appeals for the 4th Circuit on Jan. 19 denied Blankenship's appeal of his one-year sentence stemming from the conviction of a conspiracy to violate mine safety laws. The Illinois Coal Association, the Ohio Coal Association and the West Virginia Coal Association had all filed a "friend of the court" brief insisting that an executive's "tough decisions ... may at times be imperfect, prone to second-guessing, and, despite the best intentions, even incorrect."
Because of this, the coal groups wrote, mine operators should face criminal liability only if an "evil purpose" is established by prosecutors. The appeals court specifically rejected that notion, insisting Congress intended to hold coal operators personally responsible for corporate actions. The opinion insists operators cannot simply treat penalties from the U.S. Mine Safety and Health Administration as a cost of doing business and maximizing profit.
Specifically, the court said Congress designed mine safety law to deter operators from choosing to prioritize production on grounds that it is "cheaper to pay the penalties than to strive for a violation-free mine."
"By subjecting mine operators to personal liability, including incarceration, Congress forced mine operators to internalize the costs associated with noncompliance with mine safety laws, even when such noncompliance would be profit-maximizing from a business perspective," the filing states. "Accordingly, contrary to defendant's and [state coal association's] position, a mine operator cannot immunize himself from criminal liability ... by characterizing his mine's repeated failure to comply with safety laws as a consequence of 'tough decisions' he had to make weighing production, safety, and regulatory compliance."
The court found that while inadvertent violations may not amount to willingness, continuing violations after repeated warnings allows a jury to infer criminal intent. The court likened the case to another in which it rejected the argument of a firearms dealer who argued a repeated failure to correctly fill out forms establishing a customer was qualified to purchase a firearm did not amount to willfulness due to the inevitability of human error under a complex regulatory regime while a high number of firearms were sold.
The appeals court opinion said that federal law holds a mine operator criminally liable even if they fail to take actions necessary to remedy safety violations after repeated warnings "regardless of whether the operator subjectively wanted the violations to continue." The argument the associations advanced suggesting that executives might distance themselves from safety oversight to escape liability was also dismissed in the opinion.
"Because mine operators have 'primary' responsibility for safety and regulatory compliance and because an operator acts with reckless disregard if he 'clos[es] [his] eyes' to safety compliance or 'should have known' that an action or omission would lead to a safety violation, a mine operator cannot avoid liability under Section 820(d) by failing to engage in close oversight over safety and regulatory compliance," the filing states.
The court added that Congress imposes penalties on corporate officers such as Blankenship because it is "often impossible to impose monetary penalties on corporations large enough to deter corporate misconduct."
Murray Energy Corp. CEO Robert Murray said in an interview in late 2016 that while he was not aware of the facts at Massey and he does not condone Blankenship's management, he does see some room for concern based on prosecution of the case. He explained the state coal associations believe prosecutors "took matters that were subject to civil penalties" and converted that into a prison-worthy conviction.
"The coal associations filed in the courtroom because the government may try to continue this illegal prosecution of other coal managers," Murray said at the time. "Not just executives, but foremen and everywhere in the management chain. The law does not provide for, or we believe the law does not provide for something Congress said was a civil penalty and making it something you can send someone to prison for."
Illinois Coal Association President Phil Gonet was still reviewing the opinion issued Jan. 19, but he said in a brief interview that the associations were concerned the federal government had taken something handled by administrative procedure and used it to indict Blankenship. He said that could be a concern since upper management cannot be aware of "every single violation that's out there." The West Virginia Coal Association and the Ohio Coal Association did not immediately respond to a request for comment.
Former U.S. Attorney Booth Goodwin, who initiated the indictment of Blankenship, said the decision should not portend bad news for many other coal executives. He said most coal operators are dedicated to safety and that Blankenship was a "rogue" and "outlaw" who "richly deserves to be held accountable."
"I certainly hope that there aren't coal operators out there acting like Don Blankenship," Goodwin told S&P Global Market Intelligence. "That being said, I think if people are condoning safety violations that are running rampant in their corporations, especially safety violations as serious as that which really contributed to making possible the explosion that happened there at UBB, then they should be held accountable. ... What I would say to coal executives is 'don't send the message that fosters a culture where production is valued over safety.' That's what Don Blankenship did."
The opinion strengthens the notion that Blankenship's indictment could be considered a warning to those in charge of worker safety, even at the top of an organization. Celeste Monforton, a professorial lecturer at George Washington University and a member of the Governor's Independent Investigation Panel that looked into the Upper Big Branch explosion, said in early 2015 that the indictment should put executives across industries on alert.
"It really should be a wake-up call to companies and employers," Monforton said on a call hosted by the National Council for Occupational Safety and Health in April 2015. "It may be setting an important precedent. If you cut corners and put pressure on your managers and your workers to operate unsafely and someone gets hurt, you can be held accountable for that."