Winds of Change Newsletter, December 2005     See sidebar for table of contents

Massey settlement agreement scuttles insider trading allegations

Associated Press, Nov. 13, 2005

CHARLESTON, W.Va. - Allegations that Massey Energy Co. executives engaged in insider trading, illegal employment practices and flagrant lawlessness regarding environmental regulations would be dropped under a settlement agreement reached in a shareholder lawsuit.

The country's fourth largest coal producer has agreed to recommend loosening voting requirements for proposed changes to company bylaws, to increase the number of board members and establish a lower mandatory retirement age for directors, according to the agreement.

In return, Richmond, Va.-based Massey would be released from all other claims. Massey's insurer, Zurich American Insurance Co., has also agreed to pay the plaintiffs' $2.5 million legal fees, according to the agreement

In one court filing, the plaintiffs argued that their allegations "tell the story of a publicly traded corporation that is controlled and run by an individual CEO, with the assistance of a Board of Directors that is beholden to him, according to his own agenda at the extreme expense of the Company."

Massey's attorneys disputed that Don Blankenship, Massey's chairman, president and CEO, controlled the other defendants, who include timber magnate James H. "Buck" Harless, a former board member, and Bennett Hatfield, Massey's former chief operating officer and now president and CEO of International Coal Group Inc.

The lawsuit alleged that Massey had twice filed false financial statements in 2001 that artificially inflated the company's share price and allowed company insiders to obtain about $5 million before the stock plummeted from $22 per share to $7.

The plaintiffs also alleged that Massey officials' "flagrant lawlessness" regarding state and federal environmental laws, resulted in millions of dollars in fines, penalties and compensatory damage judgments.