CHICAGO Nov 17 West Virginia's environmental
regulator sued Alpha Natural Resources Inc's former management
on allegations of fraud on Wednesday, saying top executives
should be held accountable for an unusual $100 million funding
gap that has emerged just three months after the U.S. coal
producer exited bankruptcy.
The lawsuit accused six senior executives including CEO
Kevin Crutchfield of making misleading financial projections
about Alpha so its bankruptcy plan would get court approval.
After the plan was approved in July, the executives joined the
management team of Contura Energy Inc, which bought some of
Alpha's most productive mines.
"In knowingly making or allowing to be made, false and
misleading projections to obtain confirmation of (Alpha's)
chapter 11 plan, each of the named individual defendants
committed a fraud upon this court," the West Virginia Department
of Environmental Protection (DEP) said in the lawsuit.
Contura did not respond to a request for comment on behalf
Alpha said in a Nov. 3 court filing it had uncovered $100
million of "unaccounted-for obligations," including taxes,
payroll and royalty payments that were not accounted for when it
Bankruptcy attorneys said companies rarely return to court
to address such a large liability so soon after exiting
West Virginia said the shortfall threatened Alpha's
viability and could saddle the state with cleaning up retired
mining sites, which is expected to cost hundreds of millions of
Lawyers for Alpha and Contura denied the claims in court on
Thursday and said they would begin talks with the regulator to
address its concerns.
Alpha and Contura reached an agreement this month to divvy
up the obligations and planned to ask for bankruptcy court
approval on Thursday for their settlement.
U.S. Bankruptcy Judge Kevin Huennekens postponed a decision
in light of the lawsuit.
Alpha's reorganization split the company in two, with its
lenders forming Contura to operate more productive mines and the
remainder of the company focusing on cleaning retired mining
sites, mostly in West Virginia.
Alpha has said it has more than $1 billion in environmental
obligations, much of which were covered by a federal program
called "self-bonding" that exempt companies from setting aside
cash or bonds to restore abandoned mines to their natural
Alpha and Contura agreed to provide $400 million over the
next decade for mine cleanups. In a court filing this week,
Contura said it believed that Alpha will have sufficient
liquidity to meet its commitment.
(Reporting by Tracy Rucinski; additional reporting by Tom Hals;
editing by Grant McCool)