NEW YORK (Reuters) - Executives of Massey Energy Co believed President Barack Obama had a secret agenda to bring down the coal company after 29 men were killed in an accident at one of its mines last year, a lawsuit shows.
The charge came in a class action suit by investors who seek to block Massey’s pending $7 billion takeover by Alpha Natural Resources Inc as they press their claims for about $1 billion in losses from alleged Massey mismanagement.
A copy of the suit, filed on Tuesday in state court in Delaware, was obtained by Reuters. Chancery Court Judge Leo Strine is scheduled to hear the investors’ request to block the deal at a hearing in Wilmington on Thursday.
The suit, filed by several state pension funds, seeks an injunction to block the merger and allow claims against Massey to go ahead. Massey would cease to exist after the merger, on which shareholders of both companies are voting next week.
“We are challenging the way the (Massey) board and senior management handled oversight,” Amy Miller, a co-lead counsel for the plaintiffs, told Reuters.
Last week, an independent inquiry into the April 2010 blast that killed 29 miners at Massey’s Upper Big Branch coal mine in West Virginia concluded it could have been avoided and blamed it on safety failings. An inquiry by the federal Mine Safety and Health Administration (MSHA) is still pending.
In the suit unsealed in Delaware on Tuesday, the plaintiffs noted that for more than five years, “Massey has incurred record numbers of citations for serious safety hazards.”
It said Don Blankenship, Massey’s former chief executive, and Chairman Bobby Inman gave depositions in which they “firmly believed the company was being targeted by the government.”
Inman, a former CIA deputy director, “was unequivocal in his assertions” that MSHA, unions, lawyers “and President Obama himself harbored a secret agenda to destroy Massey.”
The large numbers of safety violations Massey received were proof of the conspiracy, according to the suit. Between 2005 and 2009, Massey’s total safety violations increased from 4,698 to 10,653, while violations that posed a serious threat to worker safety increased from 54 to 246, the suit said.
Just 10 days after the accident — the worst U.S. mine disaster in four decades — Obama publicly blamed Massey.
“Safety violators like Massey have still been able to find ways to put their bottom lines before the safety of their workers, filing endless appeals instead of paying fines and fixing safety problems,” the president said. Massey called Obama’s remarks “regrettable.”
There was no immediate comment on Wednesday from the White House, nor from Massey or Alpha Natural.
The lawsuit brought by several funds, including the New Jersey Building Laborers Statewide Pension Fund, seeks to hold Massey directors liable for the company’s more than $25 million in assessed violations by MSHA.
Massey posted four consecutive quarterly losses after the accident and agreed to be sold to rival Alpha for around $7 billion. Pension funds contend the price was $1.5 billion cheaper than it should have been because of Massey’s poor safety record.
On a day when all coal stocks were higher, Massey’s rose 4.0 percent to $63.16 and Alpha’s was 4.5 percent higher at $52.15 in afternoon trading on the New York Stock Exchange.
The case is: In re Massey Energy Co. derivative and class action litigation, 5430, Delaware Chancery Court (Wilmington).
Additional reporting by Tom Hals in Wilmington, Editing by Gerald E. McCormick