On Monday, Massachusetts Treasurer Steven Grossman announced a $265 million deal with Alpha Appalachia Holdings Inc. The deal settles allegations that the coal miner misled investors, including the state's pension fund, by misrepresenting its safety record ahead of a deadly 2010 Massey Energy mine explosion that killed 29 people.
The settlement is good news for investors and state taxpayers alike.
The Pension Reserves Investment Management Board, which oversees public pension investments in Massachusetts, served as lead plaintiff in a class-action lawsuit brought by multiple investors against the company formerly known as Massey Energy Co. Parent company Alpha Natural Resources bought Massey for $7.1 billion in 2011, reports The Associated Press
According to the lawsuit, Massey made misrepresentations about its safety record by telling investors it strongly adhered to proper safety procedures.
But in reality, the company was rife with safety violations, culminating in the 2010 mine explosion killed 29 employees. Following the explosion, an investigation unearthed hundreds of safety violations that caused the company's stock to plunge.
Investigators also found "systematic, intentional and aggressive efforts" to hide problems and throw off inspectors, including the falsification of safety records, according to the federal Mine Safety and Health Administration.
The $265 million settlement new resolves the claims that Massey artificially inflated its stock price prior to the explosion.
Rebuilding Pension Fund
For Attorney General Martha Coakley and other state officials, the settlement is welcome news because it will funnel a significant amount of taxpayer money back into the state pension system that was lost as a result of Massey's alleged misrepresentations.
Investors' share of the settlement will be proportional to their percentage of shares damaged in value as a result of the misstatements by Massey. But the size of the pension fund's share of the settlement has yet to be determined, reports The AP.
Not surprisingly, the defendant did not admit to any wrongdoing in the settlement.
- Mass., firm settle fraud allegations (The Boston Globe)
- Hughie Stover to Appeal Upper Big Branch Cover-Up Conviction (FindLaw's Fourth Circuit Blog)
- 25 Dead in Massey Mine Accident (FindLaw's Injured)
- Massey Energy Security Chief Charged with Lying to FBI (FindLaw's Blotter)