White Collar Crime and Coal Companies Term Paper

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White Collar Crime and Coal Companies

According to Black's Law Dictionary (1990), a "white collar crime" is the term "signifying various types of unlawful, nonviolent conduct committed by corporations and individuals including theft or fraud, and other violations of trust committed in the course of the offender's occupation" (p. 1596). The coal industry in the United States has been historically been characterized by such white collar crimes, many of which have only recently come to light. To this end, this paper provides an examination of how coal companies have evaded the law over the years, including practices such as filing bankruptcy and reorganizing to avoid pension and healthcare responsibilities, their practices on reclaiming the land, and others. A review of the safety regulations that govern the coal industry is followed by a summary of the research in the conclusion.

Review and Discussion

Background and Overview. Coal mining is an especially grimy occupation, but the country's trunk line railroad systems and coal companies have been some of the primary growth engines of the U.S. economy over the years (Rottenburg, 2003). This contribution was primarily the result of the need for the coal industry to build canals and railroads to get their products to the market during the early years of operation; this process resulted in "a combination of mining and transportation so close that, in 1833, a committee from the Pennsylvania Legislature maintained that a few interests were able to 'lock up at pleasure the resources of the whole valley or community'" (Laidler, 1931). In fact, after more than a century of mining in the "billion dollar coalfields" of Appalachia's coal-producing region, local communities still lack adequate funds to upgrade their crumbling schools; tens of thousands of citizens in these regions live below the federal "poverty line"; and public services such as fire, police, sewage treatment, and libraries continue to operate on "bare-bones" budgets (Nyden, 2004).

These conditions continue to persist in these coalfield communities in the 21st century despite the fact that highly efficient coal mines have revolutionized coal mining operations in Appalachia. According to Nyden, "Coal production largely from giant 'mountaintop removal' strip mines and highly mechanized underground 'longwall' mines approaches record levels. How does one account for the pervasive dismal economic condition in a region which could aptly be called the 'Saudi Arabia of coal'?" (p. 21). The answer to this question can be found by examining the various powerful forces that have shaped the region over the years: "For better or worse, those forces -- the coal industry and those who directly profit from mining, state and local politicians, and the United Mine Workers of America (UMWA) -- led the coalfields to its present condition. Those same players continue to exert enormous influence, which promises to extend the economic status quo" (Nyden, 2004, p. 22).

These major players achieved this level of influence by virtue of the nature of the industry itself. For example, "To avoid competition among themselves, the 'railroad companies' during these years made various agreements affecting the price of coal. They put obstacles in the way of other railroads entering the coal field. They purchased the output of independents for from 35 to 65 per cent of the price they received for coal at tidewater" (Laidler, p. 54). In 1898, the independent operators attempted to negotiate a better price or better freight rates; failing this, they believed building a rail line of their own would be the best approach. The railroad companies, though, secured control of the mines of the chief independent operators who were supporting the new railroad project and put a stop to it; thereafter, Laidler reports that the other independents were compelled to contract to sell their coal to the railroads for 65% of the tidewater price. Moreover, during this early period in the coal industry's history, large railroad coal companies inexorably acquired their competitors, resulting in a further concentration of control. In fact, Laidler points out that, "The coal companies likewise carefully limited production, so that, in years of unusual demand, the public was compelled to pay exorbitant 'premium' prices for coal. The companies did what they could, furthermore, to keep the public in ignorance of the true situation, to the end that frequent 'panics' among the consuming public resulted, with a consequent panicky rise in anthracite prices" (p. 54). Not only was the American public being held hostage by the coal companies during this period, the coal miners themselves were at an enormous disadvantage both in terms of bargaining power and their absolute reliance on the coal industry for their livelihoods. According to Fishback (1992):

Many coal mines were isolated. Coal seams often were located in Appalachian hollows or in rural settings where few had ever settled. Mining coal became the impetus for settlement with coal companies often building and owning the town around the mine. The isolation of the mines and the company's ownership of housing and stores led many to focus on powerful companies and helpless miners. (p. 11)

The powers that be in the coal industry have not rested on their laurels -- or their profits -- but continued to devise ways to avoid their corporate responsibilities to their stakeholders, especially their own workers and the communities in which they live. For example, Westmoreland Coal Company emerged from more than four years of Chapter XI bankruptcy protection in March 1999 after paying off all of its creditors in full, with interest; however, the bankruptcy proceedings had placed an automatic hold on Westmoreland's enormous obligation to pay lifetime health benefits to the company's own retired miners as well as those who worked for coal companies that had gone out of business (Rottenburg, 2003). In fact, just two months earlier, Westmoreland's chief executive, Christopher Seglem, had used the protection of the bankruptcy proceedings as a negotiating tool and succeeded in settling the company's health benefit obligations, thereby providing the framework for Westmoreland's discharge from bankruptcy at the same time that coal became popular once again (Rottenburg, 2003).

Following this bit of corporate legerdemain, the company's previous operating losses then became an accounting asset that could be carried forward and applied to protect the company's future earnings from income taxes (Rottenburg, 2003). In fact, after showing a loss of $1.5 million in 2000, Westmoreland turned around and enjoyed earnings of $3.5 million on sales of $245 million in 2001, placing it tenth among the nation's coal producers; further, Westmoreland's stock price, at one point down in the $1 to $2 range, increased to more than $16 per share in 2002. In response, the company's CEO announced, "We now do expect to be profitable going forward" (Rottenburg, 2003, p. 266). While the retired coal miners may not have applauded this action, the business community viewed it as a stroke of managerial genius. In 2003, Westmoreland received the 2002 Platts/Business Week Global Energy Award for acquiring and successfully integrating two smaller coal companies; Seglem received a nomination for "CEO of the Year" in the same competition. Rottenburg concludes that, "After nearly two hundred years, the 'rock that burns' had seduced a new acolyte in the person of Christopher Seglem. Westmoreland had survived once again. And coal itself still endured" (p. 266). Furthermore, because of the enormous acreage they have historically controlled, coal companies have had a particularly severe impact on the area's water resources as well as its forests. According to Buckley (1998), "Trees were obstacles to be cut and removed in preparation for mine development. Because even the youngest trees could be turned into mine props, the forests of Allegany County were never permitted to recover. Forests had no inherent value. Trees only acquired value when they reached the lumber mill" (p. 175).

Safety Regulations. Although the states and federal government had attempted to apply various levels of safety regulations to the coal industry over the years, the federal government first exercised direct regulatory authority over the nation's coal mines in 1946, when President Truman seized the country's coal mines. At that time, the Bureau of Mines enforced a coal-mine safety code that had been issued by the Interior Department; that code subsequently became the basis for several major changes in state laws, including those of Colorado, Wyoming, and Montana (Whiteside, 1990). Following a coal mine disaster in Illinois, the U.S. Congress assigned permanent inspection and regulatory authority to the Bureau of Mines. Thereafter, the Coal Mine Safety Act of 1952 included the provisions of the 1946 code; however, this law only to mines employing at least 15 workers underground, leaving many smaller operations at the mercy of local and state regulations. In 1966, though, the mounting evidence that indicated small mines were more dangerous than larger operations caused Congress to apply the law to all mines (Whiteside, 1990). Another federal law, the Coal Mine Health and Safety Act of 1969, was also in response to a major disaster, an explosion in the Consolidation Number Nine at Farmington, West Virginia November 1968. This new law authorized the Interior Department to…[continue]

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