White Collar Crime in the U.S. Coal Industry

Introduction: White Collar Crime and the Coal Industry

According to Black's Law Dictionary (1990), a "white collar crime" is a 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 historically been characterized by such white collar crimes, many of which have only recently come to light. This paper examines how coal companies have evaded the law over the years, including practices such as filing for bankruptcy and reorganizing to avoid pension and healthcare responsibilities, their conduct regarding land reclamation, and other related offenses. A review of the safety regulations that govern the coal industry is followed by a summary of the research in the conclusion.

Background and Overview of Coal Industry Power

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 bring their products to 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 protection, police, sewage treatment, and libraries continue to operate on bare-bones budgets (Nyden, 2004).

These conditions persist in coalfield communities in the 21st century despite the fact that highly efficient coal mines have revolutionized 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 can be found by examining the powerful forces that have shaped the region: "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 percent of the price they received for coal at tidewater" (Laidler, p. 54). In 1898, independent operators attempted to negotiate better prices or freight rates; failing this, they believed that building a rail line of their own would be the best approach. The railroad companies, however, secured control of the mines belonging to 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. 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, but the coal miners themselves were at an enormous disadvantage in terms of both 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)

Corporate Maneuvering: Bankruptcy and Benefit Evasion

The powers that be in the coal industry have not rested on their profits, but have continued to devise ways to avoid their corporate responsibilities to their stakeholders — especially their own workers and the communities in which those workers 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 had worked for coal companies that had gone out of business (Rottenburg, 2003).

Just two months before emerging from bankruptcy, 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 corporate maneuver, the company's previous operating losses became an accounting asset that could be carried forward and applied to protect the company's future earnings from income taxes (Rottenburg, 2003).

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. Furthermore, Westmoreland's stock price — at one point down to the $1–$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 outcome, 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, and 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).

Conclusion

The research showed that, as industries go, the coal mining industry has had more than its share of influence on the American economy and landscape over the years. Coal mining is an incredibly dangerous and dirty job, but someone has to do it. American coal workers have suffered the hazards of this "dusty occupation" for more than a century, but in many ways things have not changed at all. In spite of technological innovations in how coal mining is performed today and improved profitability for the coal companies, many coal mining families continue to live below the federal poverty line in communities that have also suffered from serious environmental damage.

While there has been some movement in past years to address these issues, the sad fact remains that the legacy of the nation's coal industry is one of corporate shenanigans, wrongdoing, and malfeasance — all at the expense of the American public in general and the coal miners in particular. All in all, coal mining might be a "dusty occupation," but there is apparently still plenty of white collar crime taking place.

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Fishback, P. V. (1992). Soft coal, hard choices: The economic welfare of bituminous coal miners, 1890–1930. New York: Oxford University Press.

Laidler, H. W. (1931). Concentration of control in American industry. New York: Thomas Y. Crowell.

Nyden, P. J. (2004). From pick and shovel to mountaintop removal: Environmental injustice in the Appalachian coalfields. Environmental Law, 34(1), 21.

Rottenburg, D. (2003). In the kingdom of coal: An American family and the rock that changed the world. New York: Routledge.

Whiteside, J. (1990). Regulating danger: The struggle for mine safety in the Rocky Mountain coal industry. Lincoln, NE: University of Nebraska Press.