United States v. Blankenship
| Decision Date | 04 April 2016 |
| Docket Number | CRIMINAL ACTION NO. 5:14-cr-00244 |
| Citation | 179 F.Supp.3d 647 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | United States of America, Plaintiff, v. Donald L. Blankenship, Defendant. |
R. Booth Goodwin, II, Steven R. Ruby, Gabriele Wohl, U.S. Attorney's Office, Charleston, WV, R. Gregory McVey, U.S. Attorney's Office, Huntington, WV, for Plaintiff.
Alexander Macia, Spilman Thomas & Battle, John H. Tinney, Jr., Hendrickson & Long, Charleston, WV, Blair Gerard Brown, Eric R. Delinsky, Richard Miles Clark, Steven N. Herman, William W. Taylor, III, Zuckerman Spaeder, Washington, DC, James A. Walls, Spilman Thomas & Battle, Morgantown, WV, for Defendant.
The Court has reviewed the Defendant's Motion to Dismiss Alpha's Restitution Claims, or, in the Alternative, for Discovery and an Evidentiary Hearing (Document 563), the Memorandum in Support (Document 564), the United States' Response to Defendant's Motion to Continue Sentencing Hearing, or, in the Alternative, to Bifurcate Sentencing Hearing (Document 567), and the Reply in Support of Defendant's Motion to Dismiss Alpha's Restitution Claims, or, in the Alternative, for Discovery and an Evidentiary Hearing (Document 568). For the reasons set forth herein, the Court finds that the Defendant's motion should be granted and Alpha's claims for restitution be dismissed.1
On April 5, 2010, an explosion took place at the Upper Big Branch-South mine (UBB), a facility operated by Massey Energy Company (Massey) in Montcoal, West Virginia. (Id. at ¶1-2.) The explosion killed twenty-nine Massey employees, and led to a comprehensive investigation into Massey's safety and compliance practices by multiple federal and state agencies, including the Mine Safety and Health Administration (MSHA), the United States Department of Justice, and the United States Attorney's Office for the Southern District of West Virginia. At the time of the explosion, the Defendant served as Chairman and Chief Executive Officer at Massey. The Defendant resigned from Massey effective December 31, 2010.
In June of 2011, Alpha acquired control of Massey's operations in a merger transaction. (PSR, at ¶100.) Around the same time, Alpha agreed to cooperate with the United States in the investigation of the UBB explosion and Massey's compliance and safety practices at UBB. In a proxy statement explaining the terms of the acquisition to its shareholders, Alpha acknowledged that the acquisition of Massey included the risk of certain regulatory, legal, and investigatory expenses. (Mem. in Supp. of Def.'s Mot. to Dismiss, at 16.) Specifically, Alpha indicated that:
(Id. at 16-17) (citations omitted.)
Pursuant to the merger agreement, and its agreement to cooperate with the United States Attorney for the Southern District of West Virginia, Alpha and its counsel reviewed documents, interviewed former Massey employees, and responded to document requests from the United States. (PSR, at ¶100.) On December 6, 2011, Alpha executed a non-prosecution agreement with the United States, wherein Alpha agreed not to contest, and to pay in full, “any citation or order” issued to Massey Energy “as a result of conditions which existed or conduct which occurred prior to or on June 1, 2011, that has not been assessed as of December 6, 2011,” for a total payment of $1,250,000. (Non-Prosecution Agreement, at 7(b), att'd as Ex. C to Def.'s Mot. to Dismiss.) Alpha further agreed not to contest “any citation or order issued by MSHA on December 6, 2011, in connection with the investigation of the UBB explosion ...,” and to pay “$10,828,191 for all such citations...” (Id., at 7(c), att'd as ex. C to Def.'s Mot. to Dismiss.) Alpha further agreed to cooperate fully with the United States Attorney and other federal law enforcement and regulatory agencies, to “... secure the attendance and truthful statements or testimony of any officer, agent, or employee of Massey or Alpha at any meeting or interview or before the grand jury or at any judicial proceeding related to the conduct described in this Agreement,” and to “provide the Government ... all non-privileged information, documents, records, or other tangible evidence about which the Government or any designated law enforcement agency inquires” in connection with any investigation related to the conduct described in the agreement. (Id. at ¶9, att'd as Ex. C to Def.'s Mot. to Dismiss.)
The Defendant was first charged in this case in a four-count Indictment on November 13, 2014. On March 10, 2015, the Charleston, West Virginia, Grand Jury returned the Superseding Indictment against the Defendant. Count One charged the Defendant with conspiracy to willfully violate mandatory mine safety and health standards and to defraud the Mine Health and Safety Administration (“MSHA”), an agency of the United States. Count Two charged the Defendant with knowingly and willfully making materially false, fictitious and fraudulent statements and representations to the Securities and Exchange Commission, and Count Three alleged that the Defendant made and caused to be made untrue statements of material fact and omitted and caused to be omitted material facts in connection with the sale and purchase of Massey Class A Common Stock. The Defendant was arraigned on the Superseding Indictment on March 24, 2015. Trial began on October 1, 2015.
At trial, the United States relied significantly on documents produced by Alpha. The United States also called as witnesses current and former Massey employees, who were provided counsel by Alpha. On December 3, 2015, the jury returned a verdict, finding the Defendant guilty of conspiracy to willfully violate mine safety and health standards, in violation of 18 U.S.C. § 371 and 30 U.S.C. § 820(d). The jury acquitted the Defendant on all other counts. Pursuant to this conviction, the United States has set forth its intent to support a claim by Alpha for restitution from the Defendant, based on the costs of cooperating with the investigation, the costs of providing counsel to former Massey employees and officers who participated in the investigation and/or testified at trial, and the costs of fines paid by Alpha in accordance with the non-prosecution agreement.
After the Defendant's conviction, this Court ordered the United States Probation Office to prepare a presentence investigation report pursuant to 18 U.S.C. § 3552. In its submissions to the United States Probation Officer assigned to this case, the United States represented that Alpha spent $13,472,200.21 to cooperate with the investigation of the UBB explosion and Massey's compliance and safety policies, and the prosecution of the Defendant in this case. (PSR at ¶108.) The United States further represented that Alpha spent $4,310,671.21 to represent seven former Massey employees or officers who participated in the investigation. (Id. at ¶109.) Finally, the United States represented that Alpha paid $10,004,938 in penalties for “certain mine-safety violations at UBB.” (Id. at ¶110.) The United States indicated that “Alpha is a victim of [the Defendant's] offense of conviction and should receive restitution pursuant to the Victim and Witness Protection Act (VWPA),” 18 U.S.C. § 3663. (Id. at ¶97.)
The United States Probation Officer prepared a draft PSR on February 29, 2016. Both the United States and the Defendant submitted timely objections to the report. On March 7, 2016, the Defendant filed the present motion. The United States filed its response on March 14, 2016, and the Defendant filed his reply on March 18, 2016. The United States Probation Officer filed the final PSR on March 21, 2016, which contained the United States' position in support of Alpha's claim for restitution. The Defendant's motion is ripe for review by this Court.
In sentencing a criminal defendant, federal courts have no inherent power to award restitution to victims of a crime. Federal courts may only do so where authorized by statute. See, e.g. , United States v. Hensley , 91 F.3d 274 (1st Cir.1996) ; United States v. Hicks , 997 F.2d 594 (9th Cir.1993). The Victim and Witness Protection Act (VWPA), 18 U.S.C. § 3663, and the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. § 3663A, are the primary statutes under which federal courts may impose restitution for criminal defen...
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