The admiral and the slime pit

Bill Regardie Founder, Regardie's Magazine
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Remember that mining disaster in West Virginia last spring? Of course you do. It was the worst coal mine accident in this country in the last 40 years; it claimed 27 lives.

The owner/operator was Massey Energy, real hardball players who didn’t seem to give a damn about anything but the holy dollar. Its CEO, Ron Blankenship, had all the charm of a diamondback rattler.

When the mine caved in, the media descended and Blankenship got his 15 minutes of air time. As it turned out, this was 15 minutes too much for him.

While Bob Barker was born for TV, Blankenship was born (or perhaps crafted in a lab somewhere) for running Abu Ghraib Prison. Or a coal company in West Virginia with the same kind of ethics.

After day one, the Massey brass pulled Blankenship and replaced him with a faceless drone to handle the media spin. However, the damage was more than done. It turned out the company had, by far, the worst safety record in the country.

By the end of the year, Blankenship, surprisingly, resigned. One can assume this wasn’t by choice, considering that big New York investors like BlackRock owned 81% of the company while Blankenship owned only a miniscule 250,000 shares. Bank malfeasance is one thing, but mining disasters don’t truck in the Big Apple.

Case closed, right? Not by a long strip-mining spot. It turns out that the New York investors didn’t really like the stink of that disaster and wanted to sell for a second reason — money. The stock had been at $50 a share forever.

Two strong competitors emerged for Massey in the $70 range. One was even in due diligence when, strangely, it backed away, literally over pennies late in the year.

That’s when you need a hero. Coincidentally, one was already on board.

Bidder number two, Alpha Natural, slapped down a $7.1 billion offer. Going, going, gone to Appalachia.

The new officers were then announced — all Alpha men.

The new unemployed execs were then announced — all Massey boys.

Presiding over the love fest was the newly installed outside CEO, Admiral Bobby R. Inman, one of America’s great spooks. He ran NSA and was Bill Clinton’s nominee to be secretary of defense until some still-unexplained bizarre behavior forced him to withdraw.

Since then, he has been an academician and a venture capitalist, and he probably dabbled in some black box work here and there. And, oh yes, for quite some time, has been on the Massey board with a piddling 35,000 shares, which will be worth $2.5 million when the deal closes.

So when it came time for the New York boys to cut loose Blankenship last year, who better to promote than Inman?

The admiral wrapped up the deal faster than Iraq I. The Massey stockholders got a great price, mostly in stock, so taxes weren’t an issue. And one of the worst-run companies disappeared.

Still, you’ve got to wonder, what was Inman doing in the middle of the Massey slime pit all this time?

With his credentials, he could have his choice of top boards.

But Massey? Great yearly director dividends? No sign. Free coal for his mountain cabin? Doubtful. One thing’s for sure: The New York boys will reward him big time for bringing home that 20% stock premium over last fall’s price.

Granted, he did a great job for the stockholders, and one day we’ll find out just how well he did for himself. (My bet is pretty damn good!)

But, I’m still wondering what the hell the admiral was doing in the mosh pit all those years with Don Blankenship.

Bill Regardie is the founder of Regardie magazine.