America's dirtiest coal company
IF you go to the website of the U.S. Bankruptcy Court of the Eastern District of Missouri, you can read more than 1,000 letters from retired coal miners and their widows. Their words are like the lyrics to an endless Johnny Cash ballad, and even more heartbreaking. They tell the eternal tale of the greedy few, this time playing out in real time in our America.
Here's the story: In the fall of 2007, Peabody Energy Corp. (BTU), the coalmining giant, spun off all its unionized mines into a new company, Patriot Coal Corp. (PCXCQ) In the process, it got rid of the promises it had made over generations to coal miners and their families.
Or, as Peabody's chief executive officer put it, "We're reducing our legacy liabilities roughly $1 billion." This was such a good idea that another coal giant, Arch Coal Inc. (ACI), unloaded its union mines on Patriot as well, though it cycled them first through yet another front. All totted up, Patriot now had 10,000 retirees and their health-care benefits on its books. This company was designed to fail. Patriot is almost certainly the only five-year-old company on earth with three times as many retirees as employees, 90 percent of whom never worked for the company. And fail it did, declaring bankruptcy last summer. Now it's going through Chapter 11 reorganization and hoping to emerge freed of its obligations for the pensions and medical care of those miners. In a corporate sleight-ofhand, the promises won with a lifetime of hard work and hard bargaining disappeared first into a holding company. Now, if the bankruptcy judge agrees, they will disappear into thin air. Or, to put it more explicitly, here's a handwritten note from Shirley Wells of Sullivan, Kentucky: "Over the years thousands were killed in explosions, fires, roof falls, and many other accidents. ... Many others suffer from the slower death called black lung disease ... confined to their homes, dependent on oxygen." If Patriot has its way, they won't have the medical cards that pay for their treatment. And as one miner after another points out in the letters, they bargained hard for those cards, preferring guaranteed medical care over higher wages precisely because of the toll the work took on their bodies. In this country, coal mining is our metaphor for hard work. There's really nothing much tougher on a person. Patriot's deceit is indefensible even if you're a laissez- faire purist: It makes nonsense of accounting to socialize the risks of coal mining by tossing miners on the mercy of Medicare. It's also completely unfair to any of Patriot's competitors willing to honor their obligations. As a Temple University finance professor, Bruce Rader, put it in a stinging rebuke to Patriot: "Corporate socialism is a system that privatizes profits and socializes costs. If that is considered capitalism, then Al Capone is right in his statement: 'Capitalism is the legitimate racket of the ruling class.'" And in this case, Patriot is doing nothing to hide its fat- cat heart. Its bankruptcy advisers billed $2,635 for a single dinner; the company is even now seeking court permission to hand out $6 million in bonuses to executives.