Ross found profits and controversy in Rust Belt
washington» Wilbur Ross, Donald Trump’s choice for Commerce secretary, has a history of salvaging failing ventures — including, at one point, Trump’s own.
Now worth an estimated $2.9 billion, Ross grew up in an affluent New Jersey suburb before heading to Yale University, Harvard Business School and Wall Street. A specialist in bankruptcies, Ross headed the restructuring practice at investment banking firm Rothschild Inc. when Trump’s bad bets in the Atlantic City casino industry had put him on the verge of losing everything. Ross convinced creditors to drop a plan to strip Trump’s name and ownership from the Taj Casino, a victory that set the stage for Trump’s eventual resurrection.
“The Trump name added value,” Ross told Businessweek in 1992.
In 2000, Ross departed Rothschild to launch his own private equity firm. The work brought Ross to the heart of struggling industries including textiles, subprime mortgage servicing, steel and coal: the more troubled, the better. But his time in the coal industry included a disaster that cost 12 lives at the Sago Mine in West Virginia, and the mortgage servicing business drew complaints about business practices that ended in a national legal settlement.
The essence of the work was to buy failing companies, repair them to make them presentable to investors and exit the investment through a sale or public offering; Ross’ venture into coal mining followed the same pattern and achieved similar financial success. Starting in 2001, Ross began buying coal companies and merging them into the International Coal Group. The company declared itself to have an excellent safety record before it raised $250 million in a 2005 public offering.
Just weeks later, a methane explosion killed one miner at the company’s Sago Mine in West Virginia and trapped a dozen others — 11 of whom later died of carbon monoxide poisoning before rescuers could reach them. In the aftermath of the disaster, attention turned to the mine’s past safety violations — including ventilation failures, the excessive buildup of flammable gases and partial collapses of the mine’s roof.
Ross acknowledged that he was aware of the mine’s history of safety violations but said he believed its operation was safe.
“Oh, my God, it’s the worst week of my entire life,” Wilbur Ross said at the time.
The publicly traded International Coal Group gave $2 million to the miners’ families — and Ross personally matched donations to a fund, according to Don Nestor, an attorney who oversaw it.
The fund raised $1.36 million, according to New York state tax filings, suggesting that Ross’s contribution was less than $700,000.
Ross did not respond to a request for an interview made to his firm, WL Ross & Co. The firm sold International Coal Group in 2011, for $3.4 billion.
After the disaster, the AFL-CIO accused International Coal Group of hiding the safety risks of its mining operations before the initial public stock offering.