By: By Kyle Lovern
August 23, 2013
CHARLESTON – U.S. Attorney Booth Goodwin today announced additional charges in connection with a major false billing scheme orchestrated by former employees of Alpha Natural Resources (“Alpha”) and certain companies that provided supplies, equipment, and services to Alpha. The tree individuals that were charged are Ricky R. Smith, of 49, Glen Daniels, James Rodger Long II, 34, of Beckley, and Harold Wayne Brown, II, 41, of Madison.
Smith and Long, both former local “sourcing agents” for Massey Energy (“Massey”) Legacy Mines, have been charged by information with wire fraud and aiding and abetting. Brown, a former Alpha underground maintenance chief, was charged with making a false statement to federal authorities in connection with the false billing scheme. All three have agreed to plead guilty and are cooperating with the ongoing investigation.
An ongoing investigation revealed that several mine sourcing agents, generally responsible for ordering goods and services for mining operations from Alpha suppliers, participated in an illegal scheme to obtain goods for their own personal benefit. The investigation further revealed that the sourcing agents, working in conjunction with the suppliers, hid numerous illegal transactions by creating false invoices.
According to court documents, on October 6, 2011, sourcing agent Ricky Smith submitted a false invoice for $16,500 to purchase a “duster” from a leading Alpha parts supplier, M&S Hydraulics. Court documents also revealed that in a similar scheme, James Long, working with co-conspirators, submitted a false invoice for equipment totaling $8,820 to M&S Hydraulics. The false invoices were intended to look like legitimate purchases, but were actually used to provide cash, gifts and other things of value to the sourcing agents and other Alpha employees. In March, charges were filed against the owner of M&S Hydraulics, Donald Bryan Steele. Steele was charged with wire fraud and aiding and abetting in connection with the false billing scheme. Charges were also previously filed in March against co-conspirators Edward Ellis Mullins, 41, of Peytona, Joey R. Phalin, 36, of Crab Orchard, and Nicholas R. Coleman, 29, of Lester. Mullins, Phalin and Coleman are all former sourcing agents for Massey Energy (“Massey”) legacy mines. Each defendant was charged by information with wire fraud and aiding and abetting. All four defendants have agreed to plead guilty and are cooperating with the ongoing investigation.
Mullins was employed as the sourcing agent for the Shonk Powellton #1 Mine, operated by the Elk Run Coal Company, an Alpha subsidiary. Around November 2011, Mullins approached a supplier, who generally provided tires, wheels and other vehicle-related materials to Massey and now Alpha, about supplying him and other Alpha employees with tires and wheels for their personal vehicles. In exchange, Mullins agreed to allow the tire seller to submit false invoices for payment to Alpha reflecting that tires used in the mining operations had been delivered. For its participation, the tire seller was told to “pad” the false invoice. The tire seller immediately provided this information to Alpha corporate security, who, in turn, contacted the FBI and West Virginia State Police. A criminal investigation revealed that not only Mullins, but other sourcing agents, including Phalin and Coleman, who were employed by another Alpha subsidiary, Marfork Coal Company, were also engaged in the false billing scheme. Through the sourcing agents’ cooperation and other information, law enforcement agents have identified other conspirators linked to the widespread false-billing scheme. Mullins, Phalin, Coleman and Steele each face up to 20 years in prison and a $250,000 fine. Smith and Long each face each face up to 20 years in prison and a $250,000 fine. Brown faces up to five years in prison and a $250,000 fine.
The investigation was conducted by the FBI and the West Virginia State Police with cooperation from Alpha Natural Resource’s internal security team. Assistant United States Attorney Thomas Ryan is in charge of the prosecutions. In June 2011, Alpha Natural Resources finalized the purchase of Massey, including the mining divisions located along WV Route 3 in Boone and Raleigh counties.
WILLIAMSON - A scheme which bilked the state and federal government and Brickstreet Insurance out of millions of dollars will send at least three people to prison and more could be coming.
Jerome Russell, 50, of Williamson, W.Va. and Frelin Workman, 58, of Belfry, Ky. will soon be sentenced for their role in a monetary structuring scheme uncovered by federal investigators. Russel and Workman were the principles of Aracoma Contracting. A third individual, Arville Sargent, 52, of Chapmanville, W.Va. will also face prison time for his role. Sargent is a former field auditor for Brickstreet.
According to U.S. Attorney Booth Goodwin Aracoma officials arranged for numerous transactions at the Bank of Mingo Williamson Branch in which they withdrew cash in amounts just under the limit which required federal reporting. The cash became the payroll for Aracoma employees and helped the company avoid Millions of dollars in taxes and withholdings.
“It should have triggered reporting requirements for the bank,” said U.S. Attorney for the Southern District of West Virginia Booth Goodwin. “That did not occur.”
So far, nobody connected to the bank has been named in the investigation and Goodwin isn’t saying much about whether the probe is looking into any bank employees who may have been complicit in the scheme.
“They were able to funnel millions of dollars in cash out of the bank and use that cash to pay under the table cash payments to employees to avoid taxes and Social Security,” Goodwin said. “As well as bribe an official with Brickstreet Mutual Insurance Company to keep their workers comp premiums low.”
A federal information named Sargent as the Brickstreet official who accepted the bribe. He faces 25 years in prison and a half million dollar fine.
The scheme would entail individuals showing up at a teller window and being presented with a cashier’s check. The check was endorsed and the individual handed pre-counted cash. Federal investigators said many times the checks exceeded Aracoma’s 10,000 dollar line of credit, but no currency transaction reports were filed by the bank as required by law.
“Our investigation is ongoing down there in Mingo County and I think facts will continue to emerge about this particular incident,” said Goodwin.